Overview of Supreme Court Health Cases

Monday June 25 is the last scheduled date for the release of Supreme Court opinions, but SCOTUSblog says that they fact the Justices did not today announce that Monday will be the last day of the session means that opinions will be released after Monday. There are 5 cases left to be announced if you consider the health care cases to be one. In fact, there are three cases that were heard and it is unclear if there will be three sets of opinions, or a unified opinion of some sort.

SCOTUSblog provides great plain english summaries of all Supreme Court cases that are linked below, with my understanding of the bottom line questions to be decided in each case.

U.S. Department of Health and Human Services v. Florida.

• Can Congress require most everyone to purchase health insurance or pay a fine?
• Since no one has yet had to pay this fine (couldn’t until 2014), is it too soon to decide this question?

National Federation of Independent Business v. Sebelius.

• Can Congress make states choose between complying with the ACA or lose federal Medicaid funding?
• If the requirement for most everyone to purchase health insurance or pay fine is unallowable, does that invalidate the entire law or just the insurance provisions?

Florida v. Department of Health and Human Services.

• Can Congress make states choose between complying with the ACA or lose federal Medicaid funding?
• If this is unallowable, does that invalidate the entire law or just the Medicaid expanions?

The entire ACA could be upheld or struck down, or only certain provisions could be struck down (such as the requirement to buy insurance or pay a fine, the so-called individual mandate), or the Medicaid expansions. Most writing has focused on the title I aspect of the case, the individual mandate and private insurance changes. However, around half of the coverage expansions contained in the ACA come via Medicaid. In policy terms, if the Medicaid expansion is struck down (basically saying it is coercive for the federal govt to provide states with “an offer they can’t refuse a la the Godfather”) that would have a huge impact on the ability of the federal government to use one of its most straightforward tools to expand insurance coverage.

If the individual mandate is struck down, there are other policy mechanisms through which to pool risk (and the penalty is quite weak), though revisions to the law to bring them about would require 218 votes in the House, 60 in the Senate and 1 in the White  House and it is hard to see those three bodies agreeing that today is Thursday at this point.

As far as predictions go, I am not an experienced court watcher and have no idea what they are going to rule.

Talking health reform on Voice of Russia Radio

I didn’t even know Voice of Russia radio was a thing, but it is. Here is a link to a ~15 minute discussion of my book, health reform, and the looming SCOTUS decision between myself and Carmen Russell-Sluchansky.

Op-Ed in Raleigh, News and Observer

I have an op-ed in the Sunday Raleigh (N.C.) News and Observer offering a bipartisan way forward on health reform that I think makes sense regardless of what the Supreme Court says about the Affordable Care Act. If you are a reader of this blog, it will be familiar fare.

If you are coming here from the op-ed, here are some related posts:

• Laying out general compromise with a bit more detail
• The ACA actually allows high deductible plans
• Comparing my catastrophic ideas with those of Martin Feldstein
• Post with overview of all the health policy suggestions from my book
• My book Balancing the Budget is a Progressive Priority frames health reform as central to ever having a balanced budget; a necessary, but not a sufficient condition to getting there. The other thing that must occur is a tax increase given any plausible level of federal spending. Many other things are covered in the book, but without health reform and a tax increase over the long run, we will never have a balanced budget.

High deductible plans in the ACA

Yesterday I speculated about what form a health reform deal between Progressives and Conservatives might look take (Universal catastrophic coverage implemented via Medicare).

Like many of the complaints about the ACA, the idea that everyone is forced to purchase the same plan is untrue–it does not mandate a one size fits all policy. Below are actuarial estimates produced by 3 insurance companies commissioned by Kaiser Family Foundation of what various insurance options to be sold in ACA exchanges would look like.

The Actuarial value column shows the percentage of total costs to be borne by a person (there are a series of assumptions made to produce these estimates, that are meant to be illustrative) covered by the mandated benefit package; Plan A, 60% corresponds with the so-called Bronze level package that represents the minimum coverage that persons would have to purchase in 2014 to generally comply with the ACA. You can see that there are other levels of coverage stated in actuarial value terms, 70%, up to 94% that people could choose. Obviously, a higher actuarial value means higher premiums and less out of pocket exposure during the period of insurance, and under the ACA the premium subsidy amount provided to individuals and families varies by income.

Also of note are the different ways to attain the same actuarial value and corresponding out of pocket maximum. Sticking with the Bronze plan (row A) in the Table, Actuarial Research Corporation designed a plan with a deductible of $6,350 and no coinsurance, while Aon Hewitt achieved the same actuarial value with a deductible of $4,350 and coinsurance of 20%. It is true that all of the plans cover the same benefit package.

Several points/questions:

• The ACA allows catastrophic plans (the max out of pocket allowed in 2014 will be $5950 for individuals, $11,900 for families). I suggested larger deductibles/maximums, but personally I would trade a higher catastrophic deductible/out of pocket max for universal coverage.
• It is unclear to me how the price charged for care while someone is in their deductible will be set? Presumably that will be an aspect of the plan offered on an exchange in the ACA, but this is an important question, especially for catastrophic plans, and I realize that I am unsure. Under my suggestion, Medicare payment rates could be used.
• There are different mixes of premiums, deductibles, and coinsurance through which to achieve the same actuarial value. Adding the premium side to this adds more complexity and choices, but you can generally achieve the same premium-side actuarial outcome by a set deductible/out of pocket maximum and income based premium subsidy, or you could modify the deductible/out of pocket maximum by income, probably implemented via a maximum amount of income that could be spent on health care.
• You have to set a benefit package in some way if you claim to be interested in people making informed choices. Under my suggestion, everything covered by CMS would count toward spending through the catastrophic deductible, and would be covered by Medicare once the maximum out of pocket amount was reached.

What would a health reform deal look like?

A central claim of my book Balancing the Budget is a Progressive Priority is that slowing the rate of health care cost inflation is a necessary, but not a sufficient condition to our ever achieving a sustainable budget down the road (it will also take a tax increase). Further, it will be virtually impossible to take the very hard steps to address health care cost inflation without both political parties coming up with a set of health care reform strategies that we will actually try, and which make both sides responsible for seeing to the hard work this will take. Health reform is far more difficult than Social Security reform (in a technical sense), for example, because mailing checks is much easier than purchasing health care. We will never be done with health reform and there will be many mid course corrections.

Even though we don’t know what all the steps will be, we desperately need to take some initial ones, and we will soon know what the Supreme Court will say about the ACA. This will be a landmark decision that will have profound political and policy consequences, but in one sense, regardless of what the Supremes say, the next step is to identify a bipartisan way forward on health reform (stop laughing; we have to do it).

Central to my book is a set of health reform policies that I claim represent the type of deal that would emerge if the two sides actually negotiated with one another. For such a deal to emerge, it would take both sides being clear about what their primary interest was in health policy. For Progressives, universal coverage has always been the holy grail and dream deferred, not just of health policy, but really of all social policy. As I noted in this debate with Jim Capretta, I don’t thinkConservatives have an interest that is so clear and heartfelt as universal coverage is for Progressives, but if I had to take a stab, I would claim that it is their belief that people don’t have enough “skin in the game.” As an aside, this makes little sense to me and when I look at empirical data on cost sharing with my more conservative friends, we see different things. In a similar way, when I say that I think the lack of a predictable, universal health insurance coverage scheme is an existential mark against our nation, they don’t get my degree of feeling.

Accepting such differences is an important step, because reaching a deal will mean abiding with one other to reach a compromise.

The essence of the deal I suggest in the book is this:

• Universal catastrophic coverage implemented through Medicare, with gap insurance available to persons wanting it (no mandate!) via state based exchanges (with subsidy for low income persons)
• With a massive deductible (I suggest $10,000/persons; $15,000/family to maintain a key role for private insurance; far larger out of pocket exposure than Bronze level cover in the ACA)

There are many legitimate ‘yeah buts’ that both sides will have, and I am not even getting into the other parts of the health policy deal I propose, and that are detailed in the book, in this post. However, a compromise health reform deal will have to capture the ‘big idea’ for both sides. I think step one of such a deal looks something like this if we ever manage to do it. And if we don’t, we will never again have a sustainable budget.

Medicare reform and the ACA are linked, ctd.

As I wrote in December, the key to evaluating the merits of Wyden-Ryan or any other premium support-based reform of Medicare is what will be done about the Affordable Care Act (more here and here). I meant this largely in a political economy sense–the entire health system needs reforming, and a key issue is what we will do (or won’t do) to expand insurance coverage to the uninsured and move to improve care throughout the system. Medicare and the care of younger persons are linked because they receive care from the same general health care system, but also because it is young workers (many of whom are uninsured) who pay payroll taxes to support the Medicare program. I have never gotten why this seems like a disconnect to some, or that reductions in spending on Medicare would be inappropriate to use to finance coverage expansions for younger persons (the children and grand children of Medicare beneficiaries!).

Austin Frakt has a nice post looking more technically at the issue of the linkage between the ACA and Wyden-Ryan; specifically, how increased cost savings achieved by the ACA enables a premium support approach such as Wyden-Ryan to achieve the maximal savings possible in the Medicare program. Thus, whether they realize it or not, proponents of premium support in Medicare need for the ACA succeed. Of course, there could be replacement of the ACA that could similarly succeed, but there is no evidence that such a plan will come about.

Health reform and the election

Greg Sargent noting that in spite of the Affordable Care Act not being overly popular as a whole, focus on health reform during the election could be helpful to the President.

I would agree and go even a bit further, and say that avoiding health reform discussion since passage of the law has enabled Republicans to get away with only being clear about what they are against, and let them off the hook from offering a coherent alternative. The more discussion about health reform during the election the better. If Republicans move toward a plan that attempts to substantially address coverage, cost and quality, it will start to look an awful lot like what they have been against. If they don’t offer a comprehensive plan, then they will have no answer to one of the key issues facing our country.

The Affordable Care Act was a good step because it was a step; we desperately need to take the next one and find some set of health reform policies that we will actually TRY. It will take both sides to do this, and an important step is to smoke Republicans out on what they are really for (if anything). This is a time where the Rove playbook–go on offense around a presumed weakness–should be co-opted by the President, both for policy and political reasons.

The Blahous dust up

Jonathan Bernstein with a post decrying the poor job the WaPo Ombudsman did in describing the controversy around the piece put out last week by Charles Blahous that said the ACA will increase the deficit (contro to CBO’s longstanding estimates). I was with my family in a car heading South on I-95 reading about the unfolding controversy on twitter last week, and so I didn’t post on it. However, even now, it is mostly being described as a dust up over double counting (how can something help the deficit and Medicare). Jonathan Chait has a good piece debunking this claim, Kevin Drum has a nice illustration of why this is not a valid claim, and Josh Barro adds a bit more on how this interpretation undermines one of the conservative charges leveled against the President. This is an old argument, rehashed.

The primary issue with the Blahous study is his development of a new baseline against which to compare the ACA. As I tweeted last Tuesday as we sped to vacation wonderland (I wasn’t driving)

(Here are Avik’s posts including Chuck’s guest post response: here and here).

The baseline used by Chuck Blahous essentially says that when tax inflows are no longer large enough to pay for Medicare outlays, then they will be cut to equal tax inflows; this is what is set to happen by law, but then again so are the cuts to Part B payments under the SGR. The baseline he used in this study to estimate the ACA’s impact on the deficit essentially says, Voila! There are no long term financing problem with Medicare after all, we will just fix them when we have to do so, using some sort of secret plan to cut Medicare spending (he seems to have backed off this later, but if so, the ‘stop the presses’ aspect of the paper is gone). As compared to this (very large, hypothetical) cut in Medicare expenditures cooked into the baseline used by Blahous in his study, the ACA would increase the deficit. That is a bit like me saying if I was a faster runner, I could be a professional marathoner. My point is that the main action in this study is comparing the ACA to a baseline that is unrealistic, not double counting.

Now what I would really like to read would be Chuck Blahous’ thoughts on what type of health reform strategies that we should undertake, especially ones that could do away with the long term financing problems faced by the program. I mean that sincerely because he is a great analyst with lots of experience, this just wasn’t his best.

update: edited for clarity.

Me on TV talking health reform/supreme court

Here is an ~ 8 minute interview with me discussing the big picture policy context of the Supreme Court case (being interviewed by Tim Boyum of NewsChannel 14). Here are some links to the Republican Patients’ Choice Act law I noted (introduced by Sens. Burr and Coburn and Reps. Ryan and Nunes on May 20, 2009):

• Big picture and Insurance Exchanges
• July 24, 2009 op-ed on PCA
• PCA needs to meet the CBO
• Meme roundup: IPAB similar to boards proposed by Republicans in PCA

Across state lines!

Robert Pear and Jonathan Weisman have a NY Times piece outlining Republican discussion that could be summarized as “Oh Crap. We may actually have to commit to a replace plan.”

Two things stand out for me in this piece. First, it mentions Fred Upton, the Republican Chairman of the House Commerce Committee. This, along with the Ways and Means Committee, is where the primary action of any health reform plan will be done in the House, and as I recently said if the names Upton and Camp (Chair of Ways and Means Committee) don’t become household words there is no serious replace action underway. Second, the leaders in the House haven’t moved much beyond the items offered in opposition to the ACA, and which were offered as a package in the House in Nov. 2009 as a substitute motion to the ACA, which CBO said would expand insurance coverage by only 3 Million persons. One of the key ideas that will likely ride again is the tried and true “sell insurance across state lines.”

I wrote 29 columns on health reform for the Raleigh, N.C. News and Observer from July 2009 to March 2010, most of which are here. Below is the November 6, 2009 column on selling insurance across state lines. This one makes so much sense in a cocktail party level discussion, but the roots of why it will not work as intended are based in the insurance market itself.

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DURHAM — As the Democratic health-reform plans have developed, Republicans have consistently offered one suggestion in opposition: allow individuals to purchase health insurance across state lines. In doing so, the argument goes, persons could shop via the Internet for a policy with a cheaper premium that was being sold in another state, thereby saving money.

This seems perfectly sensible to anyone who has purchased a pair of running shoes over the Internet for a price lower than that available locally. Unfortunately, it won’t work with health insurance.

States have regulated health insurance since the 1945 passage of the McCarran Ferguson Act, which, among other things, forbids interstate sale of insurance (health, auto, homeowners). States have regulated insurance ever since. Many insurance companies sell policies in different states but, in doing so, must comply with a given state’s regulations. For example, I have car insurance from the same company as my dad who lives in Georgia.

Some already purchase health insurance across state lines. The ERISA Act of 1974 allows businesses that self-insure their employees to include all employees in one health insurance pool, even if they live in different states. Self-insurance means that the company is responsible for paying the health expenditures of its employees after the employees have paid the specified deductibles and co-pays. Such companies typically hire an insurance company to process claims and are predominantly large employers who have chosen to self-insure to remove the insurance middleman.

But individuals are prevented from purchasing health insurance across state lines. Allowing them to do so would require a federal law that replaces state regulation of insurance with federal regulation. This is an odd policy prescription for Republicans to champion, because they tend to reject federal regulation in favor of state autonomy.

Let’s assume we passed a law that allowed purchase of health insurance across state lines and said, “Market, go fix it.” The reasons this won’t work are based mostly in how the market for health insurance works.

I suspect that an insurance company selling a policy in Arkansas wouldn’t mind if I purchased such a policy so long as I went to Arkansas to use health care. If I wanted to buy a policy developed for consumers in Arkansas, but wanted to use care in North Carolina, they likely wouldn’t sell it to me because the premium is based on the health care experience of someone living in Arkansas. Similarly, car insurance rates are based on loss rates in the ZIP code in which you live, because that is where you car is most often at risk of becoming a loss.

An individual health insurance premium is based on several factors: the health of the customer and therefore the expected use of care, the benefits covered, the provider network (doctors and hospitals) that patients can use and how medicine is practiced where the patient lives. State regulations influence benefits and therefore premiums. However, the way medicine is practiced (called practice patterns) where the insured person lives has a tremendous influence on premiums, but it greatly affects the expected losses of an insurance company.

For example, in 2006, Medicare beneficiaries in McAllen, Texas, received an average of $15,000 in Medicare-financed care; in El Paso – an area with similar demographics and health status – Medicare beneficiaries received half as much, around the national average. Medicare includes the same benefits across the nation and sets payment rates. This expenditure differential cannot be explained by even indirect effects of health insurance regulation because these cities are in the same state and therefore subject to the same regulations.

The twofold difference is due primarily to practice patterns, or differences in how medicine is practiced in these two locales. This variation in how care is practiced is the main reason a premium quoted in one state won’t hold in another.

The Republican mantra of sell insurance across state lines is an effective political line, because all of us have experience with Internet shopping that has saved us money. The problem is that in the case of health insurance, it won’t work.

update: the comments from a post on this topic back in 2009 has more info, including some pro-across state line links.