One more thing on Seniors’ Choice Act

Even if we managed to get the details straight for Sens. Burr and Coburn’s proposal to move toward a competitive bidding/premium support approach in Medicare (my early take, Austin’s thoughts; more this morning on premium support), it is impossible to fully evaluate their proposal without knowing what they plan to do about the ACA. Their latest proposal assumes implementation of the ACA, but they continue to call for its repeal and presumably, replacement. And of course the Seniors’ Choice Act would increase the eligibility age for Medicare, making the question of access to health insurance for the near elderly even more important.

Sens. Burr and Coburn co-sponsored a proposal to address coverage for younger persons in the last Congress (The Patients’ Choice Act), but it has never been scored by the CBO. Presumably, that could change, and it would be a useful step. You cannot fully evaluate the Seniors’ Choice Act without knowing the health insurance plan for the under-65 age group that would operate along side it.


More on Butler and the individual mandate

Kenneth Thomas has a nice post on Stuart Butler’s change of heart on the individual mandate. I think he and Aaron think I was too easy on Butler, and Ezra Klein likely concurs, especially given the timing of Butler’s switch.

One point from Butler’s USA Today piece that I want to highlight and comment on:

So why the change in this position in the past 20 years?

First, health research and advances in economic analysis have convinced people like me that an insurance mandate isn’t needed to achieve stable, near-universal coverage. For example, the new field of behavioral economics taught me that default auto-enrollment in employer or non-employer insurance plans can lead many people to buy coverage without a requirement. [emphasis mine]

The thing I most hold against Butler and many other conservatives is the degree and vociferousness of their opposition to the ACA given their past positions. A reasonable, policy based opposition might have gone something like “I used to support the individual mandate, but no longer think it is the best approach. Instead of an individual mandate, we should use auto-enroll procedures to attain the needed risk pooling. The CBO should estimate how different the individual mandate is from aggressive auto enroll procedures.”

Instead, the individual mandate was painted as an unimaginable affront to the Republic, etc. etc. and this had the effect of moving us away from the policy.

Interestingly, the first comprehensive reform bill introduced into the 111th Congress (on May 20, 2009, about a month before the first version of HR 3200 was reported out of any House committee) was the Republican sponsored Patients’ Choice Act (PCA), that had at its heart the use of auto-enroll procedures to achieve risk pooling.

It was introduced by Reps. Paul Ryan and Devin Nunes, and Sens. Tom Coburn and Richard Burr. This plan proposed altering the tax treatment of employer paid insurance, providing individuals with money to defray the cost of buying private insurance in state based exchanges, and advocated auto-enroll procedures such as signing persons up by default when they renewed their drivers license or paid state income taxes. There are some big problems with this bill, however, there are similarities with the ACA that suggest that a deal could be possible in policy terms.

The PCA has never been scored by CBO. I have written that I would like to know how different auto enroll procedures would be from the weak individual mandate contained in the ACA, in terms of insurance expansions.

Given that Stuart Butler has included his interest in auto-enroll procedures as a reason for no longer supporting an individual mandate, I would love for him to join me in calling for the sponsors of the Patients’ Choice Act (one of them is my senior Senator) to provide the details necessary for the CBO to score their bill. This would provide us with some sense of the relative effect of auto enroll procedures vs. an individual mandate in expanding insurance coverage. Who knows, we might accidentally stumble upon a compromise.


Patients’ Choice Act-Title II State Based Exchanges

The Patients’ Choice Act (PCA) represents Rep. Paul Ryan’s vision for what “replace” would look like for two-thirds of all Americans (160 Million now privately insured, and 50 million uninsured) if the Affordable Care Act were repealed. I am going to write a series of posts on the various Titles, or sections, of the bill. Past posts on the PCA:

This post looks at Title II of the PCA-State-Based Health Care Exchanges (pp. 18-26).

  • Sec 202 (b) (p. 20). Benefit Parity with Members of Congress. This section does not guarantee that all Americans will get the same type of health insurance enjoyed by members of Congress, at least not at the same price. I read the text as saying that states cannot mandate different benefit levels than those enjoyed by Congress, however, there is no limit to the premium or cost sharing that can be charged for these benefits (see Sec 202 (a)(4) p. 20). Further, the amount of the tax credit provided by the PCA ($5,710 for family coverage; $2,290 for individual, p. 28) is far below the cost of a typical private insurance policy, much less what is provided to members of Congress. The federal employees health plan provides a guaranteed percentage of the premium cost for plans regardless of what they cost, which the PCA does not do. In fact, the meta point of the PCA is to move away from a guaranteed amount of insurance coverage in favor of a defined federal contribution.
  • Sec 202 (c)(1) (p.21). Automatic enrollment procedures that are designed to get persons covered by health insurance are envisioned, and the phrase “universal” is invoked on line 1 of p. 21 even if some supporters are leery of such lingo. Settings/mechanisms for auto enrollment into health insurance mentioned include ERs, submission of state tax forms, workplaces, and state dept of motor vehicles offices, such as when people renew their drivers license. This subsection lays out other procedures designed to aid in enrollment, such as having open enrollment periods and specifies that all individuals can sign up for a plan so long as they agree to pay the premiums and cost share amounts. Sec 202 (c)(5) allows individuals to opt-out of health insurance.
  • Sec 202 (c)(4)(p. 22). Limitations of Pre-Existing Condition Exclusions. This section reads in full “The State Exchange shall ensure that health insurance coverage offered through the Exchange meets the requirements of section 9801 of the Internal Revenue Code of 1986 in the same manner as if such coverage was a group plan.” This places limits on pre-existing conditions, but does not ban them for policies sold in exchanges (exclusions limited to 6 months prior to enrollment to 12 months after).
  • Sec 202 (d)(1- 2)(p.22-25). Limitation on Exorbitant Premiums. Exchanges are directed to develop ways of protecting enrollees from “imposition of excessive premiums” and potential mechanisms include risk adjustment by a state-based board, high risk pools, reinsurance and interstate compacts. To fully evaluate these proposals requires far greater detail, like what would be expected if the relevant House committees marked up the PCA which must happen for this to ever become law. Then CBO could weigh in.

The PCA is a serious proposal that remains incomplete; many details are needed to make a full comparison with the Affordable Care Act possible. Reflecting on Title II, my biggest question is:

  • how different would aggressive auto enroll procedures be from the relatively weak penalty for not being insured contained in the Affordable Care Act in terms of insurance coverage attained? I sure would like to know what the CBO thought.

Patients’ Choice Act Needs to Meet the CBO

As I noted Thursday, Rep. Paul Ryan‘s speech last week embracing the Patients’ Choice Act (PCA), completed the “replace” part of his call to “repeal and replace” the Affordable Care Act.  While the details of Rep. Ryan’s plan differ for the various parts of the system, the overriding idea is moving toward a defined contribution from the federal government, instead of a commitment to providing a given level of insurance coverage, shifting costs to either individuals or states. The outline of Rep. Ryan’s overall “replace” plan is:

  • Medicare (45 Million persons in 2011). No great changes for those now covered by Medicare, or who will be so covered in the next 10 years. However, for those who become eligible for Medicare more than 10 years from now, they would receive a voucher with which to purchase private health insurance. Eventually, Medicare as a government insurance plan would go away with the death of the last beneficiary, replaced by this system of private coverage.
  • Medicaid (60 Million persons in 2011). Block grant the program to states, fixing the cost to the federal government and shifting the balance to the states.

These two policies were adopted  in broad form (235-189) when the House of Representatives passed its Budget Resolution on April 15, 2011, and have been much discussed; I am not going to get into them (Austin has written a lot on the Medicare proposal). I am going to instead focus on the last part of Rep. Ryan’s replacement strategy, the Patients’ Choice Act, that would directly impact around two-thirds of the U.S. population almost immediately if passed:

  • Privately insured (160 Million persons in 2011) and uninsured (50 Million persons in 2011). The Patients’ Choice Act represents Rep. Ryan’s vision for how health insurance would be remade for persons who are not elderly and not poor enough to qualify for Medicaid. In short, the tax preference of employer paid insurance would be repealed, all persons/families would get the same tax credit with which to purchase private health insurance, either inside or outside of state-based exchanges. The premium levels are far below average premiums today, meaning they would finance only catastrophic levels of coverage. There are many details that need to be considered. I outlined some of them last week.

I am going to drill down on these details by going through several of the key Titles of the PCA over the next couple of weeks. However, the punch line for this analysis is clear regardless of what I think:

  • the House Republicans need to mark up the PCA in committee (Commerce and Ways and Means for sure, perhaps Budget), pass the bill out of the relevant committees, and see what the CBO has to say about them.

Politically, it is an advantage to “have a plan” but not commit to the nitty gritty details. The PCA has been around for a while, having been introduced into the 111th Congress on May 20, 2009 but has never been scored by CBO since it did not see the light of day in the last Congress because the Democrats controlled the House of Representatives. However, the Republicans have controlled it for the past 9 months, and there is nothing standing in their way of filling in the blanks, passing the  PCA out of committee(s) and seeing what the CBO has to say. To paraphrase what a Little League umpire once told me, the PCA is nothing until CBO tells us what it is. Only then can the country understand the replace part of repeal and replace.

From the archives: Patients’ Choice Act

Paul Ryan‘s speech on Tuesday outlined the balance of his “replace” strategy to go along with the Medicare and Medicaid reforms passed in the House Budget. A House Budget Committee spokesman confirmed via email that they are not introducing new legislation, but that Ryan’s efforts will be built upon the Patients’ Choice Act, introduced into the 111th Congress on May 20, 2009. Some of my blogging about the PCA (many links) is here and here. I wrote the following column in the Raleigh, (N.C.) News and Observer on July 24, 2009 about the Patients’ Choice Act. I think it holds up pretty well 26 months later as outlining the key issues with the PCA; I will blog more about them in the future.


Sen. Richard Burr, R-N.C., is a co-sponsor of the Patients’ Choice Act, the major Republican health care reform alternative in Congress. It has yet to be “scored” by the Congressional Budget Office (CBO), and important details are unclear. However, this Act would represent a consequential change by repealing the tax exclusion of employer-paid insurance premiums and replacing it with tax credits. The Act differs in many ways from the Democratic bills in Congress, but there are some points of potential compromise.

The Act would provide an advanceable, refundable tax credit ($5,710/ family or $2,290/individual) that non-elderly individuals would use to purchase insurance. States would arrange “health care exchanges” through which private insurers would voluntarily offer plans that would be mandated to provide a benefit package similar to what Congress enjoys.

The plan would increase insurance coverage (how much is unclear) and likely result in an increase in deductibles of those covered. This is because the amount of the tax credit is less than half the current average premium ($13,000 family; $5,000 individual) of a private insurance plan. As premiums fall, deductibles rise, exposing individuals to more of the actual cost of their care. This aspect of the Act has the potential to reduce use, and therefore costs.

Employers could still pay premiums on behalf of their employees, but this would be taxable income. If a high-deductible plan costing less than the tax credit is chosen, the balance is placed in a Health Savings Account (HSA). Families can put $5,950/year ($3,000 for individuals) into a HSA and the money can be used to pay for care or insurance premiums. Individuals would be more involved in arranging their own insurance under this plan.

The biggest question is how the state insurance exchanges would work. There is no individual mandate to purchase insurance, but the Act envisions states developing automatic enrollment provisions whereby persons would be signed up for high-deductible plans when they did things like renew a driver’s license, unless they opted out.

This “soft individual mandate” is important because the plan bans health insurers from denying coverage based on pre-existing conditions, so you need a way to get healthy people into the insurance pool.

Because the tax credits can be used to buy plans both inside and outside of the state-based exchange, there is a danger that only the sickest patients will seek coverage via the exchange, since coverage cannot be denied. If this happened systematically, it could result in death spiral whereby only poor risks are included in exchange-based plans. However, the Plan notes that exchanges “shall develop mechanisms to protect enrollees from the imposition of excessive premiums, reduce adverse selection, and share risk.”

While the devil is in the details, this vagueness provides an opportunity for compromise, as the risk adjustment provisions for setting premiums from the Kennedy-Dodd Senate HELP committee bill (on which Burr sits) could fill in the blanks and are noncontroversial. These provisions allow for the consideration of family structure, actuarial value of benefits, geographic area and age only in setting premiums (premiums couldn’t vary more than 2 to 1, oldest to youngest).

Both plans ban exclusion on the basis of pre-existing conditions. And if auto enroll procedures are aggressive, there may only be semantic differences between Burr’s approach and the individual mandate which is included in all Democratic bills.

The cost of the tax credits in the Patients’ Choice Act alone is likely to be larger than the amount saved by repealing the tax exclusion for employer-provided insurance. And a big question is how many persons would be insured by the Act. These two crucial pieces of information will only be available after the CBO scores the bill. The CBO is playing the role of umpire in health reform, judging all bills in terms of their cost to the federal treasury and impact on insurance rates.

Several provisions in the Patients’ Choice Act would reduce the plan’s cost to the federal government, but these costs would mostly shift to states. The most notable such change is the proposed block-granting of the federal share of Medicaid’s long-term care coverage of the elderly and disabled, which might reduce the federal cost by up to $600 billion over 10 years.

However, this would either increase state costs, or necessitate changing how care is provided to such persons, with the impact on access and quality of care being unclear. The plan includes several other provisions, such as changes in how Medicare Advantage plans are paid, means-testing Part D prescription benefits and a modest malpractice reform.

The most intriguing aspect of the Act is the creation of a Health Services Commission, to be run by five commissioners appointed by the president and confirmed by the Senate. The purpose of the commission is to “enhance the quality, appropriateness, and effectiveness of health care services through the publication and enforcement of quality and price information.”

A systematic look at the Medicare program (treatment coverage decisions, payment approaches, quality improvement strategies) that was insulated from Congress in a manner similar to the military base-closing commission would be a good first step toward addressing cost inflation in Medicare in a comprehensive and reasoned manner. Lessons learned from Medicare could then be applied more broadly to the health system.

Any such effort will undoubtedly be called rationing by those wanting to kill it, and quality improvement and cost-effectiveness by those arguing for it. Whatever we call it, we must begin to look at inflation in the health care system generally and in Medicare in particular.

When did the IPAB become so controversial?

Sometime after May 20, 2009, the day that Rep. Paul Ryan (R-WI) introduced The Patients’ Choice Act (PCA) into the 111th Congress (along with co-sponsors Devin Nunes, and Sens. Tom Coburn and Richard Burr). The PCA proposed changing the tax treatment of private health insurance and providing everyone with a refundable tax credit with which to purchase insurance in exchanges. However, it is less widely understood that the PCA also proposed two governmental bodies to broadly apply cost effectiveness research in order to develop guidelines to govern the practice of, and payment for, medical care. The bodies proposed in the PCA had more teeth, including provisions to allow for penalties for physicians who did not follow the guidelines, than does the Independent Payment Advisory Board (IPAB) that was passed as part of the Affordable Care Act.

Rep. Ryan did not include such provisions in his budget plan unveiled earlier this Spring, and he has recently been a vocal critic of the IPAB. For example, on May 11, 2011, he tweeted from @RepPaulRyan the following:

Repeal POTUS rationing board for current seniors, ensure NO CHANGES for those 55+, save Medicare for next generation: and included a link to this video (his comment about repealing the ‘rationing board’ or IPAB is at the 3:58 mark of the video).

Rep. Ryan has undergone quite a change of heart from May 2009 to May 2011. Don’t take my word for it, lets look at the details of the PCA that he co-sponsored in May, 2009.

Title VIII of the PCA created two boards: a Health Services Commission, and a Quality Forum. Following are key portions of the bill text with line numbers removed (but the full section is relatively short pp. 205-216, so you can read the entire section for yourself in just a few minutes):

Purpose, sec. 801 (b), p. 207
(b) PURPOSE.—The purpose of the Commission is to enhance the quality, appropriateness, and effectiveness of health care services, and access to such services, through the establishment of a broad base of scientific research and through the promotion of improvements in clinical practice and in the organization, financing, and delivery of health care services.Duties, sec. 802 (a), p. 207-08
(a) IN GENERAL.—In carrying out section 801(b), the Commissioners shall conduct and support research, demonstration projects, evaluations, training, guideline development, and the dissemination of information, on health care services and on systems for the delivery of such services, including activities with respect to—(1) the effectiveness, efficiency, and quality of health care services; (2) the outcomes of health care services and procedures; (3) clinical practice, including primary care and practice-oriented research; (4) health care technologies, facilities, and equipment; (5) health care costs, productivity, and market forces; (6) health promotion and disease prevention; (7) health statistics and epidemiology; and (8) medical liability.

The Act also proposed, under subtitle B, a sub-unit of the Health Services Commission, a 15 member Forum for Quality and Effectiveness in Health Care.

Membership, sec. 812, p. 210-11
(a) IN GENERAL.—The Office of the Forum for Quality and Effectiveness in Health Care shall be composed of 15 individuals nominated by private sector health care organizations and appointed by the Commission and shall include representation from at least the following: (1) Health insurance industry. (2) Health care provider groups. (3) Non-profit organizations. (4) Rural health organizations.

Duties of the Forum, sec. 813, p. 211-12

(a) ESTABLISHMENT OF FORUM PROGRAM.—The Commissioners, acting through the Director, shall establish a program to be known as the Forum for Quality and Effectiveness in Health Care. For the purpose of promoting transparency in price, quality, appropriateness, and effectiveness of health care, the Director, using the process set forth in section 814, shall arrange for the development and periodic review and updating of standards of quality, performance measures, and medical review criteria through which health care providers and other appropriate entities may assess or review the provision of healthcare and assure the quality of such care.

When Boards will bring about guidelines, p. 213

(e) DATE CERTAIN FOR INITIAL GUIDELINES AND  STANDARDS.—The Commissioners, by not later than January 1, 2012, shall assure the development of an initial set of guidelines, standards, performance measures, and review criteria under subsection (a).

Enforcement Standards, sec. 814, p. 213-214

(b) ENFORCEMENT AUTHORITY.—The Commissioners, in consultation with the Secretary of Health and Human Services, have the authority to make recommendations to the Secretary to enforce compliance of health care providers with the guidelines, standards, performance measures, and review criteria adopted under subsection(a). Such recommendations may include the following, with respect to a health care provider who is not in compliance with such guidelines, standards, measures, and criteria: (1) Exclusion from participation in Federal health care programs (as defined in section 1128B(f) of the Social Security Act (42 U.S.C.1320a–7b(f))).(2) Imposition of a civil money penalty on such provider. [emphasis mine]

I think the policy proposed by Rep. Ryan and his co-sponsors was quite good, as I wrote on July 24, 2009.

The most intriguing aspect of the Act is the creation of a Health Services Commission….A systematic look at the Medicare program (treatment coverage decisions, payment approaches, quality improvement strategies) that was insulated from Congress in a manner similar to the military base-closing commission would be a good first step toward addressing cost inflation in Medicare in a comprehensive and reasoned manner. Lessons learned from Medicare could then be applied more broadly to the health system.

Any such effort will undoubtedly be called rationing by those wanting to kill it, and quality improvement and cost-effectiveness by those arguing for it. Whatever we call it, we must begin to look at inflation in the health care system generally and in Medicare in particular.

Obviously Rep. Ryan can change his mind, and seems to have done so. However, going from proposing what could be thought of as IPAB-on-steroids to deriding the general approach as rationing-that-is-harmful is quite a big change. What happened to change Rep. Ryan’s mind?