The Affordable Care Act -- Mend it, Don’t Break It
Most but not all Congressional Republicans want to repeal and replace the Affordable Care Act, but they lack any coherent vision or level of agreement on what the replacement should be and they have been unwilling to share their visions with the American public, the Congressional Budget Office and their Democratic counterparts. So they are tinkering in the dark with a variety of ideas, nearly each one worst than the next as they try to bring the two wings of their party together on a jury rigged bill for which they hope to get 50 votes.
The latest iteration, the Cruz amendment, would fracture the individual market between a high cost unaffordable product for those deemed by insurers as high risk and an anything goes market (including unregulated junk insurance) for all other individuals. Imagine its impacts on families with cancer, which may and does cost in the millions of dollars for treatment. I have just been through that with my brother who was fortunate to have excellent coverage and treatment. Senator Cruz and his colleague Senator Lee want to take that away. Even the very conservative America’s Health Insurance Plans are telling Senators this latest Cruz brain-storm will not work. Republican Governors are telling their Senate colleagues to go back to the drawing board and try for a bi-partisan fix.
So let’s look at some simple bi-partisan fixes. There are four issues that can and should be readily fixed on a bi-partisan basis: affordable cost sharing subsidies, reinsurance and risk adjustment, premium and health care costs in non-competitive and rural communities, and Medicaid expansion in twenty states.
First, the ACA’s cost sharing subsidies are available to individuals up to 250% of FPL ($30,000 for an individual); these help reduce copays and deductibles for individuals choosing “silver” plans. House and Senate Republicans are using their budget and appropriations authority as leverage to force others to accept their version of health reform. That is not working, just appropriate the funds necessary and end the market insecurity. Plans need certainty on these subsidies to price their coverage this year; fostering uncertainty about the subsidies is counter-productive to functioning markets.
Second, reinsurance and risk adjustment mechanisms are key to alleviating insurer uncertainty about high risk individuals in the individual market. Risk adjustment needs to occur when one or more carriers shoulder a disproportionate share of high-risk individuals, and reinsurance applies when carriers face catastrophic costs for high-risk individuals. Senator Rubio successfully led the charge in 2015 to disembowel reinsurance under the ACA, and the risk adjustment mechanisms expire in 2018. These arcane features of the Affordable Care Act were and are key to stabilizing insurer risk and the resulting premiums. They need to be reauthorized and funded, as they are absolutely essential to a well functioning individual market.
Third, the Exchanges in the ACA are built on a competitive market with health plans and providers negotiating plan premiums and provider reimbursement rates for their subscribers and patients. This works well in a market like Los Angeles with lots of providers and the environment and infrastructure for healthy price competition. Some rural communities have only one hospital and medical group; there is no possible basis for competitive markets and prices in these communities. As a result provider prices are high, insurance premiums are high, and subscribers have only high priced or no plans and unaffordable premiums. Competition is not the answer to unaffordable premiums in non-competitive markets; rate regulation is. In these non-competitive markets, provider reimbursements in Exchange plans should be linked to existing Medicare reimbursement rates. Alternatively, these are ideal communities to test the Medicare option and give residents a choice of Medicare or the Exchange plans.
Fourth, the Supreme Court ruled that the Medicaid expansion under the ACA is optional with the states. Thirty-one states have implemented the expansion so far, and twenty have not. For example, West Virginia has it, and Virginia does not. Kentucky has it, and Tennessee does not. Arkansas and Louisiana have it, and Mississippi and Alabama do not. Likewise Colorado has it while Utah does not. This checkerboard coverage makes no sense for the nation’s uninsured poor in those twenty states still without the Medicaid expansion; this is a problem for all of us in the states with good coverage and those with out any. The coverage checkerboard results from these states’ political calculations rather than financial and budgetary constraints since the federal government pays 100% of the costs for three years, phasing down to 90% in 2020. My suggestion, allow the poor uninsured in these states to enroll in the federal Exchanges or in Medicare, which is federally administered if the local political leaders continue to hold their poor citizens in such low regard that they deny them access to the federal/state Medicaid program.
Prepared by: Lucien Wulsin
Dated: 7/16/15