State Activity Update
State Activity Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
Various “Shades” of Single-Payer Proposed In Some States
- We are only 2 weeks into 2019, and we are already seeing Democratic policymakers propose various “shades” of single-payer. For example, Washington State’s Governor proposed adding a “public option” for individuals in the State’s “unsubsidized” individual market. States like New Mexico are seriously considering a “Medicaid-Buy-In” option for the constituents of their State. New York City’s Mayor is providing access to health coverage to uninsured New York City residents, including undocumented individuals. And California’s new Governor (Governor Newsom) is also seeking to expand Medicaid to younger undocumented individuals. While not a “shade” of single-payer, Governor Newsom also wants to add in a State “individual mandate” penalty, while also using State taxpayer dollars to increase the ACA’s premium subsidies for Californians who are above 400% of the Federal Poverty Level (FPL).
- Analysis: What I find interesting about the idea of the Washington State “public option” – along the idea of a Medicaid-Buy-In program in various States – is that Democratic policymakers are pursuing these proposals with the goal of helping the “losers” under the ACA (i.e., people in the “unsubsidized” individual market, and in the case of a Medicaid-Buy-In, it is an attempt to help those people who qualify for a premium subsidy but who feel they are still paying too much out-of-pocket for both their premiums and their cost-sharing). Republicans have also come up with ideas that are intended to help people in the “unsubsidized” individual market (i.e., “association health plans” (AHPs) and “short-term health plans,” and in the case of short-term health plans, it is an attempt to help people who qualify for a premium subsidy but who feel they are still paying too much out-of-pocket for their premiums). Soooo, we can at least say that Democrats and Republicans agree on something, right?!? That is, BOTH Democrats and Republicans agree that people in the “unsubsidized” individual market – along with subsidized individuals who still feel health care is too costly for one reason or another – NEED help. BUT, the ideas on how to “help” these individuals differ greatly. It also appears that BOTH Democrats and Republicans agree on another thing: Both parties do not seem to think that Congress can “improve” the ACA. So instead, both parties are trying to end-run around Congress by either enacting new ideas at the State level (in the case of Democratic policymakers) or incorporating new ideas into the law through administrative means (in the case of Republicans and the Trump Administration). This makes sense on both sides here. What I mean is, Congressional Republicans were unable to make good on their 7 years of campaign promises to “repeal and replace” the ACA. So, the Trump Administration – for right or wrong – took matters into their own hands and promulgated regulations providing additional “alternatives” to the ACA. For Democrats, it is well-accepted that the new House Democratic majority will never be able to move any “shade” of single-payer past the House of Representatives (i.e., Senate Republicans will say no). Soooo, States with a strong Democratic majority (i.e., States with a Democratic Governor and Legislature) are taking matters into their own hands and they are pursuing various “shades” of single-payer at the State level. For Democrats, the hope is that these States will serve as “laboratories for change,” which can then be leveraged and expanded if and when the politics shift in Washington, DC in 2020. For Republicans, their hope is that their new ideas – promulgated through regulations – take hold in as many States as possible, and also that these regulations withstand legal challenges.
Medicaid-Buy-In Program and the Individual Market
- “Repealing and replacing the ACA” sounded good on the campaign trail. Calls for “a Medicaid-Buy-In program” sound good too. But, when push-comes-to-shove, there are a lot of difficult questions that need to be answered before policymakers can deliver on these promises. And even if you answer these questions, the answers are unlikely to generate the political support needed for actually making good on these promises.
- Analysis: For example, “repealing and replacing” the ACA was hard – and it ultimately never happened – because the “replace” ideas that did emerge were not good enough to convince Senate Republicans to vote “Yea.” What about a Medicaid-Buy-In program? Again, it sounds good (even I am nodding my head). BUT, who would be eligible to buy into the Medicaid program? Would the program be targeted to specific populations, such as those below a certain income level? What benefits would be covered by the Medicaid plan? The same as those covered by the traditional Medicaid program or an expanded version of Medicaid plans, like the Medicaid managed care-type plans sold in the ACA’s “individual” market? In addition, would people be required to pay premiums, would there be out-of-pocket cost-sharing, and if so, how much? Who would administer the program – the State Medicaid agency or private Medicaid managed care providers? The fight that will ensue on how these questions should be answered could very will sink any Medicaid-Buy-In program. Also, how is a Medicaid-Buy-In program going to affect the individual market? Let me try to answer this question by comparing it to AHPs: The disdain for AHPs among Democrats is white-hot, primarily driven by their concern that AHPs will “siphon” off people in the individual market, which will adversely affect the individual market’s risk pool. My questions: Won’t the same thing happen if people in the “unsubsidized” – or even the subsidized – individual market are able to obtain low-cost health coverage by opting out of the individual market and into a government program? Aren’t Democrats being a little hypocritical? That is, Democrats seem to be deriding AHPs because they think AHPs will shrink the individual market. But a Medicaid-Buy-In would also shrink the individual markets (and probably to a greater extent). Democrats will likely say, “we are actually okay with shrinking the individual market because we know those people who are opting out of the individual market will be getting government-approved health coverage that – in our eyes – is comprehensive.” They will further say, “in the case of AHPs, people are going to opt out of the individual market and into skimpy plans.” My response: First of all, the facts on the ground are showing that AHPs are offering comprehensive coverage. As I have argued time-and-time again, the market will demand comprehensive coverage, and that is what we are seeing. Second, while Medicaid indeed provides broad coverage in most instances, Medicaid’s low reimbursement rates discourage providers from treating Medicaid beneficiaries. So – to me – you may have good coverage, but access is an issue. Maybe that changes if more people opt into a Medicaid-Buy-In program because providers can possibly make up for the low reimbursement rates through volume. Look, I am not trying to poo-poo a Medicaid-Buy-In program per se. I just saying that there is some irony here, in addition to some pre-conceived notions that are NOT coming to fruition. Here is another thing to think about: AHPs and a Medicaid-Buy-In program both seem to be intended to help people in the “unsubsidized” individual market. Unlike a Medicaid-Buy-In, AHPs are NOT going to be attractive to a person who is currently accessing a premium subsidy for an ACA Exchange plan (because a person has to pay 100% of the cost of AHP coverage because there is NO government subsidy (except for an above-the-line deduction)). A Medicaid-Buy-In program, on the other hand, may indeed be attractive to a subsidized person if the cost of opting into the Medicaid program is lower than the premiums a person still has to pay for their Exchange plan. Does this mean more people will opt out of the individual market and into a Medicaid-Buy-In program? Maybe. What about the health risks of people opting out of the individual market for an AHP or a Medicaid-Buy-In? While Democrats argue that only “healthy” people will be attracted to AHPs, I strongly disagree, especially when we are seeing comprehensive AHP coverage at a lower cost. My argument: A “less healthy” person is going to be attracted to this type of AHP coverage to the same extent a “healthy” person is going to be attracted to this type of AHP (it is Economics 101). But, what about opting into a Medicaid-Buy-In program? Will a greater number of “less healthy” people opt out of the individual market and into the Medicaid program? It is very possible, especially if the buy-in is low and the out-of-pocket costs are capped at a level that is far below the ACA’s out-of-pocket maximums. This would arguably help the current individual market risk pool by pulling out “less healthy” people. Sorry for the back-and-forth musings on this, but it just strikes me that both “alternatives” – AHPs and a Medicaid-Buy-In program – will impact the ACA’s individual market. The extent to which the ACA’s market would be affected, however, is unknown. And we may never know in the case of a Medicaid-Buy-In program (because it may never get past the slogan stage).
Washington State’s Public Option and the Individual Market
- It appears that the Washington State Governor is proposing a “public option” as way to “help” people in the “unsubsidized” individual market. Soooo, similar to AHPs, this “public option” is an “alternative” to ACA individual market plans. Relative to AHPs, however, a “public option” will have a vastly different impact on the individual market.
- Analysis: What I mean is this: Unlike AHPs, people enrolling in a “public option” will STILL be a part of the ACA’s individual market risk pool. As a result, there should be no concern over market segmentation if this “public option” “alternative” is introduced to consumers. However, concerns over the impact a “public option” will have on private insurance carriers currently selling individual market plans is actually GREATER than concerns over the impact AHPs could have on insurance carriers. What I mean is this: In the case of AHPs, private insurance carriers currently selling individual market plans can try to re-capture any lives that may exit the individual market by under-writing AHP coverage for a particular group or association with self-employed members. In the case of a “public option,” however, private insurance carriers are going to compete with the “public option” for market-share. And it is well-accepted that private insurance carriers will NOT be able to compete with a “public option,” likely resulting in these private carriers exiting the market. Note, private insurance carriers may exit the market if they are competing with AHPs. BUT, even left-leaning studies have shown that AHPs will have a minimal impact on the individual market (e.g., a single-digit reduction in lives in the market, and a single-digit increase in premiums), while studies on both the left and the right have shown that a “public option” will be able to under-cut private insurance carriers on price, which will encourage a significant number of consumers to leave the private insurance carriers (way more than AHPs would ever do), thus leaving the private carriers with very little market-share, which would result in their throwing their hands in the air and leaving the individual market. Make no mistake, supporters of a “public option” would say, “yes Chris, that is the point.” And, they would say, “this public option ‘alternative’ is WAAAYYY better than AHPs because, among other things, the government can essentially control the level of coverage offered through the public option.” In many cases, the government can also control the cost of the coverage under a public option (this same “control” is not present in an AHP market).
Increasing the ACA’s Premium Subsidies
- Although the Democrats only took back the House of Representatives, Democrats feel they have the wind at their backs. Due in large part to their gains at the State level, but also because the political winds are blowing at the Federal level too. Two things the Democrats have long-lamented ever since the ACA was enacted back in 2010: (1) We should have made the premium subsidies more generous and (2) We should have given the “individual mandate” penalty tax more teeth (namely, a higher penalty amount).
- Analysis: Now that the Democrats are no longer required to “play defense” on the ACA, the Democrats are finally going on “offense” when it comes to health care policy. Evidenced by proposals to incorporate “shades” of single-payer into a State’s health insurance market. And also evidenced by recent proposals to increase the ACA’s premium subsidy amounts for people above 400% of FPL (e.g., in the State of California, and House Democrats are also talking about the idea). We have already seen 2 jurisdictions add an “individual mandate” penalty tax into their laws (NJ and DC), but other States – like CA – are looking into it, and even newly elected Speaker Pelosi raised the notion of re-visiting the “individual mandate” idea. When it comes to the ACA’s premium subsidies, Democrats have long-argued that the premium subsidy amounts should not only be higher for people below 400% of FPL, but people above 400% of FPL (but really no higher than 600% of FPL) should also be able to access a subsidy. Adding to this argument is the fact that the “unsubsidized” individual market has become waaayyy too expensive for so many middle-class Americans. So now, Democrats not only have a chance to make good on what they could not do back in 2010 (because back in 2010, President Obama wanted to keep the law under $1 trillion, which meant that increasing the premium subsidies was off-the-table), Democrats can also “help” people in the “unsubsidized” individual market. And for Democrats, “helping” people in the “unsubsidized” market on their own terms – through increased premium subsidies as opposed to AHPs – is IDEAL. And for many Democrats, helping” people in the “unsubsidized” market through increased premium subsidies as opposed to a “public option” or a Medicaid-Buy-In program is preferred. So will Democrats be able to increase the ACA’s premium subsidies?? My answer: It is highly unlikely at the Federal level. In my opinion, the only way House Democrats could do it is if they were willing to “trade” for a policy priority that is a really BIG deal for Republicans (e.g., the HSA policy changes that passed the House last year, but never the Senate). At the State level, however, there is a chance. But the only way Democrats can do it is if they are willing to increase State taxes – or divert taxes away from other State priorities – to pay for the increased premium subsidies. It appears that is what Governor Newsom is suggesting when he proposed increasing the ACA’s premium subsidies for Californians between 400% and 600% of FPL. It might be a tough slog ahead for Governor Newsom, as well as any other Democratic Governor that wants to do something similar. I will continue to keep tabs on this. When it comes to the “individual mandate,” well, you obviously know where I stand on the ACA’s “individual mandate” penalty tax. Prior to the penalty tax being zeroed out, I have long-argued that the ACA’s penalty tax was ineffective. I will note, I am on record saying that an “individual mandate” penalty tax COULD work, but the penalty tax would have to be like 110% of premiums for the “individual mandate” to be effective. BUT, no Federal or State policymaker is ever going to have the guts politically to call for a penalty tax equal to 110% of premiums. So where does that leave us? In my opinion, Democratic States like CA – as well as NJ and DC before it – will add to their State law the same exact “individual mandate” penalty tax that was originally in the ACA. At the Federal level, however, there is NO CHANCE the penalty tax is resurrected. BUT, House Democrats may propose an “alternative” to the “individual mandate” penalty tax – like “automatic enrollment.” Hmmmmm, didn’t Republicans suggest “automatic enrollment” as a way to get people into the markets? Yes they did (although this idea did not get into the Republican “repeal and replace” bill primarily due to the “reconciliation” rules (i.e., adding “automatic enrollment” to the “repeal and replace” bill would have violated the “reconciliation” rules)). Personally, I am a fan of the concept of “automatic enrollment.” Stay tuned for what I expect to be a conversation on “automatic enrollment” in the months to come (possibly in CA too).