Health policy wonks of all stripes agree: GOP health plan is terrible

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Despite the terrible news, I was heartened to see the phrase “healthcare policy wonks” in this article. It’s a shame these wonks weren’t included in writing the Republicans’ American Health Care Act (AHCA).

Experts from across the ideological spectrum who actually understand health care policy know that the GOP’s health care plan doesn’t pass muster.

Here are a few objections.

From the left

The repeal bill will transfer money from low-income and middle-class Americans to millionaires.
Topher Spiro and Harry Stein, Center for American Progress

From the center

Some parts of the country will see very large financial hits even if they retain coverage.
Matthew Fiedler, Brookings Institute

From the right

The flat credit will price many poor and vulnerable people out of the health insurance market.
Avik Roy, Foundation for Research on Equal Opportunity and health policy adviser to Rick Perry, Marco Rubio, and Mitt Romney presidential campaigns

This bill misses the mark primarily because it fails to correct the features of Obamacare that drove up health care costs.
Edmund F. Haislmaier, The Heritage Foundation

Did Aetna use its participation in the exchanges as leverage to get its merger approved?

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Last year, Aetna ran into some headwinds at the Department of Justice in getting its proposed merger with Humana approved. 

So they resorted to a particularly unsavory trick: pulling out of the ACA exchanges, even in places where it was profitable for them to stay in. 

Despite their insistence to the contrary, a federal judge found Aetna used its exchange participation as leverage against the Obama administration to get its merger approved.

As you might remember, insurers pulling out of the exchanges was a major source of embarrassment for Obamacare.

What happens to Pence’s HIP 2.0 if Obamacare is repealed?

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I’ve written previously about the Healthy Indiana Plan started by former Indiana governor Mitch Daniels and updated to version 2.0 under Governor and Vice President-Elect Mike Pence as Indiana’s unique take on the Patient Protection and Affordable Care Act‘s Medicaid expansion.

In short, I’ve never been the biggest fan of Pence (to put it mildly), but I gave him credit where was due for finding a way to expand access to health care in Indiana even when it meant negotiating with his political rivals in the Obama administration.

But the Obama administration is about to come to an end, and the incoming Trump administration has made repealing and replacing PPACA (more commonly known as Obamacare) one of its top priorities in its first 100 days, which might cause as many as 21 million Americans to lose their health coverage.

Senate Democrats will have enough votes to filibuster any bill to repeal Obamacare, but just as Democrats got the fix-it bill through the Senate in 2010 via the budget reconciliation process to avoid a GOP filibuster, Republicans will probably not shy away from using the same tactic.

So, assuming Republicans go this route, what will happen to one of Pence’s signature achievements as governor of Indiana? After all, HIP 2.0 relies on the federal funds for the Medicaid expansion in the Affordable Care Act.

That’s going to be an awkward conversation.

Results on the Obamacare experiment are mixed

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We’ve seen a spate of bad news about the Patient Protection and Affordable Care Act (otherwise known as Obamacare) recently.

Insurers are leaving the exchanges. For those insurers who remain on the exchanges, premiums are on the rise. In Arizona, monthly premiums for a 40-year-old non-smoker on a “silver” plan will increase from $207 to $507 (that’s a 145% increase) in 2017.

Ouch.

Not surprisingly, Republicans have seized on this.

So is the sky falling? Is Obamacare “hurting the families it was supposed to help” as John McCain charged?

Talking about unsubsidized premiums on the exchanges is misleading

Let’s take the extreme case in Arizona of a 145% increase. What opponents of Obamacare don’t account for are the tax credits that most people on the exchange receive to help them cover the cost of care. After all, that’s why people buy individual health insurance on the exchanges in the first place…because it’s the only way to qualify for these tax credits based on income.

So, after tax credits, that same customer (assuming he earns $30,000 per year) will pay $207 in 2017: exactly the same as in 2016.

Table 1: Monthly Silver Premiums

for a 40 Year Old Non-Smoker Making $30,000 / Year

2nd Lowest Cost Silver Before Tax Credit

2nd Lowest Cost Silver After Tax Credit
State
Major City
2016
2017
% Change
from 2016
2016
2017
% Change
from 2016
Arizona Phoenix $207 $507 145% $207 $207 0%
NOTES: In areas in which the two lowest-cost silver plans have the same premium, the next lowest-cost silver plan is used as the “second-lowest” silver plan. In some cases, a portion of the second lowest-cost silver plan is for non-essential health benefits so these values may differ from the benchmark used to determine subsidies.

SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. For more information see “Early Look at 2017 Premium Changes and Insurer Participation in the Affordable Care Act’s Health Insurance Marketplaces” Jul 2016.

So, sure, if you don’t qualify for tax credits, you would not want to buy this plan on the exchange. But, if you don’t qualify for tax credits,  there’s not much point in going on the exchanges to begin with.

How did this happen?

First of all, if you want to understand why the Patient Protection and Affordable Care Act was destined to raise unsubsidized health insurance premiums for healthy people, you can read my explanation here. In short, Obamacare asks healthy people to subsidize sick people so that they can access health care.

But the exchanges have been up and running since 2014. Why the big jump between 2016 and 2017?

Table 2: Total Number of Insurers by State, 2014 – 2017

Total Number of Issuers in the Marketplace
State
2014
2015
2016
2017
Arizona 8 11 8 2
SOURCE: Kaiser Family Foundation analysis of premium data from Healthcare.gov and insurer rate filings to state regulators. For more information see “Early Look at 2017 Premium Changes and Insurer Participation in the Affordable Care Act’s Health Insurance Marketplaces” Jul 2016.

NOTES: Insurers are grouped by parent company or group affiliation, which we obtained from HHS Medical Loss Ratio public use files and supplemented with additional research.

So, six of the eight insurers on the exchange for Arizona dropped out for 2017. In most industries, less competition means higher prices. So, on the surface, that would seem to explain it.

But health insurance is not most industries. The more insurers (payers) there are, the more leverage hospitals, physicians, and other health providers have to demand higher and higher reimbursement because, if one of their insurance contracts is terminated, they can fall back on their other contracts. Also, health insurance premiums are heavily regulated and must be approved by state departments of insurance in advance. In addition to the historic regulations in each state, Obamacare added a new rule that insurers must maintain medical loss ratios of at least 80 percent…meaning they must spend 80 percent of their premium income or more on paying claims.

The insurers who dropped out cited concerns about the health risks of the populations insured on the exchanges. In short, the beneficiaries were sicker as a group than the insurers had predicted, which is a phenomenon known as adverse selection. Too many young, healthy people are opting to go without insurance and simply pay the penalty, effectively turning the exchanges into a heavily subsidized high-risk pool…something even John McCain advocated when he campaigned for President in 2008.

Is private health insurance a good way to finance health care?

Despite all of the Republican protests, PPACA was designed to be a compromise between Democrats and Republicans to reform the health insurance system without eliminating private insurance. It was modeled after the health reform law that Mitt Romney signed when he was governor of Massachusetts (commonly known as RomneyCare). It’s debatable how well RomneyCare worked in Massachusetts and how good a model it was for federal policy.

I believe the only way to truly correct what is broken in U.S. health care is by burning down (metaphorically) the private health insurance system and moving to a single-payer system financed directly by the Treasury (that is, by taxes). Here’s why:

  • Only single payer can solve the adverse selection problem. Although there is a penalty for not carrying health insurance under the Affordable Care Act, many people — especially young and healthy people — have opted to remain uninsured and pay the penalty because it’s cheaper than buying even subsidized insurance on the exchanges. But, with a single-payer system, every American would be automatically enrolled, and risk would be spread broadly among them. It would not be possible for anyone to be uninsured.
  • Single payer reduces the cost of health care itself. Health insurance premiums are a function of the cost of health care. A system with multiple payers adds layers of administrative complexity for health providers just trying to get reimbursed for the care they provide. Whether it’s managing multiple insurance contracts, hiring collection agencies to chase down payments from patients, or writing off uncompensated care, these costs get passed on in the form of demands for ever higher reimbursement from private insurers with the threat that they will go out of network if their demands are not met. In my hometown of Indianapolis, our largest insurer (and my former employer) Anthem Blue Cross and Blue Shield initially offered health plans on the exchange with “narrow networks,” to reduce costs but later backed off when subscribers were unhappy. With a single-payer system, no provider would dare go out of network because there would be no other source of income to fall back on. That’s the power of a monopsony to reduce costs. It would also eliminate the uncompensated care problem because everyone would be covered.
  • Single payer covers everyone, without exception. The goal of universal health coverage in the United States has been frustratingly elusive. The Affordable Care Act has reduced the uninsured rate from 16 percent to 8.6 percent, which is a tremendous achievement. But 8.6 percent still adds up to 27.3 million people, and that’s 27.3 million too many. Plus, many of the insurance plans offered today, including on the exchanges, have high deductibles and out-of-pocket limits, putting beneficiaries at great financial risk even though they are technically “insured.”

What else can be done?

With that said, a single-payer system doesn’t seem politically feasible, and repealing the Affordable Care Act like the GOP wants to do would put us right back where we started before 2010…including all of the serious problems that went with it. So, what can realistically be done to address the very real problems on the Obamacare exchanges?

  • Substantially increase the penalty for going without insurance. It wouldn’t be popular, but changing the financial calculus could bring more healthy people into the risk pool, which would in turn reduce insurance premiums by spreading risk more broadly. If the penalty were higher than the cost of insurance (or at least not dramatically lower), there would be little to no incentive for remaining uninsured. The higher the penalty, the lower the premiums.
  • Crack down on special enrollments. The exchanges offer special enrollment periods — intended to enable people who have had life changes like a job loss or a change in marital status — to enroll outside of the annual open enrollment period. Insurers have suggested that people have been abusing these special enrollment periods…waiting until they get sick to buy health insurance off cycle instead of enrolling during the open enrollment period.
  • Sweeten the deal for young people. To get more young people (who tend to be healthy) into the pool, they need to be enticed. Perhaps an extra tax credit for people under 30 could change the equation, at least for some. Alternatively, changing the 3:1 age banding requirement (meaning that the oldest person in the pool can only be charged three times as much as the youngest person in the pool) to something more like 5:1 could encourage more young people to enroll since their premiums would be lower.
  • Reduce the cost of care. Despite the spike in premiums on the exchanges in some states, the Affordable Care Act is working to slow the growth of total health care spending…actually exceeding expectations. If we can mitigate the adverse selection problem by getting more young, healthy adults into the risk pool, premiums will follow suit.obamacare-total-spending

 

 

Health insurance can literally be a life-or-death issue

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Health insurance is not health care (and just because health insurance premiums rise does not necessarily mean health care is more expensive), but health insurance is a crucial mechanism that we use to finance and access health care.

And, in some cases, not having health insurance can be the difference between life and death. Just take a look at the results of two studies  published in the August issue of the journal Cancer comparing survival rates for men with two forms of cancer based on insurance status.

From the first study, regarding glioblastoma multiforme, an aggressive type of brain cancer:

Among the 13,665 adult patients in the study cohort, 558 (4.1%) were uninsured, 1516 (11.1%) had Medicaid coverage, and 11,591 (84.8%) had non-Medicaid insurance. Compared with patients who were uninsured, insured patients were more likely to be older, female, white, married, and with a smaller tumor size at diagnosis. Accelerated failure time analysis demonstrated that older age (hazard ratio [HR], 1.04; P<.001), male sex (HR, 1.08; P<.001), large tumor size at the time of diagnosis (HR, 1.26; P<.001), uninsured status (HR, 1.14; P =.018), and Medicaid insurance (HR, 1.10; P =.006) were independent risk factors for shorter survival among patients with GBM, whereas radiotherapy (HR, 0.40; P<.001) and married status (HR, 0.86; P<.001) indicated a better outcome. The authors discovered an overall yearly progressive improvement in survival in patients with non-Medicaid insurance who were diagnosed from 2007 through 2011 (P =.015), but not in uninsured or Medicaid-insured patients.

Rong, X., Yang, W., Garzon-Muvdi, T., Caplan, J. M., Hui, X., Lim, M. and Huang, J. (2016), Influence of insurance status on survival of adults with glioblastoma multiforme: A population-based study. Cancer. doi:10.1002/cncr.30160

Translation: patients with private insurance lived the longest with this form of brain cancer. In terms of surviving glioblastoma multiforme, Medicaid did not seem to make a difference compared to being uninsured.

And the second study, regarding germ cell testicular cancer:

Uninsured patients had an increased risk of metastatic disease at diagnosis (relative risk [RR], 1.26; 95% confidence interval [CI], 1.15-1.38) in comparison with insured patients, as did Medicaid patients (RR, 1.62; 95% CI, 1.51-1.74). Among men with metastatic disease, uninsured and Medicaid patients were more likely to be diagnosed with intermediate/poor-risk disease (RR for uninsured patients, 1.22; 95% CI, 1.04-1.44; RR for Medicaid patients, 1.39; 95% CI, 1.23-1.57) and were less likely to undergo lymph node dissection (RR for uninsured patients, 0.74; 95% CI, 0.57-0.94; RR for Medicaid patients, 0.76; 95% CI, 0.63-0.92) in comparison with insured patients. Men without insurance were more likely to die of their disease (hazard ratio [HR], 1.88; 95% CI, 1.29-2.75) in comparison with insured men, as were those with Medicaid (HR, 1.58; 95% CI, 1.16-2.15).

Markt, S. C., Lago-Hernandez, C. A., Miller, R. E., Mahal, B. A., Bernard, B., Albiges, L., Frazier, L. A., Beard, C. J., Wright, A. A. and Sweeney, C. J. (2016), Insurance status and disparities in disease presentation, treatment, and outcomes for men with germ cell tumors. Cancer. doi:10.1002/cncr.30159

Translation: men who had private insurance were 88 percent more likely to survive germ cell testicular cancer than those who were uninsured, and the men who had Medicaid were 58 percent more likely to survive than those who were uninsured.

In both studies, patients with private insurance tended to be diagnosed earlier on the disease progression than uninsured and Medicaid patients, and this was shown to be important to a patient’s survival.

Arguments for the left and right

There is fodder here for both sides of the political aisle. On the one hand, liberals can point to the 58 percent increase in survival rates among Medicaid patients compared to those who were uninsured. And they can also point to the researchers’ acknowledgement that many of the Medicaid patients were likely to have been uninsured until just after being diagnosed with cancer. Clearly having Medicaid was better for these patients than having no insurance at all.

And yet, on the other side of the aisle, conservatives can point to the results of the first study that, despite all the tax dollars spent on Medicaid, it did not seem to make a difference in survival rates compared to having no insurance at all. Even with the second study, the right can point to the far superior outcomes of patients with private insurance compared to those with Medicaid, even while acknowledging that Medicaid was better for those patients than being uninsured.

Underlying issues

So, what’s an objective observer concerned about health policy supposed to make of these results? I have a few suggestions.

  • Private insurance probably improves access to care because reimbursement rates for physicians and hospitals are much higher than Medicaid. Many physicians will not accept Medicaid patients due to the very low reimbursement rates. Medicaid can also have issues with the timeliness of reimbursement, depending how much funding is left in a given state’s Medicaid budget. Even the physicians who do accept Medicaid might be less inclined to proceed with aggressive cancer treatments for their Medicaid patients than they would be for their patients with private insurance. The germ cell study found that Medicaid and uninsured patients did have a different treatment path from patients with private insurance, but this might be because they were also diagnosed later.
  • Medicaid isn’t as good as private insurance, but it’s better than nothing. Particularly for the germ cell cancers, Medicaid patients had much better outcomes than uninsured patients even though they did not fare as well as the patients with private insurance. Medicaid certainly has its administrative and funding/reimbursement challenges as a government bureaucracy reliant in part on state government sources, but does anyone seriously believe this is causing the cancer patients in their population to die in such large numbers? I’m all for innovations to make Medicaid as efficient as possible so that it can serve these populations as effectively and cost effectively as possible, but the idea that is it a hindrance to care for people who can’t afford private insurance is simply not borne out by the evidence. One learning point from these studies for Medicaid plans is to do more to encourage their populations to get cancer screenings so that these cancers can be caught earlier, but that doesn’t fully explain the insurance disparities.
  • These comparisons don’t represent realistic policy choices. I don’t know of anyone on either side of the aisle who has proposed putting the Medicaid population on private health insurance plans like the ones employers offer to their employees. Republicans would balk at the high cost to taxpayers, and Democrats would balk at the high levels of cost sharing for poor people who can’t afford it as well as the involvement of private insurance companies in general. Sure, some private health insurers have contracts with state governments to administer managed Medicaid plans, but those plans still don’t reimburse physicians and hospitals the way private plans do. They’re not equivalent. Even the private health insurance plans that are available on the exchanges for people a little higher up the economic ladder than Medicaid patients tend to have lower physician and hospital reimbursement rates than most employer-sponsored or individual plans outside of the exchanges. Considering how many Medicaid patients are covered by managed Medicaid plans operated by private insurance companies, one would think these private insurers would be able to close the gap between their regular insured and their Medicaid patients. Given the very real policy implications being debated in state legislatures today, it would be interesting to learn if there are real disparities between managed Medicaid and traditional Medicaid patients, but so far that research is lacking.
  • Medicaid is not Medicare, and it’s especially not single payer. Some on the left, like Senator and former presidential candidate Bernie Sanders, have been calling for a single-payer system that would essentially be “Medicare for all.” Medicare’s reimbursement rates are lower than private insurance but higher than Medicaid, and Medicare have the same payment timeliness issues that Medicaid does because it’s funded entirely by the federal government without involvement of state governments. Unlike Medicaid, physician participation in Medicare is already nearly universal (although I don’t know of too many pediatricians who take Medicare patients today because most Medicare beneficiaries are over 65). Eliminating private health insurance and moving to a “Medicare for all” system regardless of age would bring those pediatricians and the few outliers from other specialties into the Medicare fold because there would literally be no other source of income for them if they intended to continue practicing medicine at all.
  • Achieving equally bad outcomes would be a pyrrhic victory. I’ve seen bumper stickers from conservatives that read, “Liberals want misery spread equally.” It’s a concern worth addressing. If we address these disparities by merely reducing the survival rates of people who currently have private insurance, things will be equal, but no one will be better off. For germ cell testicular cancer, the research tells us that taxpayer dollars spent on Medicaid are quite literally saving lives for people who would otherwise be uninsured. But it’s very important that we understand the complex reasons why the Medicaid population is experiencing these disparities compared to the population with private insurance and address them. My health economics professor from graduate school would say that we need to build a better model.

Republicans choose poison pills over Zika virus prevention

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The Zika virus is a very scary thing indeed, and it is on the march here in America.

As of June 22, 820 cases have been reported in U.S. states and the District of Columbia, and another 1,860 cases have been reported in U.S. territories.

In February, President Obama requested $1.9 billion from Congress to fund Zika virus prevention. Congressional Republicans have responded with a bill that provides $1.1 billion in funding plus $622 million in reallocated funds.

It’s not everything President Obama asked for, but under ordinary circumstances he’d probably be eager to sign it. But he can’t sign this bill.

Why? Because Republicans have loaded the bill with a GOP wish list of exemptions from the Clean Water Act. Emergency pesticide use in cases like stopping the Zika virus is already exempt from these Clean Water Act regulations, but Republicans are counting on voters not to make such a fine distinction and just deregulate pesticide use in general. This bill also includes language prohibiting taxpayer funding for abortion (because the Zika virus causes birth defects), but the Hyde Amendment already prohibits that to begin with.

Republicans want to force President Obama to veto the bill so it looks like he doesn’t care about stopping the Zika virus — even though he asked for this funding back in February. It’s a poison pill: burying deal-breaker language in a piece of seemingly uncontroversial legislation just to embarrass your political opponents when they can’t support it, and it’s a tactic that both sides use all the time.

Since both sides agree that the funding is necessary, the games that politicians on Capitol Hill are playing with this legislation are wasting valuable time in the eyes of the people whose job it is to actually prevent the disease.

This is no way to fight an epidemic…Three months is an eternity for control of an outbreak. There is a narrow window of opportunity here, and it’s closing. Every day that passes makes it harder to stop Zika.”

— Dr. Thomas Frieden, CDC director, May 2016

John Oliver buys – and forgives – $15 million in medical debt

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John Oliver, host of Last Week Tonight on HBO, did something truly incredible recently. He purchased nearly $15 million in medical debt…and then forgave it all.

As wonderful as that act of generosity was, it was barely a drop in the bucket for the gigantic problem of medical debt in the USA.

Disclaimer: It only cost John Oliver $60,000 to buy this debt, but that’s still hugely generous.