Medicaid’s Blue State Bailout

In discussing future coronavirus legislation, Senate Majority Leader Mitch McConnell (R-Ky.) has taken a skeptical view towards additional subsidies to states, including a potential “blue state bailout.” But current law already includes just such a mechanism, giving wealthy states an overly generous federal Medicaid match that results in bloated program spending by New York and other blue states.

Section 1905(b) of the Social Security Act establishes Federal Medical Assistance Percentages, the matching rate each state receives from the federal government under Medicaid. The statutory formula compares each state’s per capita income to the national average, calculated over a rolling three-year period. Poorer states receive a higher federal match, while richer states receive a lower match.

However, federal law sets a minimum Medicaid match of 50 percent, and a maximum match of 83 percent. No poor states come close to hitting the 83 percent maximum rate, but a total of 14 wealthy states would have a federal match below 50 percent absent the statutory minimum. (In March, Congress temporarily raised the federal match rate for all states by 6.2 percentage points for the duration of the coronavirus emergency.)

Absent the statutory floor, Connecticut would receive a match rate of 11.69 percent in the current fiscal year, according to Federal Funds Information Service, a state-centered think-tank. At that lower federal match, Connecticut would receive approximately one federal dollar for every eight the state spends on Medicaid, rather than the one-for-one ratio under current law.

Federal taxpayers pay greatly because the overly generous match rate for wealthy states leads to additional Medicaid spending. In fiscal year 2018, Connecticut spent far more on its traditional Medicaid program ($6.5 billion in combined state and federal funds) than similarly sized states like Oklahoma ($4.9 billion) and Utah ($2.5 billion). Those totals exclude the dollars Connecticut received from Obamacare, which guarantees all states a 90 percent Medicaid match for covering able-bodied adults.

The budget crisis in New York that preceded the pandemic stems in large part from Washington’s overly generous match for wealthy states. Absent the statutory floor, the state would receive a Medicaid match of 34.49 percent this fiscal year, meaning it would have to spend approximately two dollars to receive an additional federal dollar.

But the one-to-one Medicaid match guaranteed under federal law led New York to expand its program well beyond most states’. At more than $77 billion in 2018, New York Medicaid cost taxpayers more than three times the $23.4 billion spent by the larger state of Florida. And a federal audit last summer concluded that New York Medicaid spent $1.8 billion on more than 600,000 ineligible enrollees in just a six-month period. Little wonder that Gov. Andrew Cuomo in January called the state’s fiscal situation “unsustainable” after the state announced a $6 billion budget deficit, most of which came from Medicaid.

To his credit, Cuomo proposed changes to crack down on Medicaid fraud and enact other program reforms. He also criticized Congress when it passed legislation to block New York and other states from changing their Medicaid programs during the pandemic. But he has not acknowledged the underlying flaws in federal law that, by encouraging profligate blue state spending, created the problem in the first place.

Of the 14 wealthy states that benefit from the guaranteed 50 percent minimum Medicaid match, Hillary Clinton won 11. If the dramatic drop in oil and commodity prices in recent weeks persists, the three traditionally red states—Alaska, North Dakota, and Wyoming—that benefit from the statutory floor may no longer do so, should those states’ income decline. In the number of states affected and overall spending levels, the 50 percent minimum Medicaid match encourages overspending by blue states at the expense of federal taxpayers in red states.

In December 2018, the Congressional Budget Office estimated that removing the guaranteed 50 percent Medicaid match would save $394 billion over ten years. If McConnell and his colleagues want to tackle rising federal debt while stopping blue state bailouts, they should amend the Medicaid statute accordingly.

This post was originally published at The Federalist.

Two Factors Behind the Medicaid Enrollment Explosion

While enrollment in Obamacare’s exchanges has fallen below original projections, largely due to unaffordable premiums for health insurance coverage, enrollment in its Medicaid expansion has exploded. By the end of 2016, enrollment in 24 states that expanded Medicaid enrollment to able-bodied adults exceeded the states’ original projections by an average of 110 percent.

New studies and data suggest two related reasons why: Ineligible individuals getting on (or staying on) the Medicaid rolls, and people dropping private coverage to enroll in Medicaid expansion.

Ineligible Enrollees

The study caused a political firestorm in Louisiana. Eventually, the state dropped approximately 30,000 individuals from the Medicaid expansion rolls. Ironically enough, the Medicaid program came in approximately $400 million under budget in the fiscal year ended June 30—due in large part to the enrollment purge. To put it another way, Louisiana taxpayers had spent $400 million in the prior fiscal year on ineligible Medicaid enrollees.

A study released this month provides new evidence that the phenomenon of ineligible enrollees may go far beyond Louisiana. The study examined Census data in states that expanded Medicaid when Obamacare’s expansion took effect in 2014 and compared it to states that have not expanded. Upon analyzing the data by income, the authors found that

There is strong evidence that Medicaid participation increased for groups for whom Medicaid was not intended to be the source of insurance coverage. Neither excluding those who might be categorically eligible [e.g., individuals with disabilities already eligible for Medicaid], nor focusing on those whose income was far from the threshold alters the fundamental results. The estimated program effect grows over time.

For instance, the authors found that for individuals making more than 250 percent of the federal poverty level—nearly double the eligibility threshold for Medicaid expansion—fully 65 percent of the gains in insurance coverage after Obamacare took effect came not from people enrolling in employer coverage or other insurance (e.g., exchange plans), but from increased Medicaid enrollment.

However, the scope of this phenomenon and the fact that it occurred comparatively high up the income scale suggests widespread problems with rooting out ineligible Medicaid enrollees. People could fail to report income increases to state authorities, improperly estimate their income when applying for coverage, or—as the authors suggest—friendly social workers could decide to cast potential enrollees’ circumstances in the best possible light when filling out application forms on their behalf.

Government Programs ‘Crowding Out’ Private Coverage

In other cases, Medicaid expansion appears to have accelerated the phenomenon of “crowd out,” whereby people drop their private coverage to enroll in government-funded benefits. Crowd out enrollees are not necessarily ineligible for benefits—that is, they meet income limits and other criteria for Medicaid—but every dollar spent on covering people who already had health insurance prior to expansion arguably represents a sub-optimal use of scarce taxpayer dollars.

As part of my work with the Pelican Institute, I recently reported that the Louisiana Department of Health compiled internal data showing that, once Medicaid expansion went into effect in the state in July 2016, several thousand individuals each month dropped their private coverage to go on Medicaid. The Department of Health, claiming the data inaccurate, stopped compiling it altogether late in 2017—even though their stated explanation for the inaccuracy meant their data arguably under-stated the number of individuals dropping coverage.

The data raise the obvious question of why states would want to follow Louisiana’s lead and spend hundreds of millions of dollars (at minimum) subsidizing individuals who previously had private insurance.

Will Congress Act?

The twin developments suggest a major role for Congress, to say nothing of the states, in combating these sizable expenditures on Medicaid waste, fraud, and abuse. More rigorous eligibility checks would help, for starters, as would the widespread adoption of a new Medicaid waiver program approved in Utah.

Beginning in January, the Utah waiver will require individuals with an offer of employer coverage to remain enrolled in that employer plan, with Medicaid reimbursing premiums—a change designed to avoid the crowd-out seen in Louisiana.

This post was originally published at The Federalist.

One Way for Florida’s Legislature to Respond to a Medicaid Expansion Referendum

Last week, Politico reported on a burgeoning effort by unions and other groups to collect signatures on a ballot initiative designed to expand Medicaid in Florida. As the article notes, the effort comes after last fall’s approval of Medicaid ballot initiatives in Utah, Idaho, and Nebraska.

The effort comes as liberals try to extend “free” health care to more and more Americans. But that “free” health care comes with significant costs, and policymakers in Florida have opportunities to make those costs apparent to voters.

‘Free’ Money Isn’t Free

By contrast, the petition being circulated in Florida includes no source of funding for the state’s 10 percent share of Medicaid expansion funding under Obamacare. The failure to specify a funding source represents a typical liberal tactic. Advocates seeking to expand Medicaid have traditionally focused on the “free” money from Washington available for states that do expand. “Free” money from Washington and “free” health care for low-income individuals—what’s not to like?

Of course, Medicaid expansion has very real costs for states, without even considering the effects on their taxpayers of the federal tax increases needed to fund all that “free” money from Washington. Every dollar that states spend on providing health care to the able-bodied represents another dollar that they cannot spend elsewhere.

I have previously noted how spending on Medicaid has crowded out funding for higher education, thus limiting mobility among lower-income populations, and encourages states to prioritize the needs of able-bodied adults over individuals with disabilities, for whom states receive a lower federal Medicaid match.

Taxes Ahead? Oh Yeah, Baby

Proposing a state income tax to fund Medicaid expansion would certainly make the cost of expansion readily apparent to Florida voters, especially the retirees who moved to the Sunshine State due to its combination of warm weather and no individual income tax. Voters would likely think twice if Medicaid expansion came with an income tax—which of course lawmakers could raise in the future, to fund all manner of government spending.

Prior efforts suggest that making the costs of Medicaid expansion apparent to voters appreciably dampens support. Utah approved its ballot initiative, which included a sales tax increase, with a comparatively small (53.3 percent) approval margin. In Montana, a referendum proposing a tobacco tax increase to fund a continuation of that state’s Medicaid expansion (which began in 2016) went down to defeat in November.

New Taxes Are an Uphill Battle

Liberal groups already face challenges in getting a Medicaid ballot initiative approved in Florida. The state constitution requires 60 percent approval for all initiative measures intended to change that document, a higher bar than advocates for expansion have had to clear elsewhere. Of the four states where voters approved Medicaid expansion—Maine, Nebraska, Utah, and Idaho—only the margin in Idaho exceeded 60 percent, and then just barely (60.58 percent).

Disclosure: While the author served on the health care transition advisory committee of Florida Gov. Ron DeSantis, the views expressed above represent his personal views only.

This post was originally published at The Federalist.

Will the Trump Administration Help Republicans Expand Obamacare?

For all the allegations by the Left about how the Trump administration is “sabotaging” Obamacare, a recent New York Times article revealed nothing of the sort. Instead it indicated how many senior officials within the administration want to entrench Obamacare, helping states to expand the reach of one of its costly entitlements.

Thankfully, a furious internal battle took the idea off the table—for now. But instead of trying to find ways to increase the reach of Obamacare’s Medicaid expansion, which prioritizes able-bodied adults over individuals with disabilities, the Trump administration should instead pursue policies that slow the push towards expansion, by making the tough fiscal choices surrounding expansion plain for states to see.

What ‘Partial Expansion’ Means

Following the court’s decision, the Obama administration determined expansion an “all-or-nothing” proposition. If states wanted to receive the enhanced match rate for the expansion—which started at 100 percent in 2014, and is slowly falling to 90 percent for 2020 and future years—they must expand to all individuals below the 138 percent of poverty threshold.

However, some states wish to expand Medicaid only for adults with incomes below the poverty level. Whereas individuals with incomes above 100 percent of poverty qualify for premium and cost-sharing subsidies for plans on Obamacare’s exchanges, individuals with incomes below the poverty level do not. (In states that have not expanded Medicaid, individuals with incomes below poverty may fall into the so-called “coverage gap,” because they do not have enough income to qualify for subsidized exchange coverage.)

States that wish to cover only individuals with incomes below the poverty line may do so—however, under the Obama administration guidance, those states would receive only their regular federal match rate of between 50 and 74 percent, depending on a state’s income. (Wisconsin chose this option for its Medicaid program.)

How ‘Partial Expansion’ Actually Costs More Money

The Times article says several administration supporters of “partial expansion”—including Health and Human Services (HHS) Secretary Alex Azar, Centers for Medicare and Medicaid Administrator (CMS) Seema Verma, and Domestic Policy Council Director Andrew Bremberg—believe that embracing the change would help to head off full-blown expansion efforts in states like Utah. An internal HHS memo obtained by the Times claims that “HHS believes allowing partial expansion would result in significant savings over the 10-year budget window compared to full Medicaid expansion by all.”

In reality, however, “partial expansion” would explode the budget, for at least three reasons. First, it will encourage states that have not embraced expansion to do so, by lowering the fiscal barrier to expansion. While states “only” have to fund up to 10 percent of the costs of Medicaid expansion, they pay not a dime for any individuals enrolled in exchange coverage. By shifting individuals with incomes of between 100-138 percent of poverty from Medicaid to the exchanges, “partial expansion” significantly reduces the population of individuals for whom states would have to share costs. This change could encourage even ruby red states like Texas to consider Medicaid expansion.

Second, for the same reason, such a move will encourage states that have already expanded Medicaid to switch to “partial expansion”—so they can fob some of their state costs onto federal taxpayers. The Times notes that Arkansas and Massachusetts already have such waiver applications pending with CMS. Once the administration approves a single one of these waivers, virtually every state (or at minimum, every red state with a Medicaid expansion) will run to CMS’s doorstep asking for the federal government to take these costs off their hands.

Medicaid expansion has already proved unsustainable, with exploding enrollment and costs. “Partial expansion” would make that fiscal burden even worse, through a triple whammy of more states expanding, existing states offloading costs to the federal government through “partial expansion,” and the conversion of millions of enrollees from less expensive Medicaid coverage to more costly exchange plans.

What Washington Should Do Instead

Rather than embracing the fiscally irresponsible “partial expansion,” the Trump administration and Congress should instead halt another budget gimmick that states have used to fund Medicaid expansion: The provider tax scam. As of last fall, eight states had used this gimmick to fund some or all of the state portion of expansion costs. Other states have taken heed: Virginia used a provider tax to fund its Medicaid expansion earlier this year, and Gov. Paul LePage (R-ME)—who heretofore has steadfastly opposed expansion—recently floated the idea of a provider tax to fund expansion in Maine.

The provider tax functions as a scam by laundering money to generate more federal revenue. Providers—whether hospitals, nursing homes, Medicaid managed-care plans, or others—agree to an “assessment” that goes into the state’s general fund. The state uses those dollars to draw down new Medicaid matching funds from the federal government, which the state promptly sends right back to the providers.

For this reason, politicians of all parties have called on Congress to halt the provider tax gimmick. Even former vice president Joe Biden called provider taxes a “scam,” and pressed for their abolition. The final report of the bipartisan Simpson-Bowles commission called for “restricting and eventually eliminating” the “Medicaid tax gimmick.”

If Republicans in Congress really want to oppose Obamacare—the law they ran on repealing for four straight election cycles—they should start by imposing a moratorium on any new Medicaid provider taxes, whether to fund expansion or anything else. Such a move would force states to consider whether they can afford to fund their share of expansion costs—by diverting dollars from schools or transportation, for instance—rather than using a budget gimmick to avoid those tough choices. It would also save money, by stopping states from bilking the federal government out of billions in extra Medicaid funds through what amounts to a money-laundering scam.

Rhetoric vs. Reality, Take 5,000

But of course, whether Republicans actually want to dismantle Obamacare remains a very open question. Rather than opposing “partial expansion” on fiscal grounds, the Times quotes unnamed elected officials’ response:

Republican governors were generally supportive [of “partial expansion”], but they said the change must not be seen as an expansion of the Affordable Care Act and should not be announced before the midterm elections. Congressional Republican leaders, while supportive of the option, also cautioned against any high-profile public announcement before the midterm elections.

In other words, these officials want to expand and entrench Obamacare, but don’t want to be seen as expanding and entrenching Obamacare. What courage!

Just as with congressional Republicans’ desperate moves to bail out Obamacare’s exchanges earlier this year, the Times article demonstrates how a party that repeatedly ran on repealing Obamacare, once granted with the full levers of power in Washington, instead looks to reinforce it. Small wonder that the unnamed politicians in the Times article worry about conservative voters exacting a justifiable vengeance in November.

This post was originally published at The Federalist.

Exclusive: Congress Should Investigate, Not Bail Out, Health Regulators Who Risked Billions

What if a group of regulators were collectively blindsided by a decision that cost their industry billions of dollars? One might think Congress would investigate the causes of this regulatory debacle, and take steps to ensure it wouldn’t repeat itself.

Think again. President Trump’s October decision to terminate cost-sharing reduction (CSR) subsidy payments to health insurers will inflict serious losses on the industry. For October, November, and December, insurers will reduce deductibles and co-payments for certain low-income exchange enrollees, but will not receive reimbursement from the federal government for doing so. America’s Health Insurance Plans, the industry’s trade association, claimed in a recent court filing that insurance carriers will suffer $1.75 billion in losses over the remainder of 2017 due to the decision.

As Dave Anderson of Duke University recently noted, the “hand grenade” of stopping the cost-sharing reduction payments, “if it was thrown in January or February of this year, would have forced a lot of carriers to do midyear exits and it would have destroyed the exchanges in some states.” Yet Congress has asked not even a single question of regulators why they did not anticipate and plan for this scenario—a recipe for more costly mistakes in the future.

A Brewing Legal and Political Storm

The controversy surrounds federal payments that reimburse insurers for lower deductibles, co-payments, and out-of-pocket expenses for qualifying low-income households purchasing exchange coverage. While the text of Obamacare requires the U.S. Department of Health and Human Services to establish a program to reimburse insurers for providing the discounts, it nowhere includes an explicit appropriation for such spending.

As the exchanges launched in 2014, the Obama administration began making CSR payments to insurers. However, later that year, the House of Representatives, viewing a constitutional infringement on its “power of the purse,” sued to stop the executive from making the payments without an explicit appropriation. In May 2016, Judge Rosemary Collyer ruled the payments unconstitutional absent an express appropriation from Congress.

The next President could easily wade into this issue. Say a Republican is elected and he opts to stop the Treasury making payments related to the subsidies absent an express appropriation from Congress. Such an action could take effect almost immediately….It’s a consideration as carriers submit their bids for next year that come January 2017, the policy landscape for insurers could look far different.

One week after my article, Collyer issued her ruling calling the subsidy payments unconstitutional. At that point, CSR payments faced threats from both the legal and political realms. On the legal front, the ongoing court case could have resulted in an order terminating the payments. On the political side, the new administration would have the power to terminate the payments unilaterally—and it does not appear that either Hillary Clinton or Trump ever publicly committed to maintaining the payments upon taking office.

Yet Commissioners Stood Idly By

In the midst of this gathering storm, what actions did insurance commissioners take last year, as insurers filed their rates for the 2017 plan year—the plan year currently ongoing—to analyze whether cost-sharing payments would continue, and the effects on insurers if they did not? About a week before the Trump administration officially decided to halt the payments, I submitted public records requests to every state insurance commissioner’s office to find out.

Two states (Indiana and Oregon) are still processing my requests, but the results from most other states do not inspire confidence. Although a few states (Illinois, Utah, and California’s Department of Managed Health Care) withheld documents for confidentiality or logistical reasons, I have yet to find a single document during the filing process for the 2017 plan year contemplating the set of circumstances that transpired this fall—namely, a new administration cutting off the CSR payments.

In many cases, states indicated they did not, and do not, question insurers’ assumptions at all. North Dakota said it does not dictate terms to carriers (although the state did not allow carriers to re-submit rates for the 2018 plan year after the administration halted the CSR payments in October). Wyoming said it did not issue guidance to carriers on CSRs “because that’s not how we roll.” Missouri did not require its insurers to file 2017 rates with regulators, so it would have no way of knowing those insurers’ assumptions.

Other states admitted that they did not consider the possibility that the incoming administration would, or even could, terminate the CSR payments. North Carolina said it did not think the court case was relevant, or that cost-sharing reduction payments would be an issue. Massachusetts’ insurance Connector (its state-run exchange) responded that “there was no indication that rates for 2017 were affected by the pendency of House v. Burwell,” the case Collyer ruled on in May 2016.

Despite the ongoing court case and the deep partisan disputes over Obamacare, many commissioners’ responses indicate a failure to anticipate difficulties with cost-sharing reduction payments. Mississippi stated that, during the filing process for 2017, “CSRs weren’t a problem then, as they were being funded.” Minnesota added that “it was not until the spring of 2017 that carriers started discussing the threat [of CSR payments being terminated] was a real possibility.” Nebraska stated that “I don’t think that there’s anyone who allowed for the possibility of non-payment of CSRs for plan year 2017. We were all waiting for Congress to act.”

However, as an e-mail sent by the National Association of Insurance Commissioners (NAIC) to state regulators demonstrates, federal authorities at the Centers for Medicare and Medicaid Services (CMS) stated their “serious concerns” with the Texas and New Mexico proposals. Federal law requires insurers to reduce cost-sharing for qualifying beneficiaries, regardless of the status of the reimbursement program, and CMS believed the contingency language—which never went into effect in either Texas or New Mexico—violated that requirement.

In at least one case, an insurer raised premiums to reflect the risk that CSR payments could disappear in 2017. Blue Cross Blue Shield of Montana submitted such request to that state’s insurance authorities. However, regulators rejected “contingent CSR language”—apparently an attempt to cancel the reduced cost-sharing if reimbursement from Washington was not forthcoming, a la the Texas and New Mexico proposals. The insurance commissioner’s office also objected to the carrier’s attempt to raise premiums over the issue: “We will not allow rates to be increased based on speculation about outcomes of litigation.”

Of course, had insurers requested, or had regulators either approved or demanded, premium increases last year due to uncertainty over cost-sharing reduction payments, they would not now face the prospect of over $1 billion in losses due to non-payment of CSRs for the last three months of 2017. But had regulators approved even higher premium increases last year, those increases likely would have caused political controversy during the November elections.

As it was, news of the average 25 percent premium increase for 2017 gave Trump a political cudgel to attack Clinton in the waning days of the campaign. One can certainly question why Democratic insurance commissioners who did not utter a word about premium increases and CSR “uncertainty” during Clinton’s campaign suddenly discovered the term the minute Trump was elected president.

However, at least some ardent Obamacare supporters just did not anticipate a new administration withdrawing cost-sharing reduction payments. Washington state’s commissioner, Mike Kreidler, published an op-ed last October regarding the House v. Burwell court case. He did so at the behest of NAIC consumer representative Tim Jost, who wanted to cite Kreidler’s piece in an amicus curiae brief during the case’s appeal. But despite their focus on the court case regarding CSRs, it appears neither Jost nor Kreidler ever contemplated a new administration withdrawing the payments in 2017.

Congressional Oversight Needed

The evidence suggests that not a single insurance commissioner considered the impact of a new administration withdrawing cost-sharing reduction payments in 2017, a series of decisions that put the entire health of the individual insurance market at risk. What policy implications follow from this conclusion?

First, it undercuts the effectiveness of Obamacare’s “rate review” process. That mechanism requires states to evaluate “excessive” premium increases. However, the program’s evaluation criteria do not explicitly include policy judgments such as those surrounding CSRs. Moreover, the political focus on lowering “excessively” high premium increases might result in cases where regulators approve premium rates set inappropriately low—as happened in 2017, where no carriers priced in a contingency margin for the termination of CSR payments, yet those payments ceased in October.

As noted above, Montana’s regulators called out that state’s Blue Cross Blue Shield affiliate for proposing a rate increase relating to CSR uncertainty. The state’s insurance commissioner, Monica Lindeen, issued a formal “letter of deficiency” in which she stated that “raising rates on the basis of this assumption [i.e., loss of cost-sharing reduction payments] is unreasonable.” But events proved Lindeen wrong—those payments did disappear in 2017. Yet the insurer in question has no recourse after their assumptions proved more accurate than Lindeen’s—nor, for that matter, will Lindeen face any consequences for the “unreasonable” assumptions she made.

Second, it suggests an inherent tension between state authorities and Washington. Several regulators specifically said they looked to CMS’ advice on the cost-sharing reduction issue. Iowa requested guidance from Washington, and Wisconsin said the status of the payments was “out of our hands.” But given the impending change of administrations, any guidance CMS provided in the spring or summer of 2016 was guaranteed to remain valid only through January 20, 2017—a problem for regulators setting rates for the 2017 plan year.

Obamacare created a new layer of federal oversight—and federal policy—surrounding regulation of insurance, which heretofore had laid primarily within the province of the states. The CSR debacle resulted from the conflict between those two layers. Unless and until our laws reconcile those tensions—in conservatives’ case, by repealing the Obamacare regime and returning regulation to the states, or in liberals’ preferred outcome, by centralizing more regulatory authority in Washington—these conflicts could well recur.

Third, and perhaps most importantly, it should spark Congress to examine state oversight of health insurance in greater detail. The fact that insurance commissioners escaped the equivalent of a Category 5 hurricane—the withdrawal of CSR payments in January—and struggled through a mere tropical storm with payments withdrawn in October instead, had no relevance on their regulatory skill—to the contrary, in fact.

Unfortunately, Congress has demonstrated little interest in examining why the regulatory apparatus fell so short. The same Democratic Party that investigated regulators and bankers following the financial crisis has shown little interest in questioning why insurers and insurance regulators failed to anticipate the end of cost-sharing reduction payments. With their focus on getting Congress to appropriate funds restoring the CSR payments President Trump terminated, insurance commissioners’ lack of planning and preparation represents an inconvenient truth that Democrats would rather ignore.

Likewise, Republicans who wish to appropriate funds for the cost-sharing reduction payments have no interest in examining the roots of the CSR debacle. In September, Sen. Lamar Alexander (R-TN) convened a hearing of the Health, Education, Labor, and Pensions (HELP) Committee to take testimony from insurance commissioners on “stabilizing” insurance markets.

At the hearing, Alexander did not ask the commissioners why they did not predict the “uncertainty” surrounding cost-sharing reductions last year. HELP Committee Ranking Member Patty Murray (D-WA) asked Kreidler, her state’s insurance commissioner, about regulators’ “guessing games” regarding the status of CSRs with regard to the 2018 plan year. But neither she nor any of the members asked why those regulators made such blind and ultimately incorrect assumptions last year, by not even considering a scenario where CSR payments disappeared during the 2017 plan year.

Alexander and Murray claim the legislation they developed following the hearing, which would appropriate CSR funds for two years, does not represent a “bailout” for the insurance industry. But the fact remains that last fall, when preparing for the 2017 plan year, insurance regulators dropped the ball in a big way.

Ignoring their inaction, and appropriating funds for cost-sharing reductions without scrutinizing their conduct, would effectively bail out insurance commissioners’ own collective negligence. Congress should think twice before doing so, because next time, a regulatory debacle could have an even bigger impact on the health insurance industry—and on federal taxpayers.

This post was originally published at The Federalist.

What’s Blocking Consensus on Health Care

In the wake of the Supreme Court’s King v. Burwell ruling, some have argued that a more bipartisan approach to health policy may emerge. But fundamental philosophical disagreements between liberals and conservatives suggest that rapprochement will be difficult.

Philosophical disagreements played into in the debate over pre-Obamacare health coverage. Many conservatives argued that people should be allowed to keep their plans (as the president originally promised). Most also want to liberalize the ACA’s definition of “insurance.” That involves widening the age rating bands—older people will pay a little more, so younger people can buy cheaper policies—and eliminating some benefit requirements so that, to use a frequently cited example, single men don’t have to purchase pregnancy coverage and retired couples don’t have to buy plans that cover well-baby visits.

In a speech in October 2013, just after the failed HealthCare.gov launch, President Barack Obama talked about how some Americans have “cut-rate plans that don’t offer real financial protection in the event of a serious illness or an accident.” The administration had always wanted to eliminate some plans. Political pressure and the technical meltdowns of many exchanges upon their launch that fall forced the administration to extend the period for which some plans were grandfathered. But this was a temporary concession to political reality; its objective has not changed.

Another example of administration flexibility working toward its preferred ends involves the program that allows states to seek years-long waivers from certain provisions of the ACA. By one argument, the “State Innovation Waiver” would allow states to “alter the ACA’s generous ‘minimum essential benefits’ requirements,” which mandate types of coverage. Some of those requirements involve coverage that many people don’t want or need, and that contribute to insurance premium increases. Language in section 1332 of the ACA says that states using a waiver must cover as many individuals, with at least as comprehensive insurance benefits. In other words, states can alter the “minimum essential benefits”—but only in a way that makes them more generous, not less so. If states want to prioritize resources for certain groups—say, individuals with disabilities—over coverage of able-bodied adults, the “flexibility” in Obamacare would prove elusive.

The administration has also been inflexible about some approaches to state Medicaid expansion. Utah proposed adding job search requirements as part of broadening the program, but the administration refused to go along. Last year, Pennsylvania’s then-governor, Tom Corbett (R), proposed a mandatory work/job-search requirement, but administration opposition led to the proposal becoming a voluntary job referral service.

Ideally, states function as laboratories of democracy, and one state’s experiments can spark broader national trends. But when it comes to health care, the administration and Obamacare are offering little flexibility to states whose leaders have differing philosophical objectives. This suggests that, at least in the near term, bipartisan health experiments will remain an elusive goal.

This post was originally published at the Wall Street Journal Think Tank blog.

21st Century Health Care Options for the States

A version of this post is available on the Galen Institute website.

Across the country, state legislatures are considering whether or not to expand their existing Medicaid programs.  Last year’s Supreme Court ruling struck down the mandatory nature of Obamacare’s expansion of Medicaid to all families with incomes up to approximately $30,000 a year.  Chief Justice Roberts’ June 2012 opinion stated that the health law as originally written engaged in “economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion.”[1]  The Court’s opinion gave states a choice whether or not to expand their Medicaid programs to approximately 20 million new individuals,[2] a decision which states are weighing during their current legislative sessions.

The reasons why states should NOT participate in Obamacare’s Medicaid expansion are well-documented[3]: Medicaid patients have worse health outcomes than patients with other forms of insurance, and in many cases worse health outcomes than the uninsured;[4] Medicaid beneficiaries often face difficulty finding doctors who will treat them;[5] and by increasing federal spending funded by massive tax increases, a Medicaid expansion will destroy jobs rather than create them.[6]

Less well known, however, are the innovative programs states have utilized over the past several years to modernize and enhance their health sectors, expanding coverage and improving quality of care while lowering costs.  Rather than utilizing Obamacare’s top-down, government-centric approach of putting more people into a broken Medicaid program, these policy solutions seek to transform Medicaid using market incentives to create a health system that works for patients.

Recently the Centers for Medicare and Medicaid Services (CMS) issued a bulletin providing clear evidence that the Obama administration views Medicaid expansion as an all-or-nothing proposition.[7]  The Administration apparently hopes that pressure from hospitals and special interests will force state legislators to approve Obamacare’s massive Medicaid expansion.  However, as Chief Justice Roberts indicated in his opinion last June, states now have a real choice.  Based on the examples presented below, states should choose innovative, market-driven solutions, rather than Obamacare’s bureaucratic approach.

Rhode Island

States seeking to improve their health care system should closely examine Rhode Island’s successful global compact waiver for its Medicaid program.  The waiver, negotiated by then-Gov. Don Carcieri and approved by CMS in January 2009, attempts to reduce expenses by giving the state the flexibility to improve the quality of care.  The Rhode Island waiver focuses on promoting home-and-community-based services as a more affordable (and more desirable) alternative to nursing homes, on improving access to primary care through managed care enrollment, and on other similar methods to provide quality care at better cost.  In December 2011, the non-partisan Lewin Group released an analysis of the Rhode Island global compact waiver.[8]  The Lewin report provides demonstrable examples of the waiver’s policy success, saving money while simultaneously improving care:

  • Shifting nursing home services into the community saved $35.7 million during the three-year study period
  • More accurate rate setting in nursing homes saved an additional $15 million in Fiscal Year 2010 alone
  • Better care management for adults with disabilities and special needs children saved between $4.5 and $11.9 million, and
  • Enrollment in managed care significantly increased the access of adults with disabilities to physician services.

Lewin’s conclusion:

The GW [Global Waiver] initiatives and budget actions taken by Rhode Island had a positive impact on controlling Medicaid expenditures.  The actions taken to re-balance the [Long Term Care] system appear to have generated significant savings according to our estimates.   The mandatory enrollment of disabled members in care management program reduced expenditures for this population while at the same time generally resulting in improved access to physician services.  Continuing the GW initiatives already undertaken by the state and implementing the additional initiatives included in the [Global Waiver] will result in significant savings for the Rhode Island Medicaid program in future years.[9]

All this progress comes despite the Obama administration’s efforts, not because of them.  Pages 14-15 of the Lewin report note that maintenance of effort mandates imposed in Obamacare and the “stimulus” prevented Rhode Island from imposing modest premiums on some beneficiaries, even though the approved waiver was supposed to give the state that flexibility.[10]

Despite the ways in which the Obama administration’s bureaucratic requirements interfered with Rhode Island’s ability to implement its global waiver fully, the state achieved measurable progress in reducing costs while improving care – providing a clear example that other states can emulate.

Indiana

The Hoosier State’s Healthy Indiana Plan (HIP), created in 2008, applied the principles of personal responsibility, consumer-driven health plans, and Health Savings Accounts in its expansion of coverage to low-income populations.  Initiated as part of a Medicaid demonstration waiver, the program requires individuals to make contributions to a Personal Wellness and Responsibility (POWER) account.  No beneficiary pays more than 5% of their income, and the state supplements individual contributions so that all participants will have $1,100 in their accounts to pay for routine expenses.

Healthy Indiana promotes personal responsibility in several ways.  First, the required beneficiary contributions to the POWER account ensure that all participants have an incentive to take greater responsibility for their own health and health spending.  Second, the program promotes preventive care by providing an additional $500 to fund important preventive screenings.  Moreover, only those beneficiaries who participate in a series of annual screenings may roll over unused POWER account funds from year to year.  Third, Healthy Indiana assesses co-payments for non-urgent visits to the emergency room, attempting to reverse a trend of high ER usage by Medicaid beneficiaries prevalent nationwide.[11]

Overall, Healthy Indiana has achieved many of its policy goals.  Despite the modest incomes of beneficiaries enrolled in the program – all of whom must have incomes below 200% of the federal poverty level, or about $31,000 for a couple in 2013 – nearly four in five contributed to their POWER account.[12]  Nine in ten participants have at least one physician visit in their first year of enrollment, demonstrating that the HIP deductible does not hinder patients from obtaining needed care.[13]  And an analysis by the consulting firm Milliman found that parents in Healthy Indiana “seek preventive care more frequently than comparable commercial populations.”[14]

Healthy Indiana has not only proved successful – it’s been popular as well.  Only about one-quarter of participants ever enrolled in the program during its first two years left the program, “a retention rate much higher than the rate for adults in Indiana’s regular Medicaid managed care program.”[15]  Approximately 70% of beneficiaries considered the required POWER account contributions just the right amount, and 94% of members report being satisfied or highly satisfied with their coverage.[16]

A 2011 policy brief by Mathematica Policy Research commented on the program’s successes:

HIP has successfully expanded coverage for the uninsured, while giving enrolled members an important financial stake in the cost of their health care and incentives for value-based decision making.  Early implementation suggests that members value HIP benefits and that at least some low-income, uninsured adults are willing and able to contribute toward the cost of their care.[17]

Just as important, the program’s increase in preventive care, and decrease in emergency room usage, have achieved measurable savings. Milliman reports that HIP exceeded its targets for budget neutrality, spending nearly $1 billion less than its original spending cap in its first five years.[18]

In the past five years, the market-based incentives of the Healthy Indiana Plan have yielded two-fold success in improving the population while containing overall spending.  It remains to be seen whether CMS will approve an extension of HIP or will instead claim that Obamacare’s bureaucratic mandates preclude the program’s continuation.  The week the law passed, then-Gov. Mitch Daniels publicly worried that Obamacare would force him to plan for HIP’s termination.[19]  State legislators seeking to avoid Obamacare’s requirements and restrictions who are looking instead to market incentives as a way to control costs would be wise to examine the Healthy Indiana Plan approach.

Florida

Earlier this year, CMS granted approval to the state of Florida’s two waivers to alter its Medicaid program.  These waivers, which follow on the heels of a five-county pilot reform program begun in 2006, will roll out over the coming 18 months; both waivers should be fully implemented by October 2014.[20]

One of the two waivers would transform the Medicaid program for low-income beneficiaries. The waiver will allow all Medicaid recipients to enroll in managed care plans; each will have at least two, and as many as 10, Medicaid plans from which to choose.[21]  The waiver allows managed care plans – which are based in one of 11 regions – to create customized benefit packages that meet the unique needs of their local populations.  In applying for its waiver, Florida rightly noted that “each plan will face the competitive pressure of offering the most innovative package,” which will allow beneficiaries “to use their premium [dollars] to select benefit plans that best meet their needs.”[22]

Other features of the waiver likewise seek to reduce costs while improving the quality of beneficiary care.  Managed care plans will be required to “establish a program to encourage and reward healthy behaviors,” similar to the Healthy Indiana Plan incentives discussed above.[23]  Florida also is seeking waiver flexibility from CMS to encourage beneficiaries to enroll in health coverage through their employer when available and require modest cost-sharing for certain populations.[24]

Coupled with another waiver for the state’s long-term care program – one which seeks to place individuals in home and community-based services instead of nursing home facilities – the two waivers collectively will transform the Medicaid program in Florida.  The waivers’ focus on participant choice, competition among plans to enroll beneficiaries, and incentives to promote wellness and preventive care all hold the potential to provide a more personalized experience for Medicaid beneficiaries – and, just as important, a more effective and efficient one as well.

Even as Florida moves ahead on implementing its waivers, state legislators are offering state-based alternatives to Obamacare’s costly Medicaid expansion.  House Speaker Will Weatherford introduced legislation – the Florida Health Choices Plus bill – with Rep. Richard Corcoran, chairman of the House Health and Human Services Committee, to provide incentives for low-income individuals to obtain health insurance.[25]  Under the proposal, individuals with incomes below the federal poverty line would receive $2,000, deposited into a CARE (Contribution Amount for Reasonable Expenses) account.[26]  Beneficiaries would be required to deposit $25 per month, or $300 per year, into the account, and employers could contribute additional amounts as well.  The money could be used to purchase affordable health coverage in the Florida Health Choices insurance clearinghouse, or used directly for health expenses.

Because more than two in three uninsured Americans lack coverage for periods of less than a year, Florida Health Choices Plus would provide bridge funding to the majority of citizens who suffer only short spells without health insurance.[27]  It does so without providing incentives for individuals to drop private health insurance and enroll in a government program – a problem that has plagued past state coverage initiatives.[28]  The proposal includes a personal responsibility component, coupled with incentives for beneficiaries to serve as wise consumers of health care.  And it accomplishes these objectives without relying on Obamacare’s massive new gusher of federal spending.

Texas

Although it has not yet come to fruition, state thought leaders have begun to consider how additional flexibility from Washington could result in better care for patients and a more predictable and stable Medicaid budget for states.  The Texas Public Policy Foundation recently released a paper outlining its vision for a Medicaid block grant, and how Texas could use the flexibility under a block grant to revamp its existing Medicaid program.[29]  The paper describes how the amount of a block grant might be set, along with the terms and conditions establishing a new compact between the federal government and states – giving states more flexibility, but also requiring accountability for outcomes in the process.

Texas envisions a block grant as providing a way to revamp its Medicaid program for both low-income and elderly beneficiaries.  For lower-income applicants, the state could choose to subsidize private health insurance, with incentives linked to Health Savings Account (HSA) plans.  Beneficiaries would fund the difference between the amount of the state-provided subsidy and the cost of the insurance plan, “provid[ing] strong incentives to the enrolled population to purchase low premium, high value plans.  Beneficiaries selecting coverage that costs less than their premium support entitlement would be allowed to deposit the difference in an HSA.”[30]

With respect to long-term care for the elderly, the Texas paper envisions a series of reforms under a Medicaid block grant.  Incremental reforms – including partial benefits for those who seek to remain in community settings, a competitive bidding process for nursing home care, and greater restrictions on asset transfers, to ensure benefits are targeted toward truly needy individuals – would eventually lead to a fundamental transformation of the long-term care benefit into a defined contribution model.  Under this reform, “the state will provide a pre-determined level of financial support directly to those eligible by establishing and funding an account on each beneficiary’s behalf” to be used for eligible care expenses – maximizing beneficiary choice and flexibility and encouraging the use of community-based service over institutional nursing homes.

Unfortunately, a block grant requires approval from Congress – and neither the Democrat Senate nor President Obama currently appear inclined to grant states the degree of flexibility the Texas paper envisions.  But Rhode Island’s Global Waiver, approved in the final days of the George W. Bush administration, shows that the administration does have the authority to grant global waivers to other states seeking the same control over their Medicaid programs.

Nevertheless, the ideas offered in the paper present a vision where both flexibility and market incentives can provide better quality coverage to residents while providing budgetary stability to federal and state governments alike.

Learning from other states

Other examples of states taking action on their Medicaid programs:

North Carolina:  States first need to be armed with solid information about how the Medicaid program is working.  They need to know who is being helped or harmed and how much is being lost to waste and inefficiency in this ossified, rule-driven program.  In North Carolina, state auditor Beth Wood recently found that the state’s Medicaid program endured $1.4 billion in cost overruns each year, including $375 million in state dollars. As a result, North Carolina has decided not to expand its Medicaid program. Before considering any action, others states should commission objective, independent audits of their Medicaid programs to understand the program and the problems that need fixing.

New York also was able to gain more control over how Medicaid subsidy money is spent in exchange for a global cap on a substantial fraction of its Medicaid expenditures.

West Virginia offers alternative benefit packages that create incentives for beneficiaries to take responsibility for their own health and health care. Kentucky and Idaho are among other states with similar programs.  Patients receive additional benefits if they select a medical home, adhere to health improvement programs, keep and arrive on time for appointments, use the hospital emergency room for emergencies only, and comply with prescribed medications.

Utah fought for and received a waiver that allowed the states to scale back Medicaid’s excessively large benefit package to stretch the money to cover more citizens.

These are a few examples of the creative programs that states could develop if they weren’t forced to jump through Washington’s Mother-May-I Medicaid hoops to get approval to make even minor changes to their Medicaid programs.  

Lessons and Themes

While each state’s Medicaid program is unique, the examples discussed above each contain common themes that should guide policy-makers seeking to transform their state health systems – and avoid the pitfalls of Obamacare’s massive, bureaucratic expansion:

  • Customized Beneficiary Services:  Providing beneficiaries with a choice of coverage options can provide plans an incentive to tailor their benefit packages to best meet individuals’ needs.  Similar incentives promoting competition in the Medicare Part D prescription drug benefit helped keep that program’s cost more than 40% below original estimates.[31]
  • Coordinated and Preventive Care:  Several of the reform programs focus on providing individualized, coordinated services to beneficiaries – an improvement to the top-down, uncoordinated care model of old.  In many cases, preventive care interventions for Medicaid recipients suffering from chronic conditions can ultimately save money.
  • Personal Responsibility:  Cost-sharing can be an appropriate incentive, to encourage beneficiaries to take ownership of their health, and discourage costly practices, such as emergency room trips for routine care.  The fact that more than two-thirds of Healthy Indiana Plan participants consider their cost-sharing levels appropriate proves that even families of modest means are both willing and able to provide some financial contribution to their cost of care.
  • Home and Community-Based Services:  Several of the reform programs attempt to continue and accelerate the trend of providing long-term care in patients’ homes, rather than in more cumbersome and costly nursing home settings.
  • No New Federal Funds:  Most importantly, each of the reform projects discussed above neither seek nor require the massive new spending levels contemplated by an Obamacare expansion.  In many cases, the programs above were implemented successfully despite Washington’s interference, not because of it.

Conclusion

Functioning in their traditional role as laboratories of democracy, states have provided better solutions for policy-makers seeking to reform their Medicaid programs.  These solutions have expanded coverage, and improved the quality of care, even while reducing costs to taxpayers.  As the Obama administration denies states true flexibility when it comes to Obamacare’s costly Medicaid expansion, states have demonstrated that they can convert a modicum of leeway from Washington into maximum improvements for their citizens – and savings for taxpayers.

The analysis above shows that Chief Justice Roberts was right: states do have a choice when it comes to their Medicaid programs.  They can – and should – choose the options that will reform and revitalize their programs, rather than the massive and costly expansion of the Medicaid monolith included in Obamacare.

States must take the lead in insisting that Washington provide more flexibility over Medicaid spending so they can expand access to care without burdening taxpayers with significant new costs or burdening their citizens with a program that can be worse than being uninsured.

States can show that Medicaid can have a more efficient and effective service delivery system that enhances quality of care and outcomes.  Expanding Medicaid without a guarantee of flexibility would be a major missed opportunity for the states. If states join together, they have more leverage to demand true flexibility than if they try to gain leverage one by one.

 

NOTES

[1] NFIB v. Sebelius, June 28, 2012, http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf, p. 52.

[2] Prior to the Supreme Court ruling, the Congressional Budget Office estimated that Obamacare would expand coverage to 17 million individuals through Medicaid by 2022, while the Office of the Actuary at CMS estimated the Medicaid expansion would cover 25.9 million individuals by 2020.  See CBO, “Estimates for Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” July 24, 2012, http://cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf, Table 1, p. 19, and Office of the Actuary, Centers for Medicare and Medicaid Services, “2011 Actuarial Report on the Financial Outlook for Medicaid,” March 16, 2012, http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2011.pdf, p. 30.

[3] Grace-Marie Turner and Avik Roy, “Twelve Reasons States Should Not Expand Medicaid,” Galen Institute, March 15, 2013, http://www.galen.org/topics/tennessee-should-block-medicaid-expansion/.

[4] Scott Gottlieb, “Medicaid Is Worse than No Coverage at All,” The Wall Street Journal March 10, 2011, http://online.wsj.com/article/SB10001424052748704758904576188280858303612.html.

[5] See, for instance, Joanna Bisgaier and Karin Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” New England Journal of Medicine June 16, 2011, http://www.nejm.org/doi/full/10.1056/NEJMsa1013285.

[6] Chris Conover, “Will Medicaid Expansion Create Jobs?,” Forbes, February 25, 2013, http://www.forbes.com/sites/chrisconover/2013/02/25/will-medicaid-expansion-create-jobs/.

[7] CMS Bulletin, “Medicaid and the Affordable Care Act: Premium Assistance,” March 29, 2013, http://medicaid.gov/Federal-Policy-Guidance/Downloads/FAQ-03-29-13-Premium-Assistance.pdf.

[8] Lewin Group, “An Independent Evaluation of Rhode Island’s Global Waiver,” December 6, 2011, http://www.ohhs.ri.gov/documents/documents11/Lewin_report_12_6_11.pdf.

[9] Ibid., p. 40.

[10] Specifically, the report notes that the maintenance of effort requirements included in the “stimulus” (P.L. 111-5) and Obamacare (P.L. 111-148) “had a profound impact on the flexibility Rhode Island anticipated…The Special Terms and Conditions for the global waiver authorized Rhode Island to charge premiums of up to 5 percent…however, CMS prohibited Rhode Island from using this authority,” citing the maintenance of effort requirements.  Ibid., pp. 11-12.

[11] See, for instance, a 2010 Centers for Disease Control research brief finding Medicaid beneficiaries were nearly twice three times as likely as those with private insurance to visit the ER multiple times in one year.  Tamrya Caroll Garcia, Amy Bernstein, and Mary Ann Bush, “Emergency Department Visitors and Visits: Who Used the Emergency Room in 2007?” National Center for Health Statistics Data Brief No. 38, May 2010, http://www.cdc.gov/nchs/data/databriefs/db38.pdf.

[12] Timothy Lake, Vivian Byrd, and Seema Verma, “Healthy Indiana Plan: Lessons for Reform,” Mathematica Policy Research Issue Brief, January 2011, http://mathematica-mpr.com/publications/pdfs/health/healthyindianaplan_ib1.pdf.

[13] Indiana Family and Social Services Administration, Healthy Indiana Plan 1115 Waiver Extension Application, February 13, 2013, http://www.in.gov/fssa/hip/files/HIP_WaiverforPosting.pdf, p. 18.

[14] Cited in Ibid.

[15] “Healthy Indiana Plan: Lessons for Reform.”

[16] Healthy Indiana Plan 1115 Waiver Extension Application, pp. 19, 6.

[17] “Healthy Indiana Plan: Lessons for Reform.”

[18] Milliman letter to Indiana Family and Social Services Administration regarding budget neutrality of Medicaid Section 1115 waiver, January 30, 2013, http://www.in.gov/fssa/hip/files/041115_Budget_Neutrality_Waiver_Renewal.pdf.

[19] Mitch Daniels, “We Good Europeans,” The Wall Street Journal March 26, 2010, http://online.wsj.com/article/SB10001424052748704094104575144362968408640.html.

[20] Frequently Asked Questions on Statewide Medicaid Managed Care Program, Florida Agency for Health Care Administration, http://ahca.myflorida.com/medicaid/statewide_mc/pdf/FAQ_MC-SMMC_general.pdf.

[21] Ibid.

[22] Florida Agency for Health care Administration, Section 1115 waiver submission to the Centers for Medicare and Medicaid Services, http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/fl/fl-medicaid-reform-pa.pdf.

[23] Ibid., p. 16.

[24] A summary of the specific federal authorities Florida seeks to waive can be found on the state Agency for Health Care Administration website, http://ahca.myflorida.com/medicaid/statewide_mc/pdf/Summary_of_Federal_Authorities_01232013.pdf.

[25] “Florida Health Choices PLUS+: Creating a Stronger Marketplace for Better Health, More Choices, and Expanded Coverage,” Floriday House Majority Office, April 2013, http://myfloridahouse.gov/Handlers/LeagisDocumentRetriever.ashx?Leaf=housecontent/HouseMajorityOffice/Lists/Other%20Items/Attachments/6/Florida_Heath_Choices_Plus.pdf&Area=House.

[26] Available online at http://myfloridahouse.gov/Sections/Documents/loaddoc.aspx?PublicationType=Committees&CommitteeId=2738&Session=2013&DocumentType=Proposed%20Committee%20Bills%20%28PCBs%29&FileName=PCB%20SPPACA%2013-03.pdf.

[27] Congressional Budget Office, “How Many People Lack Health Insurance and for How Long?” May 2003, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/42xx/doc4210/05-12-uninsured.pdf, Table 4, p. 11.  For a further discussion of the cohorts comprising the uninsured, see Chris Jacobs, “Deconstructing the Uninsured,” Republican Study Committee Policy Brief, August 26, 2008, http://rsc.scalise.house.gov/uploadedfiles/pb_082608_uninsured%20analysis.pdf.

[28] See for instance Jonathan Gruber and Kosali Simon, “Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Insurance?” Journal of Health Economics, February 2008, http://economics.mit.edu/files/6422.  The study found that about three in five individuals enrolled in government health programs dropped their private coverage to do so.

[29] James Capretta, Michael Delly, Arlene Wohlgemuth, and John Davidson, “Save Texas Medicaid: A Proposal for Fundamental Reform,” Texas Public Policy Foundation, March 2013, http://www.texaspolicy.com/sites/default/files/documents/2013-03-RR05-MedicaidBlockGrants-Final.pdf.

[30] Ibid., p. 10.

[31] Robert Moffit, “Medicare Drugs: Why Congress Should Reject Government Price Fixing,” The Heritage Foundation Issue Brief 3880, March 18, 2013, http://www.heritage.org/research/reports/2013/03/medicare-drugs-why-congress-should-reject-government-price-fixing. ­­­

How You CAN’T Keep Your Current Coverage

In case you hadn’t seen it, the Galen Institute yesterday released a new paper discussing the havoc Obamacare is wreaking on insurance markets, and specifically the insurance many Americans had – and liked – before the massive 2700 page law was passed.  The paper includes the most comprehensive collection I have seen of anecdotes regarding insurance carriers who have dropped out of some markets, or gotten out of the health insurance industry completely, since Obamacare passed.  Below are the relevant excerpts from the Galen paper that tell the tale of Obamacare’s woes (I’ve edited the below lightly for length and by replacing citations with hyperlinks).  The complete list of companies that have dropped out of the insurance market shows the breathtaking scope of the impact this massive reorganization of health care is having on Americans’ lives.

Three years ago, candidate Obama promised that “you will not have to change plans.  For those who have insurance now, nothing will change under the Obama plan – except that you will pay less.”  And President Obama followed with the same pledge: “If you like your doctor, you will be able to keep your doctor.  Period.  If you like your health care plan, you will be able to keep your health care plan.  Period.  No one will take it away.  No matter what.”  The Galen report once again illustrates how hollow those pledges have proved.

 

The American Enterprise Group announced in October 2011 that it would stop offering non-group health insurance in more than 20 states.  As a result, 35,000 people will lose the health coverage they have now.  The company cited regulatory burdens, including the “medical loss ratio” (MLR) requirements (see page 4 for more), in explaining its decision to leave the markets.  This means there will be less competition in these 20 states, resulting in higher prices for consumers in many cases.

In New York, Empire BlueCross BlueShield said it will drop in the spring of 2012 health insurance plans covering about 20,000 businesses in the state. Mark Wagar, president and CEO of Empire, said that the company will eliminate seven of the 13 group plans it currently offers to businesses which have two to 50 employees.  The move is expected to have a great and potentially “catastrophic” impact on small businesses in New York, according to James L. Newhouse, president of Newhouse Financial and Insurance Brokers in Rye Brook, NY.  This loss of competition inevitably will lead to higher prices and fewer choices for businesses and their employees.

In Colorado, World Insurance Company/American Republic Insurance Company announced in October 2011 that it is leaving the individual market, citing the company’s inability to comply with insurance regulations.

In Indiana, nearly 10 percent of the state’s health insurance carriers have withdrawn from the market because they are unable to comply with the federal medical loss ratio requirement.  Indiana was hoping to bring the companies back by asking the Department of Health and Human Services (HHS) for a waiver from the rule, but Washington refused in late November 2011 to grant the waiver….

These are the latest in a series of announcements that health insurers are leaving the market as a result of ObamaCare’s edicts.  But there are many more.

The exodus continues

Citizens in states around the country have learned that carriers are leaving markets, largely as a consequence of the combined effect of the health law and state regulations that make it particularly difficult to offer coverage in the small group market.

Principal Financial Group, based in Iowa, announced in 2010 that it would stop selling health insurance, impacting 840,000 people who receive their insurance through employers served by the company.  The company assessed its ability to compete in the new environment created by PPACA and concluded its best course was to stop selling health insurance policies.

Another 42,000 employees of small and midsize employers learned in January 2011 they were losing their health coverage with Guardian Life Insurance Co. of America. The company announced it was leaving the group medical insurance market (it had reached an agreement with UnitedHealthcare to renew coverage for Guardian clients).  Guardian began withdrawing from the medical insurance market in specific states more than a decade ago, and says it would be leaving the market with or without PPACA.

Cigna announced that it is no longer offering health insurance coverage to small businesses in 16 states and the District of Columbia: California, Connecticut, Florida, Georgia, Hawaii, Illinois, Kansas, Missouri, New Hampshire, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia, and Washington, D.C.

In Colorado, Aetna will stop selling new health insurance to small groups in the state and is moving existing clients off its plans this year, affecting 1,200 companies and 5,200 employees and their dependents.   Aetna also has pulled out of Colorado’s individual market because of concerns about its ability to compete there, dropping 22,000 members.  Aetna also has dropped out of the small-group market in Michigan and several other states.

Since June of 2010, 13 plans have left the health insurance market in Iowa, citing regulatory concerns.

In New Mexico, four insurersNational Health Insurance, Aetna, John Alden, and Principal — are no longer offering insurance to individuals or to small businesses — drying up the market and driving out competition.

In Utah, Humana is ending its participation in the Utah Health Exchange, leaving only three carriers participating in the exchange.

In Virginia, UniCare has eliminated its individual market coverage for about 3,000 policyholders.  And shortly after the health law was enacted in

2010, a new Virginia-based company, nHealth, announced it was closing its doors, saying that the regulatory burdens posed by the health law made it impossible to gain investor support to continue operating.

More on State Flexibility

Three interesting points on the ongoing debate over states’ Medicaid budgets and flexibility under the health law:

First, liberal commentators in the past few days have made striking admissions that the President’s proposal for state waivers does NOT give states the flexibility to enact conservative health care solutions.  This morning Jonathan Cohn wrote a column including this line: “[Senator] Hatch…and other critics of Obama’s proposal have a point: It wouldn’t allow them to enact the sorts of health care reforms they would prefer.  Likewise, the Post’s Ezra Klein notes that “conservatives can’t do any better – at least not under these rules.”  Both columnists go on to say this lack of flexibility is a good thing – defending the richer benefit mandates that will raise the price of individual insurance by $2100 per family, according to the Congressional Budget Office.  Cohn also goes on to promote a single-payer health care system as a “more efficient” plan that could receive a waiver – “not the sort of health care alternative conservatives have in mind.”  Mind you, some (certainly not all) conservatives might actually support a state like Vermont that seeks to enact a single-payer alternative – so long as states like Indiana or Utah have the flexibility to enact THEIR alternative without meeting new federal requirements.  But Cohn and Klein both admit that the “flexibility” in the President’s proposal only goes one way – towards more government involvement and regulation.

Second, does anyone remember the debate over the Basic Health plan during the Finance Committee markup in October 2009?  You may recall that Sen. Cantwell offered an amendment to the Finance bill – which later became Section 1331 of the statute – allowing states to receive funding to establish programs similar to Washington state’s Basic Health plan.  Well, a New York Times article this morning reported that “Gov. Christine Gregoire of Washington, a Democrat, recently removed 17,500 adults covered under Basic Health.”  It’s an interesting admission that what Democrats once viewed as a de facto government-run plan hasn’t succeeded in controlling costs – either that, or states need more flexibility in managing their health care programs during times of tight budgets (or both).

Finally, if you haven’t had a chance to read the testimony from yesterday’s governors’ hearing yesterday morning, it’s worth taking a few minutes to do so.  Governors Barbour and Herbert both gave specific examples of how they are attempting to innovate within their Medicaid programs, and how Washington bureaucratic requirements – such as Utah’s eight-month-long expedition to get approval to send e-mails to beneficiaries – frequently get in the way.  (Other coverage of the hearing – and the joint Finance/Energy and Commerce report on states’ $118 billion in Medicaid costs – can be found in articles by the New York Times and Washington Post.)

Fact Checking the President on State-Based Exchanges

During his remarks to the National Governors Association yesterday, President Obama made an interesting claim regarding state-based exchanges.  Specifically, he cited the different models of Exchanges utilized by both Massachusetts and Utah, and claimed that “we made sure the law allowed that” type of flexibility for states to come up with their own Exchange models.

The reality however is quite different.  Multiple press reports in January 2010 noted that the President had signed off on a “backroom deal” with other Democrats ensuring the creation of national – NOT state-based – Exchanges.  On January 15, 2010, the Washington Post’s front-page story noted:

In a closed meeting with House Democrats, Obama indicated support for a national exchange, as the House prefers, rather than the 50 state exchanges the Senate would like, according to one person present who spoke on the condition of anonymity because of the sensitive nature of the negotiations.

Of course, Scott Brown’s special election victory in the Massachusetts Senate race four days later made the White House’s agreement irrelevant – House Democrats were forced to accept the Senate bill, and its state-based Exchanges, wholesale.  But apart from the President’s attempt to have his own facts on the matter and re-write history, one must ask:  If the President’s first inclination was for a top-down, Washington-imposed approach to health care “reform,” how much flexibility will the Obama Administration really show for states seeking to innovate?