N.C. Medicaid Managed Care Proposal

The N.C. Medicaid Managed Care proposal was put out today by the Cooper Administration NCMedicaidManagedCare. Don’t look now, but North Carolina looks to be engaging in bipartisan health care reform. You may recall that the Republican-controlled Legislature dictated that the Republican Governor develop and submit a 1115 Medicaid waiver by June 1, 2016, which he did. I submitted a comment on their plan with Aaron McKethan–some good ideas, some not so good. However, it was mostly an aspirational document and was not really detailed enough to warrant a CMS response.

Governor Roy Cooper’s Secretary of HHS Mandy Cohen (and former COO of CMS under President Obama) was confirmed last Spring and immediately set out to lead a process that is putting the meat on the bones of the Republican Medicaid reform aspirations. She fully committed to moving it ahead, demonstrating that both political parties are searching for common ground on Medicare reform.

It will take both sides to do something this big.

Does Health Insurance Improve Health?

An old question has gotten some new evidence. Does health insurance coverage improve health? This is a simple (and important) question that is complicated to answer definitively due to methodological reasons, but the evidence base has grown by two important papers in peer review journals in the past few weeks:

  • Ben Sommers has a recently accepted paper in the American Journal of Health Economics that is available online as an eprint. He finds that Medicaid expansions in the early 2000s in 3 states saved lives, and he documents the costs of doing so. The point of the paper is better methods of determining if Medicaid expansions did in fact save lives and looking at the cost of coverage. His top level findings:
    • 1 life saved for every 239-316 persons newly covered by Medicaid (the range represents the uncertainty in the estimate–could be as high as 316 lives saved, or as low as 239, for each newly covered person).
    • The cost per life saved was $327,000-$867,000
    • He discusses the other things that could be done with this amount of money and notes these amounts are less than often paid per life saved for many interventions
  • Ben Sommers, Atul Gawande and Kate Baicker have a paper in the most recent NEJM that looks more comprehensively (not only mortality as an outcome, and at different types of insurance, public and private) and reviews the recent peer reviewed work on the broad topic of does health insurance improve health. This is a nuanced paper that focuses on the current health reform discussions that our nation is having and goes directly to how important losses in recent coverage expansions could be to public health. On the most basic question at hand they conclude

    There remain many unanswered questions
    about U.S. health insurance policy, including
    how to best structure coverage to maximize
    health and value and how much public spending
    we want to devote to subsidizing coverage for
    people who cannot afford it. But whether enrollees
    benefit from that coverage is not one of the
    unanswered questions. Insurance coverage increases
    access to care and improves a wide range
    of health outcomes. Arguing that health insurance
    coverage doesn’t improve health is simply
    inconsistent with the evidence.

The evidence base changes weekly. These two important papers need to make their way into the ongoing policy debates.

House Republicans Pass AHCA

House Republicans passed AHCA, their version of repeal and replace of Obamacare, 217-213. The Republican controlled Senate declared it dead on arrival and set about to write their own bill. Here is past blogging on earlier versions of AHCA; they did not wait for a CBO score before voting, but the prior score estimated that 24 Million people would lose coverage as compared to the ACA baseline, and the most important policy points of AHCA 1.0 and zombie AHCA remain

  • Tax cut for persons with AGI greater than $200,000
  • $890 Billion (~25% cut) in Medicaid that existed prior to ACA
  • Ending of Medicaid expansion in the ACA

The new parts of AHCA related to the individual insurance market, devolving waiver responsibility to the states related to pre-existing conditions, under funded high risk pools, etc. They are mostly incoherent as a policy whole and won’t survive the Senate.

A few thoughts on all this.

  • Its shocking that after 6 or 7 years of ‘repeal and replace’ as the unifying theme of a party that this is the best they can do, both in policy and process terms. Health Policy is just not the Republican Party’s thing–sorta like the 1980s Oklahoma football team trying to throw the ball. But they spilled so many words they had to do something.
  • The Medicaid changes are by far the most consequential part of the bill. I have written lots about changing the state-federal relationship on Medicaid and think it is a big part of an eventual (inevitable) deal on health reform. But AHCA’s Medicaid provisions are just “tag, you’re it” flexibility to the States.
  • The rage of progressives/left/supporters of the ACA shows the asymmetry of health policy for the two sides. It is our ‘main thing’ and Rs in the House were willing to pass anything, just to say they had passed something. And the clarity of the ACAs ending of pre-existing conditions and lifetime limit provisions gives way to long, complicated answers under AHCA that end with, ‘well, its complicated and really depends upon that state in which you live.’ Here are two examples addressing the question of whether rape would be a pre-existing condition under AHCA (probably not; and more of same–there is some info in the length of the analysis required to answer the question).
  • After the football spike is over, I think if Rs actually pass a health reform law, it ends exactly like the ACA did–with the Senate jamming the House. Whatever passes the Senate, if anything, will define Trumpcare if there is to be such a thing.


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.


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.


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.

The Case for Medicaid Expansion

I have a piece (caseformedicaidexpansion-1-23-17) in the latest issue of the North Carolina Medicaid Journal arguing for Medicaid expansion. I wrote it last fall and thought it was going to be out during the Fall. I updated it briefly earlier this month, by invoking a Meatloaf song. The piece is based on the ACA payment formula and the Urban Institute’s modelling of expansion uptake and costs that they completed late last Summer.

The looming Cassidy-Collins Senate replacement bill actually includes even more advantageous Medicaid expansion terms for States like North Carolina than the ACA had (appears to have 95% FMAP for long run instead of 90%).

If expanding insurance coverage is an important policy goal, there won’t be a more advantageous way for States to achieve that goal than a Medicaid expansion with favorable terms like those included in the ACA, or in the Republican health reform bill that seems to be picking up steam in the U.S. Senate. Much like the ACA, expect the Senate to set the terms for what can actually become law re health reform in Republican controlled Washington.

Fact checking Medicaid expansion

Will Doran, a News and Observer/Politifact reporter has given a Mostly True rating to Governor Cooper’s claim that North Carolina is already paying for Medicaid expansion.

I have long been a supporter of Medicaid expansion as anyone who has read much of what I have written will know. I have a piece coming out in the next issue of the North Carolina Medical Journal that tries to make the case for the expansion (I was written last Fall, with a light update). I consider the case for expansion to be fairly straightforward, but there are many complicated moving parts to get both the coverage and financial numbers straight, and certainly to estimate what I would call derivative effects like jobs.

Just to help identify some of the complexities, I include a copy of my correspondence with Will when he asked my advice on this Fact Check. He wrote me On Jan 11, and I answered later that night while riding in a cab in Washington DC, so its not the most beautiful prose but you get the point (I italicized and bolded my answers here for clarity & I removed Will’s email and phone number):


Some answers below.

From: Doran, Will
Sent: Wednesday, January 11, 2017 7:51 PM
To: Don Taylor
Subject: Media inquiry on Medicaid in North Carolina

Hi Professor Taylor, I’m a reporter for PolitiFact North Carolina and the News & Observer in Raleigh. I’m working on a fact-check about Medicaid and was hoping you could answer what’s probably a stupid question that I have.

North Carolina residents and business pay 2.4 percent of the taxes the U.S. government collects. Is it safe to also say that the state’s taxpayers cover about 2.4 percent of the federal government’s Medicaid expenses? Or is the math much more complicated in reality?

Math is more complex than this. It is possible this is a reasonable estimate, but I am not sure without some work and digging.

Here is a toe dip into the complexity. Social Security payroll taxes are a key source of federal taxes paid in, but they don’t go to Medicaid expansion, and another large tax are Medicare payroll taxes that don’t pay for Medicaid expansion. Medicaid (federal share) is generally funded from general tax revenue (income taxes) and there are a variety of taxes levied by the ACA that could be thought of as paying for the expansion. This post address expansion and taxes, but doesn’t really answer your question. https://donaldhtaylorjr.wordpress.com/2017/01/05/did-gov-cooper-raise-taxes-yesterday/

This link lists the ACA taxes https://www.irs.gov/affordable-care-act/affordable-care-act-tax-provisions1

I also have one question that’s more policy-related, if I may take up a bit more of your time. Gov. Roy Cooper has said Medicaid expansion could create tens of thousands of jobs in North Carolina. But I know other states have not necessarily had that kind of result.

Kentucky, for example, has actually lost health care jobs since accepting the Medicaid expansion – despite a study that said the state would gain jobs. Is there any reason to believe that either scenario (the job gains or the job losses) is more likely to happen in North Carolina if we accept the expansion?

I am not sure. Surely someone must have done a summary of job impacts across states? Why did you pick Kentucky? There is a new model out focused on Michigan that predicts big job impacts….but I have read some criticisms of the study say the effect projected is implausibly large. The methodology of any given study in question is important. This is not really my area, but I will say from policy standpoint that I think job gains are what I would call derivative effects and not the primary intended effect. However, leveraging Billions of dollars into the state that wouldn’t otherwise be spent in the state will either increase jobs and/or wages paid to existing employees and/or expand revenue to health care providers that can be used for other purposes (like have a better bottom line). So, you could have derivative economic benefits even if you didn’t create more jobs. I don’t know this area better in part because I don’t think of jobs as the main point of Medicaid expansion. The key issue is how important is it to expand health insurance coverage? If it is impt, there will never be a more financially advantageous way for the state to do it.

I am sorry the answers are not simpler.


I appreciate any help you can give me about either of these questions. And if a phone call works better for you, my number is xxxxxxx.

Thank you.

Will Doran

PS here’s a news article on the Kentucky situation if you’re not already familiar: http://www.wdrb.com/story/30603715/kentucky-medicaid-expansion-has-not-produced-jobs-beshear-claims


Revisiting Cassidy 2015 as a potential deal

Margot Sanger-Katz from the NY Times flags an interesting pre King vs. Burwell Republican plan that could actually pass the Senate with more than sixty votes.  It was designed to deal with a conservative win in King vs. Burwell.

Let’s look at it with the 53 page PDF here:

Section 101 is the three options a state has if the Supreme Court ruled in favor  in King in King v Burwell and thus knocking out advanced premium tax credits for people who lived in Healthcare.gov states.

Option 1 would be to stay under PPACA and establish a state based exchange. Option 2 would be a complete withdrawal from PPACA with no subsidies. Option 3 would be to establish a HSA-like equivalent of coverage with most of the regulator requirements, taxes and mandates of PPACA thrown out. This is actually interesting if the funding makes sense. The default assumption is a complete opt-out. States would have to to opt into either Option 1 or Option 3.

Section 102 talks about the state alternative with HSA. It wipes out mandates and federal regulation. Essential health benefits, minimal actuarial value coverage and other regulatory requirements of PPACA that define a qualified health plan also are junked in this section. 102-4-A authorizes an initial HSA grant and the rest of 102-4 describes the mechanics of that grant. 102-C establishes a public health block grant that is 2% of the eligible funds for the HSA.

Section 103 determines the size of the HSA subsidy. This is where the money matters. The HSA amount is age and geography adjusted which is very similar in function as the ACA benchmark Silver is determined by zip code and age of the recipient. Bingo — 103-1-B is meaty.
Read more of this post