“Shades” of Single-Payer Update
“Shades” of Single-Player Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
- In my last update I ended by saying: We are so far removed from ACA “repeal and replace” it’s kind of funny. That is definitely true because we once talked about limiting the scope of public health programs like Medicaid, and also reducing insurance regulations. But NOW, we are talking about a government-run system where the only health coverage that is made available IS a public health program (a.k.a. Medicare-for-All), and also increased insurance regulation under various “shades” of single-payer like a “public option” or a Medicare-Buy-In or price controls.
- Analysis: Interestingly though, we may be closer to talking about ACA “repeal and replace” than we think. Not in the context of limiting public health programs and reducing insurance regulations, but instead, scrapping the ACA and replacing the ACA with…wait for it…a government-run program. The fact that the ACA may go away is NOT sitting well with many Democrats, including Democratic Leadership in Congress. For example, Speaker Pelosi is on record arguing that Democrats worked really hard for the ACA, and now that the Democrats are back in power (at least in the House), efforts should be undertaken to “improve” the ACA, not eliminate the ACA. Democratic Leadership also reminds the rank-and-file that beating up Republicans over “pre-existing condition protections” – which is one of the bed-rocks of the ACA – gave the Democrats the majority in the House. Despite Democratic Leadership’s arguments/reminders, many among the rank-and-file are NOT buying it. Instead, these rank-and-file members feel that they now have an opportunity to talk about something “transformative” (their words), and they argue that the ACA – while protecting people with pre-existing conditions – does NOT provide universal access to health coverage, while Medicare-for-All does. Soooo – they argue – Medicare-for-All is superior to the ACA because everyone will get health insurance. And – these proponents argue – people will get their health coverage at a lower cost, and we as Democrats can finally make good on our promise to make sure that health care is a “right” and not just a “privilege.” This all tells us that there are some clear divisions among Democratic Leadership and rank-and-file Democrats. Sure, you will hear Democratic Leadership say they are all for “universal access to health care.” But even Speaker Pelosi cautioned – in a sort of “be careful what you wish for” comment – that once all of these ideas are out on the table, people are going to finally know what you are talking about. And converting our current health care system to a government-run system – while “transformative” – will cost a lot of money, and the American public won’t be too accepting of tax increases to pay for this new system (even if the tax increases are more or less the same amount of money people are currently paying in the form of out-of-pocket costs for health care). What I mean on this last point is this: It has been argued that under a Medicare-for-All-type program, Americans will NOT be required to pay premiums or money for deductibles and co-pays out of their own pocket. Instead, the government-run program will cover these costs. BUT, in order to pay for these costs, Americans will instead be required to pay taxes. Think of it as a re-allocation of disposable income. Under our current system, Americans pay – out of their disposable income – amounts for premiums and out-of-pocket costs that their private insurance plan does NOT cover (in the form of deductibles and co-pays). Under a Medicare-for-All-type program, Americans will instead pay – out of their disposable income – taxes (but again, nothing for premiums and other out-of-pocket costs). This approach has appeal to progressives. That is, while lower-income individuals will have to pay taxes to fund the program, progressives in Congress will make sure that taxes remain low for the lower-income population, and simply require high-income individuals to pay more in taxes. This way, lower-income individuals will be the “winners” because they will be paying less money – out of their disposable income – on taxes than they would have otherwise paid – out of their disposable income – for premiums and out-of-pocket costs under our current system. Despite some of the resistance from Democratic Leadership to fully-embrace Medicare-for-All, I do expect that proponents of Medicare-for-All and other “shades” of single-payer will successfully convince Leadership to allow hearings to be held in the House Energy and Commerce (E&C) and Ways and Means Committees. Probably this Summer. We will also see a hearing on Medicare-for-All in the House Budget Committee at some point. But interestingly, the Budget Committee Chairman is on record warning progressives that it would be ill-advised for the Congressional Budget Office (CBO) to develop an official “score” of the recently introduced Medicare-for-All proposal. Another “be careful what you wish for” comment.
- As stated above, a good number of House Democrats – along with Democratic Leadership – would prefer to spend their “time” and “political capital” on “improving” the ACA. Delivering on this policy pursuit, the House E&C Health Subcommittee recently considered 3 pieces of legislation: (1) A bill to provide Federal dollars for State-based reinsurance programs, (2) A bill to provide additional dollars so States can set up their own State-based Exchange, and (3) A bill to provide Federal funding for Navigators.
- Analysis: To a large degree, these 3 bills are NOT new. Democrats have wanted to see these types of changes enacted into the law for the past 2 years now (and for the past 4 years in some cases). Soooo, I don’t want to spend too much time talking about them. But you know me, I like to talk: Let me start with the Navigators. As I have said in the past, I support Navigators, and I believe Navigators do serve a purpose: Helping low-income individuals and individuals with limited or no proficiency in English. BUT, I do NOT believe that Navigators get you the bang-for-the-buck you are spending on them when it comes to increasing Exchange enrollment. What I mean is, there is verifiable data that shows the amount of money spent on Navigators does not justify the amount of people Navigators enroll. There is also verifiable data that shows that money spent on advertising has actually produced a greater number of enrollments than Navigators. Look, I get it, advertising is not going to reach low-income individuals or people who do not speak English. And for this reason, Navigators are helpful, if not necessary. From my perspective, I would suggest this: Plow the additional money Democrats are calling for into Enhanced Direct Enrollment (EDE) and other advertising and outreach efforts (e.g., an increased budget for HHS staff to send emails and messages through social media, etc.). And, if you want increased funding for Navigators, it seems more logical to pull the money from Medicaid (based on the low-income population that Navigators are primarily serving). On the subject of State-based Exchanges, as you know, I am a big fan of State-based Exchanges. I have a personal connection to State-based Exchanges due to my time on Senate Finance and thinking through how these distribution channels should work and be regulated (and the extent to which the Exchanges should – and should not – regulate the markets). BUT, I believe millions of dollars were wasted trying to establish State-based Exchanges back during the 2011 to 2014 time-frame. I do not want to call out specifics, but there was so much money paid to certain contractors who simply FAILED that I still have trouble understanding how they FAILED, and accepting the fact that they were paid millions, and yet they FAILED. It’s unacceptable, plan-and-simple. The bottom-line is this: I am NOT overly supportive of giving more money to States to set up their own State-based Exchanges (based on what happened in the past). HOWEVER, if there were conditions placed on how the money could be spent, like saying the only way a State can get the money is if they spend it on an EDE-like system, or if the State uses the money to outsource most of their functions to a private-sector company with experience with technology, enrollment, and outreach. But alas, I unfortunately do not foresee a majority of Democrats supporting this approach. With respect to a State-based reinsurance program, you already know how I feel about this issue: I support Federal dollars to be set aside for State-based reinsurance programs. Actually, I am a bigger supporter of simply using ACA Section 1332 to set up a reinsurance program, where the State can use the “pass-through” funding. Maybe we can combine these 2 ideas? That is, set aside Federal money for State-based reinsurance programs, but as a condition to getting the money, the State has to set up their reinsurance program through a 1332 Waiver. This may sound like it is duplicative, but my thought here is this: The Federal dollars for State-based reinsurance programs will augment the money States can get through the “pass-through” funding under a 1332 Waiver. And, the Federal dollars will serve as a temporary bump to get the State going on their reinsurance program, where the “pass-through” funding will be a constant, so long as the ACA is still around. It just seems like a win-win. And – to me – an efficient use of taxpayer dollars. But alas, I do NOT believe we are ever going to see Federal dollars to fund State-based reinsurance programs unless and until Democrats and Republicans can resolve their conflict over abortion funding (Republicans wanting Hyde language to provide safeguards from using Federal dollars to fund abortion services, and the Democrats refusing to place any safeguards in the law that might limit access to abortions).
- I don’t need to tell you that everyone on Capitol Hill is trying to figure out how to lower prescription drug prices. Over the past month, we saw at least 8 Congressional hearings on the subject (and I may be missing a couple). You also know that the Administration is trying to lower prescription drug prices too. For right or wrong, both the Administration and Congress are going after Pharmacy Benefit Managers (PBMs) as at least one solution to lower drug prices (although we all know it really comes down to lowering the “list price” of the drugs, which only the drug manufacturers can do).
- Analysis: As you all know, the Administration took the lead in the battle over lowering prescription drugs by prohibiting “rebates” drug manufacturers selling prescription drugs to Medicare and Medicaid pay over to PBMs. However, one of the main critiques of the Administration’s PBM rebate proposal is that it does NOT directly change the practices used in the private insurance space. Many observers argue that in order to effectuate any material reductions in drug prices, a similar prohibition on PBM rebates MUST be extended to private-sector plans, especially employer-sponsored plans. After all, about 160 million Americans get their health coverage through the employer-sponsored system. Compare that to about 60 million in Medicare and about 70 million in Medicaid. BUT, it is important to understand that the Administration does not really have the authority to prohibit rebates in the area of private insurance. Rather, the Administration – as the “payer” for Medicare and Medicaid – really only has jurisdiction over payment reforms in our public health programs. Soooo, the Administration cannot effectively get at the “elephant in the room”: Which is the cost of prescription drugs paid for by employer plans (which includes joint funding from the employer and the employee, which makes it real for American businesses and a large majority of the American public). A client of mine recently provided me with some interesting stories about the struggles employers face when it comes to paying for prescription drugs for their employees. In one example, the cost of a particular drug increased by 6,400%. In this case, the employer was paying $20,000 for a generic version of a particular drug one of its employees needed to treat their chronic condition. But in the following year, the drug that the employee needed was classified as an “orphan” drug, which resulted in the cost sky-rocketing to $1.3 million. Interestingly, the difference between the ingredient composition of the generic and the “orphan” drug never changed, but a specific “time release” for the drug was protected by the patent, again, resulting in a 6,400% increase. Another example involves a specialty drug that costs about $250,000 in U.S., while prices for the same specialty drug in Europe costs 55% to 60% less. It is important to emphasize that employers WANT to cover as many prescription drugs as possible under their plan, because employers WANT to help their employees, especially those with chronic health conditions. BUT, the rub here is that due the ever-increasing cost of drugs, employers – both fully-insured and self-insured employers – are finding it harder and harder to continue paying for drug coverage. Something has got to give. Either the employer will stop covering some of these very important drugs that employees rely on to stay alive OR the cost of these drugs must go down. Which scenario is going to happen first?? Most likely the former, because I think we can all agree that the latter ain’t happenin’ any time soon. So what can be done? Well, it appears that a couple of Senators want to increase transparency in the rebating process through specific reporting requirements. Other Senators are asking CBO to analyze different ways to reform the rebating process. Importantly, Sen. Braun (R-IN) just introduced legislation that would extend the Administration’s prohibition on PBM rebates in Medicare and Medicaid to private-sector plans. In truth, I don’t know enough about Sen. Braun’s proposal to know whether the Administration’s prohibition on PBM rebates can easily be applied to private insurance, or whether the introduction of this legislation is setting up a square-peg-round-hole scenario. Until I know more, I can at least say this: It is important to see that members of Congress understand that to effectuate any material reduction in drug prices, private-sector plans – especially employer-sponsored plans – must be a part of the equation. Last comment: While prohibiting PBM rebates is merely the treatment of a symptom (rather than an overall cure for the drug pricing problem), it is arguably a step in the right direction. After all, every stakeholder that has spoken up about this issue (ranging from patient groups, to employers, to drug makers, and even the PBMs) is on the record indicating how confusing the whole rebating process is. What I mean is: No one knows where the money goes. The PBMs argue that they pass-through the rebates to the consumer in the form of lower prices these consumers pay. But others argue that the PBMs are pocketing a portion of this money, or alternatively, people argue that the insurance carriers are pocketing the money. Others argue that the drug manufacturers are artificially inflating their “list prices” to account for any so-called discounts that are – or are not – being passed on to the consumer. It is a lot like a Rubik’s Cube, which one Senator recently noted in the Senate Finance Committee hearing. I can’t agree more, and I am sure you are nodding your head right now too.
Employer Plans and Medicare-for-All
- Employer-sponsored plans are also the “elephant in the room” when talking about Medicare-for-All. What I mean is, while proponents of Medicare-for-All are on record saying that they want to “eliminate private insurance,” no one really knows what that means. On its face, it means that 160 million people will be required to adapt to an entirely new system of health coverage. And as well all know, when it comes to health insurance – or really most things – people do NOT like change.
- Analysis: Even if people were open to change, they would need to understand what the change will mean for them, and we all have yet to really understand what Medicare-for-All means when it comes to (1) the type of health coverage – and “access” to care – people will have, (2) the amount of taxes people will have to pay, and (3) how Medicare-for-All will impact the economy as a whole (e.g., if the economy takes a big nose-dive, most people will likely care more about their 401(k) retirement savings and their jobs than caring about no premiums, no deductibles, and full-service coverage of their health care). I think you know me well-enough by now to know that I do NOT like to over-state things. And, I am definitely NOT an absolutist. But, the following dawned on me last week: This whole debate over Medicare-for-All is primarily a referendum on employer-sponsored health insurance. What I mean is, if Medicare-for-All – in its purest form – is enacted, employer plans are GONE. Which means that if Medicare-for-All is going to ever happen, a majority of the 160 million Americans who are currently covered under an employer plan are going to want a change. Look, I am NOT saying that people who are currently covered by an employer plan are NOT wanting change. The employer-sponsored system has many flaws. But, an argument can be made that even among those people who want to somehow change their employer health coverage, they will likely be hesitant to take the plunge into a government-run system. Look, I am also NOT saying that a majority of people who are currently covered by an employer plan will NEVER be willing to take the plunge. What I am trying to say is that it is going to REALLY, REALLY hard trying to convince people that a government-run system is better for them (1) from a health coverage perspective (because “access” may change), (2) from a financial perspective (because their taxes will change), and (3) from an economic perspective (because their job and/or retirement savings may change). We have also seen this movie before. That is, past Congresses and prior Administrations have tried to dismantle the employer-sponsored system in one way, shape, or form. Take changing the tax preference for employer-sponsored plans (i.e., the exclusion) as an example. The exclusion has been under attack ever since 1986. And it wasn’t until the ACA where a limit (albeit indirect) was placed on the exclusion through the Cadillac Tax. BUT, the Cadillac Tax has yet to go into effect, and while I thought differently as recently as a year ago, I do NOT believe that we will EVER see the Cadillac Tax – or some other “cap on the exclusion” – become law. Why? Politically, it has proven time-and-time again to be waaayyyy too difficult. To me, the fight over limiting the exclusion is small-potatoes compared to a whole-sale change to the employer-sponsored system. And if Congress is/was unable to effectuate a change to the tax preference due to significant political pressure from employers and labor unions, and also individual employees, how are proponents of Medicare-for-All going to convince a majority in Congress – and a majority of the American public who are currently covered by an employer plan – to replace the employer-sponsored plan and go with an un-tested government-run program that people have yet to fully understand from an economic, financial, and health coverage perspective?? Just sayin.’