Saturday, April 29, 2017

Will Medicaid drown in a high risk pool? (updated)

Update, 5/3/17: $100 billion over ten years for high risk pools, as speculated below? Ha ha ha -- a HRP patch has been proposed, and it's all of $8 billion over 5 years. That's after a $15 billion "invisible risk" fund was tacked onto a $115 billion state stability fund... the math outlined below still broadly applies. As Larry Levitt said of the $15b infusion, it's all chump change. And they're making the ACA look simple.
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Rumor has it that Republican leadership may lure "moderates" holding out against AHCA passage by throwing perhaps $100 billion over ten years into high risk pools. Moderates could then declare themselves satisfied that prospective individual market enrollees who have pre-existing conditions will have access to coverage.

Leaving aside the historic poor performance of high risk pools, this reinforces my fear that all the public hand-wringing about medical underwriting is a smokescreen, giving moderates cover to eventually sign onto a bill that still rolls back the Medicaid expansion and cripples all Medicaid via per capita caps.

In fact, the patchwork of funding grants slapped onto the bill via amendment  (pregnant women and addiction! invisible risk! more medical expense deduction!) can be used to obfuscate and only modestly soften the original AHCA's basic math: over ten years, $1.2 trillion in healthcare spending cuts offsetting $880 in revenue loss stemming from repeal of the ACA's taxes and mandates. In the original bill, the spending cuts include:

  • $880 billion to Medicaid, via repeal of Medicaid expansion and imposition of per capita caps on federal contribution
  • $673 billion cut mainly by repealing ACA marketplace subsidies, partly offset by $361 billion in new subsidies for the individual market and $80 billion for "stability funding" for states
The original bill's $337 billion in 10-year budget savings credited by CBO can be spent down to placate various groups, reducing a $1.2 trillion spending cut toward a mere $900 billion while boasting about generous spending. That's what Republicans are doing (spending and boasting). Here's Tom MacArthur on March 27, posing as a champion of the vulnerable:
To protect lower-income, working families, I insisted that the federal government continue to pay 90% of the cost for those currently in Medicaid Expansion - including nearly 500,000 New Jerseyans - as was promised in the ACA, and also successfully negotiated that no other changes would be made to Medicaid until 2020.  Further, the old funding equation for Medicaid was inadequate, especially for the elderly and the disabled.  To fix this, I fought alongside others, and won $60 billion dollars in additional resources for states so they can continue to provide high-quality health care through the Medicaid program.

Another critical issue for me was increasing the tax credit for older Americans in the 50-64 age group, many of whom call Burlington and Ocean Counties home.  Millions of people in this age group are living on fixed income and would not have been able to pay more money for quality health insurance.  I was also concerned that the gap between ACA subsidies and the proposed tax credits would be too large, and that these Americans would lose coverage or access to care. In response, I fought for and won an additional $90 billion dollars in tax credits for these older Americans, plus an additional $15 billion for new mothers, mental health care, and substance abuse care, a critical issue to me given the heroin and opioid addiction crisis gripping our state and nation.
There are four boasts here. The first one is breathtaking in its chutzpah. No further changes to Medicaid until 2020! The bill he's touting ends the federal government's 90% share of the cost for Medicaid expansion beneficiaries as of 2020, thereby effectively ending the expansion. Given high Medicaid churn, CBO estimates that 95% of those funded by the 90% match would be gone by the end of 2024.  Next, MacArthur boasts about a March 20 amendment that uses a more generous inflation adjustment to the per capita caps the bill imposes on the federal Medicaid contribution.* This change led CBO to reduce its estimate of the 10-year Medicaid spending cut from $880 billion to $839 billion (MacArthur's spending estimates seem to be higher than reported figures).

Touting these two changes reminds me of the Cyclops' promised "gift" to Odysseus: you will be eaten last.

Next, MacArthur touts two straight-up funding boosts. After analysts graphically demonstrated the gross inadequacy of the original AHCA's subsidies for older buyers, a planned amendment (which was never actually written into the bill) directed the Senate to find a way to allocate $75 billion to bolster tax credits for those in the 50-64 age band. (The House bill instead lowered the threshold for deducting medical expenses, a tax break that overwhelmingly benefits the affluent. That break was estimated by CBO to cost the Treasury $85 billion over 10 years.**) Finally, of a total of $130 billion allocated in state stability funding, $15 billion is set aside for services related to maternity coverage and newborn care, and mental health and substance use.

Shreds and patches. MacArthur is posing as Santa Claus for giving back less than 20% of what the AHCA takes away in federal healthcare spending.

At the same time, Republican leadership placated the party's right wing and got the Freedom Caucus aboard by allowing states to opt out of the ACA's core consumer protections, Essential Health Benefits and guaranteed issue (a ban on insurance companies varying premiums in light of an applicant's medical history). States that restore a measure of medical underwriting must establish either reinsurance programs or high risk pools. Hence the talk of more robust federal funding for the latter, which historically have proved chronically underfunded and ineffectual.

Meanwhile, in the hue and cry about that opt-out provision, most moderates who spoke out against the bill staked their opposition on the erosion of protections for people with pre-existing conditions. That's where all the heat is now: ACA defenders have starkly highlighted studies indicating that half the population is subject to such conditions.

Moderates may now dive into more deeply funded high pools to avoid that heat. If they do so, will everyone have forgotten about $839 billion in Medicaid cuts, still forecast to reduce enrollment by 14 million, and still likely to erode enrollment and service quality across the full range of Medicaid programs?

I don't think Republicans consciously planned to raise anxiety and passion about pre-existing conditions to divert attention from their planned decimation of Medicaid. But that's where they're tacking

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* Thanks to Edwin Park of the Center for Budget and Policy Priorities for pointing me to this change.

** Updated and corrected, with help again from Edwin Park.  As his post linked to above explains, the ACA raised the income threshold above which medical expenses could be deducted to 10%. The first AHCA iteration dropped it back down to 7.5%; this amendment dropped it further to 5.8%. Three quarters of the benefits of both drops would go to households with incomes over $100,000, according to Tax Policy Center and CPBB estimates; just 3% would go to taxpayers with incomes below $50,000. At the same time, the benefit would be generally be more valuable to older buyers, especially under the AHCA, which would increase "age-banding" from the current 3:1 ratio to 5:1. That is, a 64 year-old's premium would be five times greater than a 21 year-old's for the same policy. House leaders suggested that the Senate might use the funds allocated to this tax break to instead increase subsidies for 50-64 year-olds, as MacArthur manages to imply he accomplished.


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