A Quick Fix to the Senate Health Bill

I had hoped that the Senate, toiling away in secrecy, would toss out the crap sandwich of the House bill and replace it with something shiny and new that I could really get behind.

No such luck.  The “Better Care Reconciliation Act of 2017” is mostly the same crap sandwich, with some of the crust trimmed off.  As I wrote about the House bill last month, this bill, or something like it, would wreck healthcare and ensure Democratic ascendency, in the same way that Obamacare strip mined the Democratic majority in the House and Senate.

It’s not quite a total loss.  It did move in the right direction to fix some of the problems I had pointed out in the House bill, such as restoring tax credits based on income rather than age (I never got an explanation for that).  But of course it fell far short of providing reasonable tax credits.

As for pre-existing conditions, the main issue that tortured the public discussion of the House bill, the Senate appears to have just given up and is keeping the Obamacare requirement.  So after all the trouble, when it comes to pre-existing conditions, it’s Obamacare after all.

Although there’s no CBO score on the bill yet, it will probably come out similarly to the House Bill since it keeps much of the same structure for slowing Medicaid Expansion and although I’ve already criticized the way the CBO score was arrived at, it won’t matter in terms of a Democratic talking point; 26 million will lose their healthcare.  You’ll hear it all over cable news until the vote, then in campaign ads for the 2018 election.

How to solve this issue?  Here is the difference between politicians and regular people; I can conceive of a fairly simple answer that would never occur to a professional, and it’s not one I’ve yet heard either in public policy articles or blathering about on cable news.

Consider: There are about 14 and a half million people covered under the Medicaid expansion from Obamacare.  You can criticize Medicaid all you want in terms of studies on health outcomes or availability of providers, but if you’re on it, it’s free (to you).  There are no premiums, deductibles, or copays.  So even if you provide market alternatives to that, none of them are going to be as cheap to the patient as free Medicaid is.  People being kicked off Medicaid will generate stories for years for the Democrats.  There will be no end to the number of hard luck stories (and the children! Think of the children!).  That will fill nightly news and newspaper stories for years to come.

So just let those people keep Medicaid.

That’s it.  No complicated policy issue or complicated public/private program.  Just allow the people who are currently covered by the Medicaid expansion, as long as they meet their income eligibility, keep their Medicaid healthcare.  It’s not a new entitlement since it won’t be open to any new applicants; it will just cover those who currently have it.  Eventually those numbers will shrink, either by people improving their lot and exceeding the income eligibility, or worst case, aging into Medicare.

Will it cost money?  Yes, but frankly, the Republicans seem to be under some sort of delusion that they can turn health care into a tax cutting bill.  I don’t see how that’s realistic.  At some point they are going to have to realize that the bill is going to have to be revenue neutral.

More importantly, this buys time to fix what’s ailing in the individual insurance market.  Obamacare has wrecked and nearly destroyed the individual insurance market and I don’t think that’s going to be fixed on the day of a bill signing.  This will probably take years, so the fewer people in that market, to buy time and give reforms time to work, the better

Conservatives vs Pre-Existing Conditions

 

The CBO score for the House Republican health bill came out last week and the news is “unexpectedly” bad: 14 million more people uninsured next year and 26 million by 2026.  These numbers are crap of course.  Not just because the CBO is notoriously wrong (remember their rosy predictions about Obamacare?) but because their comparisons are not based on reality.  As the Legal Insurrection site notes, the CBO used a March 2016 baseline that they had previously acknowledged was wildly inaccurate. With health plans dropping like flies from Obamacare exchanges all over the country, if you do nothing, you’re likely to get a similar result of increase in uninsured by 2026.

But the purpose of the CBO report wasn’t to provide a statistical analysis of the possible effects of a healthcare replacement plan, it was to provide talking points to the Democrats, and on that basis, mission accomplished.  And that’s why Mitch McConnell is trying to stall bringing up the healthcare bill in the Senate for as long as possible.  It’s a policy, political, and PR nightmare.

But the real nightmare in the health care debate boils down to the one issue that actually frightens people, stirs them to show up to town halls, and dominates the cable news coverage of health care policy is pre-existing conditions.  How to handle pre-existing conditions occupied the majority of debate on the House plan, and ultimately failed to satisfy.  The AHCA has planned to handle pre-existing conditions through high risk pools.  The way they are supposed to work is that people with pre-existing conditions would sign up for their health plans like normal, but money set aside in high risk pools in each state would go to subsidize the insurance companies directly for each customer with pre-existing conditions.  This was based on a highly successful program in Maine. The problem with rolling that out nationwide is that we have no good way to estimate either the costs per person or the number of people involved.

Our guide to how little we know about the pre-existing population lies in an Obamacare program called the Pre-Existing Condition Insurance Plan (called either PPACA or PCIP). PCIP was set up to provide health insurance as a bridge until the requirement for individual health plans to accept everyone, regardless of pre-existing conditions, kicked in. The assumptions were wrong both in number of enrollees and how much they would cost.  The original cost estimate per enrollee was $13,026.00 and in only 11 months was upgraded to $ 28,994.00 per enrollee. And how many people are affected by pre-existing conditions?  Up to 130 million people according to most government estimates. So how many were actually enrolled in the PCIP program?  At its peak, there were never more than 114, 959 enrollees.  So the entire US health system was re-arranged to accommodate a little more than 100,000 people.  Interestingly 78% of PCIP spending went to only four conditions, cancer, heart and circulatory diseases, post-surgical care, and joint diseases.

So there is a major gap between pre-existing conditions, the propaganda talking point, and pre-existing conditions, the actual policy issue.  And these lead me to notice some curious conservative commentary on the issue.  Prior to the House vote, columnist Anne Coulter wrote a column about the House bill in which she made the remark, “Until the welfare program is decoupled from the insurance market, nothing will work.”  But the biggest player in the conservative pundit class is radio host Rush Limbaugh.  With a 20 million person radio audience, he can move or set the agenda among the right. So what are Rush’s views on pre-existing conditions? He spent quite a bit of time discussing the issue on his show after the House vote, but what caught my eye was this:

“What ought to really happen here is, the simplest way, is to take whatever the percent, 4% who have preexisting conditions and designate them as a special class who are going to have medical expenses covered by some funding mechanism that may be part of the overall bill or not, but don’t commingle these people with the genuine insurance that’s going on elsewhere. ‘Cause then we’re not talking insurance. And it does matter because that’s the way they’re able to convert this into a massive welfare bill while everybody thinks it’s insurance. It’s another sleight of hand.”

To me, it sounds like both commentators are arguing that pre-existing conditions should be handled outside the normal insurance system and covered by a government program.  I think this shows a movement that’s removed from where the House Freedom Caucus is on the issue.  The problem is that no one in the Republican Congress will squarely address the issue.  Putting together a bill to replace Obamacare would be much simpler if they just came out and admitted that people with pre-existing conditions should be served outside of the insurance market.

In other words, a government program.

I had addressed various health reform proposals in general and pre-existing conditions in particular 5 years ago during the Obamacare court fight. At the time I addressed two major issues that needed to be in a future health reform bill:

  1. Tax Credits and deductions to cover the costs of insurance premiums in the individual insurance market.
  2. Some manner of dealing with pre-existing conditions, preferably by some sort of 2nd payer coverage.

I thought I would expand on just how I would cover pre-existing conditions if I were writing the bill.  As stated I would pay charges related to pre-existing conditions with a second payer plan; I’m thinking Medicaid.  But first, some background:

Second payers are plans that pay in addition to regular insurance plans.  People most commonly run across them in Workers Comp and Auto accident issues.  For example, you’re in a car accident, and are taken to the emergency room.  Normally an emergency room visit and associated treatment and tests would be paid by your regular health insurance, but because you have auto insurance and in an auto accident, your auto insurance would be billed first.  The auto insurance pays whatever they are contracted to pay in those circumstances, and the bill goes to your health insurance, which pays whatever it’s contracted to pay minus what was paid by the auto insurance.

Now years ago, some HMO plans would pay for pre-existing conditions, but not right away.  You are a new member on an HMO plan, but you have diabetes.  You could use your insurance for any medical condition except the procedure codes and diagnosis’s associated with diabetes for a period of time, either a year or two years depending on the plan.  After that period was over the HMO would start picking up the costs of diabetic treatment.  This way, the health plan didn’t immediately go into the hole over a brand new member who brings expensive health issues to the plan.  Obviously, this isn’t great at all if you have diabetes because it means you are paying for all of your diabetic treatment and medicines out of pocket until your waiting period was over.  For many however, it was better than no insurance at all.

So how would my plan work?

When you sign up for a health plan on the individual health insurance market in your state, part of the application process is identifying if you have a pre-existing condition.  If so, you are automatically signed up in your state’s Pre-existing Medicaid plan.  This is a secondary payer that only pays if during your first two years in your health plan (or whatever time period is arrived at) you have charges related to your pre-existing condition.  So, let’s say you have heart disease as a pre-existing condition, you go to the doctor for some issue related to that, the doctor files insurance like normal, and it goes to your insurance company.

Since you’re in the first two years of your health plan with this insurance company, and the procedure codes and diagnosis codes are related to your known pre-existing condition, your insurance company denies the claim but then sends it to your state Medicaid, which processes and pays the claim.  For you, the process is seamless, your insurance company gets out of paying charges, and Medicaid pays the doctor.

So, why do I think this is better than the currently proposed high risk pools in the AHCA?

First, we don’t know what the costs are going to be and who is going to need help.  That was the problem with the Obamacare PCIP; far fewer people signed up than expected, but it cost way more per person than expected when they did sign up. So there are a lot of unknown costs associated with this.

Secondly, under high risk pools there seems to me a thin line between subsidizing patients with pre-existing conditions and subsidizing health insurance company profits.  Are the insurance companies just going to present a bill to the high risk pools and they will just pay no matter what?  Who knows?  There isn’t any transparency in knowing what you’re paying for so you can never predict what the costs are.

Third, Medicaid pays out under the cheapest rates available, cheaper than Medicare and far cheaper than private insurance rates.  If the government is going to subsidize pre-existing conditions somehow, why not do it in the way that provides the cheapest rates, and the most transparency? Medicaid will be able to grow a database of all pre-existing conditions, their frequency, and their costs for the private insurance market.

One way or the other, the government will be paying for this. Either the Senate puts together a plan that the President signs, or Obamacare continues to fall apart and a new Democratic Congress will be elected to fix healthcare, and if they do it, given previous experience, it won’t be cheap, transparent, or voluntary.

 

The Sure Fire Failure Republican Health Plan

One would think that last week’s passage of the Republican version of the American Healthcare Act, the bill to “repeal and replace” Obamacare, would be met with jubilation on the right.  Instead it’s been met with a mostly “meh” attitude.  Unlike Obamacare, which Democratic activists enthusiastically defended every step of the way, Republican activists aren’t happy with this bill. When the bill is taken up in the Senate, they are likely to be even less happy. Probably the only positive feature that Republicans will agree on is that it’s likely to be better than Obamacare.

Some of the features of the Republican bill include:

  • Ends the mandates and tax penalties of Obamacare.
  • Changes the subsidy system to a system of tax credits
  • Allows states to get waivers to the old Obamacare coverage requirements
  • Blocks Planned Parenthood payments for one (?) year.
  • Stops and begins the rollback of the Medicaid expansion.
  • Changes Medicaid from an entitlement to a block grant.

If, through some miracle, this bill were to sail through the senate unscathed, and become law as currently written, it would destroy healthcare in this country and do to Republicans what Obamacare did to Democrats; Reduce their numbers to a shrill minority in the House and Senate and forfeit the Presidency to the Democrats for the foreseeable future.

Why am I so glum about the results of the bill?  Changing the subsidy to a tax credit is a positive step, one that Republicans have supported for years, but the range of tax credits, $2,000 to $4,000, and the method of doling them out, is a disaster.  First, the tax credit amounts are ridiculously low.  John McCain’s 2008 health reform plan was better than that, and I thought that was a bit low at the time; $5000 for families and $2,500 for individuals. Also, the amounts are more based on age rather than income. There may be a rationale for that, but the Republicans in the House have not attempted to explain why basing tax credits on age will be more helpful to people than basing them on income. The average family employer insurance plan cost for 2015 was $ 17,322.00. To buy an equivalent plan on the individual insurance market, the tax credit should be anywhere from a third to half of that (to provide somewhat equal equivalence to the employee cost that employer plans have); way more than the Republican bill is offering.

The other issue is Medicaid.  Changing Medicaid from an entitlement to a block grant is probably the single most important long term feature of this bill, and one that does the longest term good. However, depending on where you get your estimates, more than 84% of the increase in health insurance coverage is due to Obamacare’s increase in Medicaid expansion coverage.  That’s coverage that, to the recipient, is free, with no premiums or co-pays.  Almost 12 million people will lose the Medicaid Expansion coverage over time. To offer them a replacement of a $2, 000 tax credit (with no mandate to force coverage) will leave a result that almost all of those people will lose coverage and not get a replacement plan.

However in terms of media coverage, the GOP elephant in the room has been pre-existing conditions.  The way the House bill handles pre-existing conditions is described in Time this way:

“The American Health Care Act stipulates that states can allow insurers to charge people with pre-existing conditions more for health insurance (which is banned under the ACA) if the states meet certain conditions, such as setting up high-risk insurance pools. Insurers still cannot deny people coverage outright, as was a common practice before the ACA’s passage, but they can hike up premiums to an unaffordable amount, effectively pricing people out of the market.”

So if you have a pre-existing condition, your health care costs are likely to go up, even though you’ll still be able to purchase insurance.  We are currently in an Obamacare death spiral; a death spiral which probably represents a good portion of the Obamacare exchange market. Next year it will be worse. So in this way at least, things are likely to continue under the House bill the same way they are currently under Obamacare-higher prices and fewer choices.

Of course there is an answer to the Pre-existing conditions conundrum, one I touched on back in 2012 during the Obamacare discussions. But I think that’s probably an entire post on its own, so stay tuned…

So to summarize, the House bill is an unworkable mess as currently written and is less a repeal and replace than an optional opt out of Obamacare, while taking away the features of Obamacare.  So Congress is keeping the Obamacare rules and regulations, but taking away the features that made them workable. States can opt out of those requirements, but Medicaid Expansion is going away anyway.  If you have a pre-existing condition, you may be no worse off, but certainly no better, than if we do nothing and let Obamacare death spiral into the ground.

Some reform.

Ultimately, none of this will probably matter. The Senate is likely to so alter the bill that it will be unrecognizable.  But the struggle and fight over the House bill is a precursor to the fight in the Senate.