Both Sides Still Need a Deal

The Republican Party suffered a spectacular political defeat yesterday when they pulled their AHCA legislation from the House floor, after all the words they spilled the past 7 years. Speaker Ryan said the ACA is the law of the land, and President Trump said that Democrats will want a deal to improve the ACA within a year.

On December 16, 2010 I first blogged that “Both Sides Need a Deal” and laid out a set of big ideas that I claimed would emerge in a deal if the two sides negotiated in policy good faith. I even wrote a book that more fully laid out what a health reform deal would look like, and said it was the crux of a sustainable federal budget. Last Sunday, Ross Douthat, maybe sensing the outcome of yesterday, wrote that a catastrophic insurance program loosely based on Singapore would be the best way forward for Republicans. This column reminded Reihan Salam of my pitch from several years before.

reihan.bloginsert

Deal’s between Democrats and Republicans seem impossible politically, but the structure of our system of government makes them a feature, and not a bug. At some point we will have to return to that type of equilibrium. And both sides really do need a deal to achieve more of what they want. I want to re-emphasize 3 of the big ideas from my original proposal and add a fourth in the hopes of starting a conversation, perhaps only with myself.

  • Replace the individual mandate with federally-guaranteed, universal catastrophic insurance coverage and sell private “gap” insurance in state-based exchanges, with income based subsidies
  • End the Medicaid program as we know it by transitioning full responsibility for dual eligible Medicaid costs to Medicare, and moving non-elderly and disabled low income persons into subsidized private gap insurance
  • Modify the tax preference of employer paid health insurance, and replace the cadillac tax with this provision
  • Not in my original proposal, but we should provide some help in purchasing health insurance to persons in the individual market, but whose incomes are too high to qualify for tax credits under our current system; it will help the risk pool and high income persons get a subsidy via the tax treatment of Employer coverage

I am a policy guy, and the policy is crucial (I wrote in 2014 what some of the above ideas could look like for one state–North Carolina to try some of this via an ACA waiver). What I have proposed above is a bit more grand, but it seems that a big deal may paradoxically be easier to obtain than a small one, particularly around the issue of Medicaid. Precisely because there is a no “best way” to address health policy, the politics are particularly important if we are to ever develop a sustainable health care system. A quote from my 2012 book in Chapter 7 sums this up for me:

What our nation most needs is a bipartisan health reform strategy that will allow us to address the interconnected problems of the health care system: cost, coverage and quality. There is no perfect health care system and no perfect plan. However, without a deal that allows both political parties to claim some credit as well as to have some responsibility in seeking to slow health care cost inflation, we have very little chance of success.

I will do some follow up posts on the policy aspect of the imperfect ideas above. I am happy to engage in dialogue if anyone is interested.

Defending Speech and Speakers on Campus

I was recently elected to the Chair of the Academic Council at Duke (the Faculty Senate), and so have been doing a bit of thinking about issues related to how college campuses deal with issues of free speech, association, inquiry and the like. This statement is the best thing that I have read  in the way of general guiding principles (Truth Seeking, Democracy, Freedom of Thought, and Expression). These two paragraphs are especially critical:

None of us is infallible. Whether you are a person of the left, the right, or the center, there are reasonable people of goodwill who do not share your fundamental convictions. This does not mean that all opinions are equally valid or that all speakers are equally worth listening to. It certainly does not mean that there is no truth to be discovered. Nor does it mean that you are necessarily wrong. But they are not necessarily wrong either. So someone who has not fallen into the idolatry of worshiping his or her own opinions and loving them above truth itself will want to listen to people who see things differently in order to learn what considerations—evidence, reasons, arguments—led them to a place different from where one happens, at least for now, to find oneself.

All of us should be willing—even eager—to engage with anyone who is prepared to do business in the currency of truth-seeking discourse by offering reasons, marshaling evidence, and making arguments. The more important the subject under discussion, the more willing we should be to listen and engage—especially if the person with whom we are in conversation will challenge our deeply held—even our most cherished and identity-forming—beliefs.

Three things stand out as key to me here. First, humility. Second, there are facts and things that are true and false. Third, it takes (at least) two sides to have a real conversation. I like this statement as guidance to navigating the many issues related to speech, academic freedom and inquiry on college campuses.

A few more thoughts that deserve later amplification.

This is a great piece by Mike Munger that notes the role of academic freedom that flows from the 1st Amendment protection of freedom of association as the true distinctive of Universities (and not speech, which is a universal freedom of our nation). However, bad, harmful speech often has an asymmetric chilling effect on individuals from groups that have historically been excluded from full membership in the robust discussions envisioned by the statement linked above. And freedom of association is a key way that people can decide which issues to discuss and debate, as well as how and when. So, while the entire University could never rightly be a “safe space” so would it be wrong to say there can be no such “safe spaces” on campus, of a variety of ilks. This may seem to be a paradox.

Similarly, for some members of University communities the term “safe space” is viewed only as a term that applies to intellectual discussion, while for others they have in mind their physical safety. People who are physically afraid have no hope of engaging in intellectual inquiry. Living up the best that a University can be will require continued struggle on many fronts.

CBO Score of AHCA

Following up on past stuff on the blog on the House reform plan, the CBO released its score of the legislation that passed the House Energy and Commerce and Ways and Means Committees last week. This puts numbers on on the general description I provided earlier, but I was wrong–CBO scored that it will reduce the deficit.

  • $1.2 Trillion decrease in spending on health insurance (Medicaid and private subsidies)
  • $900 Billion tax cut/decline n revenue
  • Reduce the deficit by $337 Billion (all over 10 years)

This version of health reform costs so much less than the ACA because it covers so many fewer people. The project a loss of health insurance coverage of 14 Million persons by next year, and 24 Million by 2026.

Underneath all this, the most profound thing going on in this bill is a nearly $900 Billion drop in federal Medicaid spending over 10 years– a 25% decline in the federal share over 10 years. The Medicare cuts that Republicans savaged for years that are part of what Obamacare used to pay for coverage expansions are kept in place.

This is horrible policy is health insurance coverage expansions are remotely important. The politics are even worse I think, as the shift of burden to states of either paying for Medicaid or deciding who not to cover in the future will be hard, and premiums in the exchanges will decline for younger persons under the new tax credit subsidies, but they will rise for persons in the decade before Medicare eligibility (age 55-64).

I keep thinking there must be some political angle that I am missing, but I don’t see it. If you wanted to lose the House in 2018, you would push for this. Many elected Republicans are getting cold feet. Not sure what comes next, but nothing is increasing as a possible outcome. If something becomes law, expect it to come out of the Senate–in much the same way the ACA did.

 

 

Boil it down for me

A friend asked me “boil it down–how is the Republican repeal and replace different from the new status quo after the ACA?”

  • Most fundamentally, it would change the financing formula for Medicaid, and limit the federal government’s financial responsibility for same. The flexibility given to states will have to be used to decide how to cover the same number of people with less money, or increase state funding. I am not talking about expansion but the part of the Medicaid program that was untouched by the ACA–children, pregnant women, disabled, elderly.
  • It ends the Medicaid expansion that is a part of the ACA (so will increase uninsured rate).
  • It provides more people with smaller tax credits for purchasing private health insurance while making the mandate/penalty/steering mechanism to purchase health insurance weaker. Hurt are low income people who will get less, while higher income people get more. The ban on pre-existing conditions is kept, as are mandated essential health benefits. The bottom line will almost certainly be fewer more uninsured (update post), and a much more likely death spiral in the individual insurance market. There are some complicated geographical forces at work that mean the impact on uninsured rates will differ by state, but fewer will be covered as compared to the ACA. It is unclear what the changes will do to employer sponsored coverage–some say there will be lots of drops. We need to know what the CBO thinks to see by how much private insurance coverage is likely to drop.
  • The Medicare cuts that were used to partially pay for increased coverage in the ACA-and which the Republicans have viciously criticized–remain. About $700 Billion worth over the next 10 years.
  • The taxes on people making over $290,000/year in the ACA have been repealed. The exact size of the tax cut is unclear (again, we need to hear from CBO, but estimates are between $700 Billion and $1 Trillion.

In summary, this bill is a tax cut for high income folks that is funded by cuts to the Medicare program as compared to the ACA new baseline. In addition, it provides a fundamental change of the federal governments financial commitment for Medicaid which weakens the safety net we have, while wiping out coverage gains from Medicaid expansion. States get less money, but the same number of people who now qualify for coverage, leaving aside any expansion effects. And the changes to the tax credit, insurance rules, penalty structure seem likely to destabilize the individual, private insurance market, with unclear impacts on the employer sponsored health insurance system. And the bill will likely increase the deficit (update post: CBO says it reduces the deficit, because of how many more uninsured there will be), but unclear by how much.

The simplest I can do.

Thoughts on Republican Repeal & Replace

The House Republicans dropped two bills yesterday, that they say they will vote on Wednesday, before the CBO even has a chance to score the bills’ impact on insurance coverage, Medicare, Medicaid and the deficit (they aren’t rushing to suppress good news–many fewer will be covered and they get rid of Medicare payment cuts and cut the taxes used to pay for Obamacare, so it will increase the deficit). The House Energy and Commerce bill focuses on Medicaid, while the Ways and Means bill focuses on tax credits for private health insurance.

A few key thoughts.The most consequential part of the two-bill proposal are cuts to the Federal Share of Medicaid. Several Republican Senators in States that have expanded Medicaid and/or Blue States have said Medicaid expansion had to be maintained in any repeal and replace bill. House Republicans dislike Medicaid expansion quite a lot, so it is hard to find a bill that can get 50 votes in the Senate (in which case the VP would break the tie) and 218 in the House.

  • This attempts to thread the political needle by keeping Medicaid expansion, with enhanced Federal share of the cost in the ACA until 2020. From 2020 on, anyone who is continuously covered by Medicaid will retain the enhanced cost match until the become ineligible for Medicaid; then the enhanced match will be lost. There is tremendous churn in and out of Medicaid, and so this will mean that almost no enhanced cost match beneficiaries will be left within a year or so. This effectively sunsets Medicaid expansion.
  • Equally consequentially, the funding agreement between the federal government and state will be converted to a “per capita cap” version of a block grant. In 2020, the Medicaid funding levels will revert to those that existed in 2016 for the non-ACA Medicaid pool. From this point forward, the federal match will rise at medical CPI. This is like your employer saying I will give you raises until 2020. In 2020, your salary will revert to your 2016 salary and then we will go from there.
  • The effect will be a great reduction of the federal cost of Medicaid over time, with States given “flexibility” to figure out who to pay for and how.
  • The political question is whether the Senate Republicans who are worried about Medicaid expansion will go for this. They could say, we kept expansion until 2020….and there might be a lot of wink-wink, nod-nod that during the election we won’t go through with this, and then you get a 2 year can kick. Then another, etc and your recreate the SGR/Doc Fix fiasco.

The Structure of the Private Insurance Aspect of the bill is very similar to the one we have in the ACA, just with lots smaller subsidies spread across more people.

  • The individual mandate and the employer mandate are not actually repealed in this–instead the penalty for an individual being uninsured is set to $0 as is the penalty for an employer over 50 employees dropping coverage (that is because this is a Budget Reconciliation vehicle, that can only change things that directly impact federal spending).
  • In place of the individual mandate is a continuous coverage provision that says if you are uninsured for more than 63 days after December 31, 2017, if you come back to sign up for private coverage in a State exchange than you have to pay a penalty of 30% of the value of the premium (so if monthly is $100, then you have to pay $130). Note that this is not a tax in the bill–the penalty has to be paid to your insurance company. Basically, the law tells insurers to charge more to people with gaps in coverage of 63+ days.
  • This looks nearly designed to blow up the individual insurance market to me. Under the individual mandate we have now, there is a problem with too few healthy folks signing up. The penalty is supposed to incentivize staying covered, but the penalties will be lower than they are now for many young folks. I am interested in CBO’s take here, but I think there is worse adverse selection than the current ACA.
  • Tax credits are age-based, with a means test. Basically, more people get smaller tax credits and with ending of mandated benefits (states will now decide) the key issue will be what can  you buy with the tax credits. The answer will be not much. People between $75,000 (single)-$150,000 (couple) incomes who if buying coverage now get nothing, will get a tax credit, based on their age. This is probably the one group better off in health policy terms (hospitals that get DSH cuts restored immediately, and rich folks who get tax cuts will be better off).

Extra interim money for non-expansion states. There is a provision of $10 Billion over 5 years for states that have not expanded Medicaid, but note that this is for the entire nation and is not more than a few hundred dollars per member, per month for a state’s Medicaid program. The state of N.C.’s cost of Medicaid expansion from 2017-2026 is estimated at $6.2 Billion. This provision is very little money to states.

Cadillac Tax is not repealed, but delayed until 2024 and no other financing mechanism noted. There had been talk of replacing the cadillac tax with a capping of the tax exclusion of employer sponsored health insurance, which has long been a Republican think tank thing to be for. However, they instead keep the Caddy Tax and delay it (this will help make the CBO score less of a shit-show, but they will plan to can kick this too).

  • The bills remove the financing for coverage expansion (increased taxes on high income folks, and it reinstates DSH payment cuts immediately).
  • They don’t identify alternative financing mechanisms, other than the cadillac tax in years 2024 and out (which they will later want to delay). So, this is basically a deficit financed tax cut, with a Medicaid expansion that is preserved until 2020, and after that a huge reduction of federal Medicaid cost share with the state’s left holding the bag.
  • The fact that the Commerce and Ways and Means Committees are supposedly voting on this before getting a CBO score, should put to rest once and for all that the Republican Party cares about fiscal responsibility.

I will say more later. I don’t see how this can pass the House and the Senate. I have no idea what impact President Trump will have on this debate, or really anything else–that is an hour-by-hour determination.

Annual State Costs of Medicaid Expansion

Governor Cooper released his first state budget yesterday, and he continued his call for Medicaid expansion, with the state share to be paid by hospitals that would receive more revenue from expansion. I have a piece in the January-February issue of the North Carolina Medicaid Journal making the case for expansion.

A few folks have asked me about some of the numbers in my piece above, and in particular my estimate of $6.2 Billion in State costs for the 10 years 2017-26 (that would leverage $52.4 Billion more in new federal money over the same period). The two most common questions are whether the State costs (1) account for other savings; and (2) are they the same each year?

The first answer is no, the $6.2 Billion are the estimated state flows required under expansion. This doesn’t answer what source pays them (the Governor suggested hospitals), but is just the magnitude of the flows required. The $4.9 Billion number also highlighted is adjusted for an estimate of uncompensated care savings, so is the net cost.

ncmj-medicaid-3-02-17-blog

The answer to the second question is that the flows are not uniform across the years 2017-2026, but start lower and increase over time (with inflation and in growth in population). The table below provides the flows of new State costs with expansion, along side the state costs if we do nothing. The default federal cost of North Carolina’s Medicaid program under no change is around $135 Billion over the same 10 year period.

ncmj-medicaidcosts

Note that the estimates I used are based on the Urban Institutes work and projections. There are a variety of such models and they don’t all yield the exact same answer, but provide similar magnitudes. More precise estimates could likely be developed for North Carolina, but at this point I don’t really think such technical questions are the stumbling block to expansion in North Carolina.

CMMI Palliative Care Project

We have a piece in Health Affairs blog describing our Center for Medicare and Medicaid Innovation (CMMI) grant in Palliative Care. We are working with Four Seasons Hospice who is providing care in this model in Western, North Carolina and down into South Carolina. We will be receiving Medicare claims for the first two years of the project in the next month, so should have some sense of the cost before, during and after (most typically hospice election) the palliative care program.

The table below frames the policy landscape for Palliative Care financing in the Medicare program. A key part of the CMMI project will be to propose the outline of how Medicare payments should be changed to facilitate more provision of Palliative Care, including considering the development of an Alternative Payment Model (APM).

A key aspect of this discussion is what type of health care organization can provide all of the care encompassed in a Palliative Care Benefit, and how the creation of new payments approaches can be flexible across different types of local health care delivery markets.

Table 1. Policy Landscape For Financing Palliative Care Services At End Of Life In Medicare

Medicare Benefit
Part A
Hospital Insurance
Part B
Physician Services
(Medical Insurance)
Part C
Commercial Medicare Advantage
Part D
Prescription Drug Coverage
Financing Trust Fund payroll tax and other sources Premiums with deductibles and general revenue (income tax) Commercial premiums with deductibles General revenue (income tax) & premiums with state contributions
Services Hospital, skilled nursing, long-term care, hospice Doctor visits, lab services, durable medical equipment, therapy Private A + B + (D) + additional benefits
• 30 percent population
• Hospice carved out
Prescription drugs
Cost triggers Reduce unnecessary utilization Increase care coordination and goals of care Unknown; unavailable claims for research Symptom management outlay vs. curative
Current movement Hospice “two-tiered” payments with service intensity last seven days Advanced Care Planning CPT codes

Transitioned Care Management codes

Chronic Care Management PBPM

PILOT: Medicare Care Choices Model (test $400 PBPM concurrent care for hospice-eligible beneficiaries)

Aetna Compassionate Care program for under 65 commercial

Numerous proprietary coordinated/ palliative care management programs underway

Review of access, medication reconciliation, polypharmacy, and discontinuation issues
Potential bundles as APM Hospital-based palliative care services

Post-acute care (90-180 days) prior to hospice palliative care services

Primary care (CCM, CPC+, PCMH medical homes) additive for palliative services in PBPM

Specialty care (CCM, medical home) additive in PBPM

Proprietary build on HCC risk score methodology Pharmacy/drug benefit during episode transitions (90-180 days) prior to hospice
Implication of ACO-MSSP Provider groups managing Total Cost of Care (Parts A, B, D) with increasing risk models and flexibility to deliver care across settings where financial control can be leveraged Excluded from MSSP; MA program innovation increasing but not publically shared Clustered resourcing as part of Total Cost of Care

Abbreviations: ACO=accountable care organization; APM=alternative payment model; CCM=chronic care management; CPC+=comprehensive primary care plus; HCC=Hierarchical Condition Category; MSSP=Medicare Shared Savings Program PCMH=patient-centered medical home; PBPM=per-beneficiary per-month