[The Supreme Court ruling that made the Medicaid expansion a state option] lead to constant speculation regarding which states would exercise the ability to opt-in or opt-out of Medicaid. Fed by the high profile case, national media have been tracking the expansion through color-coded maps that tend to rely on a five category sorting. States that have been categorized as not participating, leaning toward not participating, or alternative have been in constant flux over the last several months. The majority of these states have performed or are engaging in studies, negotiations, and other processes that move them toward participating in the Medicaid expansion. Though the media have reported that only half of states are participating, of the remaining states categorized as not participating or leaning toward not participating, all but about six are actively debating and planning to expand. The future of Medicaid expansion is not nearly as bleak as the media suggests. If anything, the Medicaid expansion is beginning to expose an animated set of political choices at both the state and the federal level that feed a dynamic federalism story that has so far evaded the Court’s understanding. The story of the Medicaid expansion is just beginning, and it will take time to fully develop the research I have begun to analyze here, but the preliminary enquiry indicates strong prospects for Medicaid expansion.
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Like many of you, I have a lot to be thankful for. You can probably imagine what some of those things are: family, friends, their good health and mine (or the courage and strength to manage when that’s not the case), a decent job, and so forth.
Not to diminish all those things, I’m going to focus for a moment on something else that, in the grand scheme of things, is relatively insignificant. But it’s significant to this blog and comes from a philosophy I admire.
Ashish Jha offered, and we have accepted, some in-kind support for TIE from one of his research assistants, Dan Liebman. For this, I am thankful, both to Ashish and Dan. With Dan’s help, we can do so much more and better. Soon, you’ll begin to see what I mean. So, this is a little thing you can be thankful for too.
When Ashish and I discussed this arrangement, I asked him why he was willing to contribute the time of one of his RAs that could otherwise be used to further his own research program. His answer was that when he sees something of high quality, something he values and that is also, in his view, good for the world, he wants to help make it better, if he can. He wants to make a tangible contribution. What he was saying was that lending a hand in this way to TIE was not a hard choice for him. He did it with joy and confidence that his contribution would be put to good use. It’s a way for him to express gratitude with more than words, with a gift. It’s not just saying “thanks,” it’s literally giving thanks.
Giving in this way is how Ashish lives. It’s wonderful and worthy of emulation.
I expect Dan’s contribution, facilitated by Ashish, will make a large impact on what we do here. But gifts of thanks that help this blog can be small too. For example, many readers help TIE when they share our content with their network. It’s a small gesture that doesn’t take much time. But, I’m grateful for it. Thank you! And keep doing it. If you read something here you find valuable, please retweet it or post it on Facebook or email it to some friends, etc. When you do so, you’re giving thanks right back.
Now, as I said, this blog and our sharing of it is not the most significant thing we could be thankful for. But in my life it has been and is significant. It’s worth a moment of reflection to recognize that readers like Ashish and you help make that happen.
I hope you (and I) spend today, tomorrow, the weekend, and beyond giving thanks to things of value in our lives and our world — big and small. Happy Thanksgiving!
PS: It goes without saying, but I’ll say it anyway: blogging will be light through the weekend.
In a new column at Bloomberg, I suggest that even liberals should accept some aspects of conservative health reform. You’ll regret not reading it! If nothing else, it’ll give you something to say about health care policy to both your conservative uncle and your liberal sister-in-law at Thanksgiving.
In a prior post I described James Capretta’s plan that could replace Obamacare’s exchanges with lighter-touch regulations. I also wrote that his plan seemed to be identical to that offered by Yuval Levin and Ramesh Ponnuru. An essential, common feature of the approach offered by these gentlemen is that they do not include competitive bidding. That is, the premium subsidy for consumers in the individual and small-group markets would not be a function of market premiums; it’d be a flat tax credit.
To these authors, I presume this is a feature. By stepping away from the competitive bidding design of the Affordable Care Act’s (ACA’s) exchanges — in which subsidies are tied to to the premium of the second cheapest silver rated plan — their proposal does not require an administrator to take and manage bids from qualified plans. With this obviation, many regulations fall away. The market is unleashed! (To be fair, a few, other regulations would or could be put in their place.)
And yet, I think a flat tax credit is far from the most efficient design. One should not abandon competitive bidding and exchanges eagerly. The fundamental reason is that we do not know the right level of tax credit. It cannot be determined administratively. Capretta suggests starting levels “of about $5,000 [for families], and for individuals, about $2,500,” and then indexing them “to grow with some measure of inflation.” Is this exactly how much support should be offered individuals and families for purchase of health insurance? Why should it be identical across markets, which exhibit considerable variation in health care costs and premiums? To what measure of inflation should it be indexed?
Similar puzzles have arisen with respect to Medicare Advantage plans, for which subsidies are set administratively. We know what happened. They shot up well above what plans reported was necessary to provide the Medicare benefit. The ACA was supposed to change that, and to a large extent it did. But the administration also layered on a quality bonus program — the value of which has been questioned by MedPAC and the GAO — that helped keep payments above cost, providing yet another example of the difficulty of administratively setting and maintaining payments at an efficient level. Capretta’s argument against exchanges, which necessarily drove him away from competitive bidding, is that they invite price controls. The lesson from Medicare Advantage is that administratively set subsidies invite bureaucratic meddling too, which is no less damaging to the efficiency of markets.
Competitive bidding, which I’ve covered extensively, is an alternative to guessing the right subsidy level, as it ties that level to the actual cost of plans (or a plan) in a market. Moreover, if plan bidding is conducted on a market-by-market basis, it permits subsidies to vary with the geographic cost of care. This provides protections for consumers, as it keeps subsidies in line with their actual premium costs; and it provides protections for taxpayers, as it prevents subsidies from running amok, as they have for Medicare Advantage plans.
One might be concerned that competitive bidding implies a defined benefit, as opposed to a defined contribution (e.g., in the form of a pre-determined tax credit), but it need not. One can retain competitive bidding in a defined contribution regime, though possibly at the expense of the consumer protection I just described. My point is that if one’s interest in a pre-set tax credit, such as that Capretta proposed, is because it’s a defined contribution, one need not abandon competitive bidding to achieve that.
To be sure competitive bidding requires some additional regulations. Plans must bid their costs for some set of benefits. Thus, one needs to specify a minimum benefit standard and establish standardized plans for the purposes of bidding. But this also aids competition. Choice among many different options that vary in many different dimensions is difficult for consumers. Such an environment weakens competition, as consumers are forced to rely more heavily on inaccurate heuristics. This is the basic premise of a managed competition design, of which competitive bidding a one variant. Exchanges so designed are good for competition and consumers. One can always argue what the minimum benefit and standardized designs should be, of course.
Perhaps one might be reasonably pessimistic about exchanges, given the poor roll-out of healthcare.gov and some of those in specific states. There’s no denying this has been a disaster. And yet, we also have examples of well-functioning exchanges. Kentucky’s works well, for example. Enrollment in the California exchange has been brisk. Medicare has a perfectly fine, exchange-like environment on medicare.gov for Medicare Advantage and Part D drug plan selection. There are also private exchanges that serve businesses and individual markets. I’m no fan of a big bureaucracy screwing up a large IT project such as healthcare.gov, but I don’t think that condemns the exchange concept; it condemns the administration overseeing that bureaucracy.
My final concern about abandoning exchanges that harness a competitive bidding design is that I do not find doing so to be a conservative notion at all. For one, we know competitive bidding works. It’s a sound theory that has been tested. Capretta, Ponnuru, and Levin know this. Medicare’s drug benefit program — Part D — has a competitive bidding design that has performed well, and Capretta himself has praised it. The Federal Employees Health Benefits Program also has competitive bidding design elements and has been cited by conservatives, Capretta included, as a model.
Competitive bidding is also central to any Medicare premium support proposal worth considering. In this context, Levin once called it “the confident market solution.” I agree! With so much evidence of its soundness, and having expressed confidence in it, I’m surprised to see thought leaders for right-of-center policy abandon it. Have they lost the courage of their convictions? If there is a clear line of conservative logic from the confident market solution to an administratively set subsidy, I am not aware of it.
Suppose the exchanges of one or more states fail to thrive, as I think is possible, if not likely.* What alternatives might we consider? James Capretta has offered one, the aspects of which I will consider in this post and at least one other.**
First, you should know that, though I’ll be focusing on the exchange-alternative provisions, Capretta has a full ACA replacement plan, about which you can read in more detail here, here, and here. I’ve already touched on some of its elements in a prior post. Second, though Capretta’s ideas may represent the latest in right-of-center health policy reform — to my eye they appear identical to those suggested by Ramesh Ponnuru and Yuval Levin in the Wall Street Journal – I do not yet believe that Republicans are, in general, anti-exchange. (See also Adrianna’s reaction to the Ponnuru/Levin column.)
With respect to exchanges, Capretta’s concern is that they require and invite too much government intervention in the market. He worries that the government will, in time, impose price-distorting, Medicare-like payment regulations in the name of cost control. There’s a lot one could debate on this point alone, but, for the purpose of this post, I will accept his premise that this is both likely and undesirable. What’s Capretta’s alternative?
It has several, interlocking components. First, instead of the ACA’s competitive bidding market design, in which subsidies are tied to the premium of the second lowest plan of some actuarial value (70% or “silver” for the ACA), Capretta advocates a flat tax credit for individual-market and small-group participants. To the extent one wants to get away from exchanges, the virtue here is that there is no bidding and subsidy determination to manage. There is no need to asses which plans qualify as “silver,” and so forth. I see some offsetting limitations, but I’ll defer those to another post.
Next, there are still some things states would or could do under Capretta’s plan. They would have to manage high-risk pools, to which insurers could refer consumers in order to protect other, less sick consumers from the high cost of covering them in the community-rated design he imagines.
States would then need to work with insurers to establish a system to identify the truly high-risk cases among the state’s insured population. To prevent abuse, states would need to create disincentives for excessive referrals for high-risk funding, perhaps by penalizing insurers for seeking subsidization for people who are found unqualified.
States also could (or should? or must?) help their residents manage receipt of the tax credit for which they may qualify.
The second important role for the states would be reducing the burden that citizens eligible for the tax credit will face when they want to find and sign up for coverage. Specifically, states would need to establish a process by which individuals could make their selection of health insurance, and the state would forward those selections to the federal government so that the credits could be paid directly to the insurance plans chosen.
Under Obamacare, this process is assigned to a bureaucracy—the state exchanges. But there is no reason a state could not handle this process without ever building a new bureaucracy. For instance, private vendors already facilitate the choice of health insurance in the private market. States could leverage that capacity to build platforms tailored to tax-credit individuals.
Is this a distinction with or without a big difference? I can’t tell. It’s not clear to me if states would be obligated to facilitate this process in some way or if Capretta is merely suggesting that they might do so. What is clear is that he advocates more flexibility in how they do so than perhaps the ACA currently allows. But this is beginning to sound like tweaks to the current exchange regulations than wholesale replacement of them. One could reasonably debate this point.
[S]tates could approach the task of aiding consumer choice by focusing strictly on the transparency and accessibility of the information available to consumers. The states could work with all licensed insurers and brokers to require the standardization of comparison information and then require insurers as well as employers not offering insurance to participate in the broad distribution of that information to the tax-credit-eligible public.
This really sounds very exchange-like (“transparancy,” “accessibility,” “standardization of comparison information”), though still different from the ACA’s. Moreover, Capretta is clear here that states “could” but not “should” or “must” play this role. Fair enough.
All in all, this is a different direction than the ACA in terms of states’ roles in managing the insurance market. Is it one that would be an improvement over conditions that might exist in a few (or many?) states in a few years? That, of course, is unclear. As I said, I will return to this subject.
* I mostly mean too few insurers participate long-term and/or premiums rise rapidly over time. The fact that the federal government is running many state exchanges is not relevant here.
** Not sure when, but likely soonish. I’m still gathering information.
Holman Jenkins wrote in the Wall Street Journal last night,
Many on the left tell us the solution is Medicare-for-All, because Medicare is so much more efficient than private insurers, spending a mere 2% on overhead compared to 20% or higher for private plans. [...]
This requires overlooking a lot. Even if overhead-to-medical spending were the right measure, much of Medicare’s overhead is hidden on the books of other agencies, including Health and Human Services, which provides management, and the IRS, which handles revenues.
Sounds convincing, doesn’t it? But I am not convinced Jenkins has considered all the facts. They’re out there. For example,
[A] portion of IRS costs are allocated to Medicare’s overhead by OACT [CMS's Office of the Actuary]. [...] [Also,] (1) the Social Security Administration, not the IRS, calculates and collects Part B premiums for the vast majority of Medicare enrollees, and the Railroad Retirement Board does so for former railroad workers; and (2) a portion of the SSA’s and the railroad board’s costs are allocated to Medicare’s overhead by OACT. [...] OACT does include the cost of claims processing, which is done by what used to be called “carriers” and “intermediaries” and are now called “Medicare administrative contractors.” [...]
The federal agencies for which Treasury collects expenditure data, and which are therefore included in the trustees’ reports on Medicare administrative spending, include the Treasury Department, the IRS, the SSA, CMS, the Department of Health and Human Services, the Medicare Payment Advisory Commission, the Area Agency on Aging, the Department of Justice, the Federal Bureau of Investigation, and the Railroad Retirement Board (see the appendix). In addition, the appendix lists “quality improvement organizations,” which are private-sector organizations with which CMS contracts. The appendix also indicates that payments by CMS to insurance companies that process claims for Medicare’s original fee-for- service program are included in the trustees’ definition, as are the cost of buildings that house CMS staff and the cost of the numerous demonstration projects Congress requires CMS to conduct.
This is not just buried in an academic journal article. You’ll find it freely available in my post. I’ve written more on this and other issues relevant to Jenkins’ piece. If you’re interested, read his (Google the title to get it ungated) and then these:
On this blog, we’ve written a ton about prostate cancer and testing and treatment thereof. A few posts discuss quality of life outcomes (QOL) associated with treatment, like impotence and incontinence. Two papers I read (or reread) recently cover those issues in a particularly helpful way, comparing QOL outcomes between treatment modalities. Moreover, they do so in some fairly comprehensive charts, which I share below.
First, from “Prostate Cancer: Epidemiology and Health-related Quality of Life,” by David Penson et al. (Urology, 2008) and citing prior work by Tracey Krupski et al. (Urology, 2000):
Next, from “Long-Term Functional Outcomes after Treatment for Localized Prostate Cancer,” by Matthew Resnick et al. (NEJM, 2013), a paper I’ve referenced before:
Naturally, mortality is also a relevant outcome, but we’ve covered that extensively, particularly as it pertains to prostate cancer screening. Here’s one such post. Here’s another. All the rest under the prostate cancer tag. But, really, if you’re interested in this stuff, just go read the recent systematic review by Richard Hoffman and colleagues. It’s ungated, but only for a short time. I think it’s awesome.
[S]ince 2010, [health care insurers and providers] have invested billions of dollars to overhaul their businesses, design new insurance plans and physician practices and develop better ways to monitor quality and control costs.
Few industry leaders want to go back to a system that most had concluded was failing, as costs skyrocketed and the ranks of the uninsured swelled.
Nor do they see much that is promising from the law’s Republican critics. The GOP has focused on repealing Obamacare, but has devoted less energy to developing a replacement.
Healthcare industry officials generally view several GOP proposals, such as limiting coverage for the poor and scuttling new insurance marketplaces created by the law, as more damaging than helpful to the nation’s healthcare system.
–Noam Levey, LA Times