A very smart analyst that I respect asked me to think a bit more on the Cassidy bill from 2015 that I was writing about last week. So I’m working on that. Now I want to look at the distributional impacts of the Cassidy-Sessions bill. I’ll be using a pair of 27 years olds as I’m working my way through a couple of different scenarios. The Cassidy scenario is the state run and regulated HSA option #3.
The first thing we need to review is the individual level funding mechanism in Cassidy as money illustrates values. Cassidy Option #3 gives a flat per capita deposit to HSA that is determined by the funds that the eligible but not insured population would have received on the PPACA as is. A 5% discount from the PPACA money pool would be applied. This applies to states that have expanded Medicaid and also those that did not expand Medicaid. Non-Expansion states would see 95% of the theoretical federal Medicaid Expansion funds also go into the pool for the HSA’s.
So let’s look at a simple chart of who benefits and we’ll go through some of the scenarios below the fold:
So what does this all mean?
For people who are enrolled in states that Expanded and who are either Medicaid Expansion enrolled or make enough money to qualify for strong Cost Sharing Reduction subsidy support and enroll, PPACA is a very good deal. It is high actuarial value coverage with fairly low premiums. Individuals who are sick and not signed up are well off if they are Medicaid eligible as enrollment is year round and most states will have some retrospective enrollment where bills will be paid. Individuals who are either CSR eligible and not signed up or not-subsidy eligible and sick are okay. The healthy but low income have significant option value to sign up in either Open Enrollment or a Special Enrollment Period. The well-off and sick get access to guarantee issue and community rated insurance at a decent price without underwriting. The healthy and wealthy are paying a lot more for their coverage and paying higher income taxes to fund everything else. They are worse off with PPACA.
The same logic applies to individuals who earn over 100% Federal Poverty Level (FPL) under the status-quo in non-Expansion states. The big difference is the status of individuals who earn under 100% FPL. They are not eligible for Medicaid expansion as their states did not expand. They are also not eligible for subsidies on the Exchange as they don’t earn enough. They are in a hole where there is no help.
The critical thing that we need to note is the split between the signed-up and non-signed up categories. PPACA is an opt-in program. People are eligible for premium and cost sharing subsidies as well as Medicaid but they don’t sign up. If they don’t sign up, they are in a bad position.
Now let’s look at Cassidy. The first thing we need to remember is that it is an opt-out program. Everyone is assumed to be enrolled in at least a catastrophic, limited benefit program that is paid for by the HSA subsidy. They get some coverage with no out of pocket premium. They are better off.
People with significant incomes who are not PPACA subsidy eligible are better off. They get an age adjusted subsidy and the premiums will probably decrease as some essential health benefits are no longer covered.
The people who are in a worse position are people who signed up under PPACA and received significant subsidies through either Medicaid Expansion or APTC/CSR. They are still receiving a subsidy. But they are receiving a flat subsidy that is determined by their age. The subsidy pool is an allocation divided equally between everyone who is eligible for a QHP. A significant portion of the eligible population receiving the flat HSA deposit are people who are not eligible for any PPACA subsidy because they make too much money. A dollar going to a 500% FPL HSA is a dollar taken away from people who currently receive income sensitive subsidies and earn under 400% FPL. The baseline plan will be a low actuarial value plan (50% actuarial value (AV) is a good possibility). People earning under 150% FPL are either getting 94% AV or 97% to 100% AV (Medicaid). 60% AV is Bronze and that currently means a $7000 out of pocket maximum. Medicaid Expansion and 94% AV Silvers have deductibles between zero and $500. If an individual is healthy, the harm is real but minimal. If the individual in this bucket are either sick or unlucky, they are suffering significant harm.
These impacts will vary by state. If Texas went Option 3, the net benefit due to some Medicaid expansion will probably lead to a significant improvement in the general welfare. If a state like California went Option 3, there would be a lower level of general welfare. These are the extreme examples.
Baud
Been there, done that.
Richard Mayhew
@Baud: do you have the pictures or are the Russians holding them as their 2020 kompromakt?
Richard Mayhew
@Baud: do you have the pictures or are the Russians holding them as their 2020 kompromakt?
Alain the site fixer
@Richard Mayhew: Richard, do you want me to change your nym? When you comment, it’s showing Mathew and not David…I’m working on the site a bit later this morning as my schedule shifted. If you what to comment under David, change that in the comment form and then you’ll need to approve your first comment under the new name. Don’t forget to do that on all devices you use on Balloon Juice.
Spanky
@Baud: In your dreams. And only in your dreams.
Hey, there was a guy named Mayhew that used to do these kinds of posts. Should we assume the move has been made?
Taylor
OT but I’d be curious to get, er, Mayhew’s views on: My employer is considering a high deductible (HDHP?) plan, eventually to replace one of the other options available. Naturally rather than replacing the cheapest option, my guess is that it will replace the most expensive, most generous option (not good news for those with a chronic condition). The sales pitch for HDHP is that it gets healthcare consumers to be better informed consumers. The example we were given was MRIs: $8K at a hospital, $2K at a clinic. With more skin in the game, people will make smarter decisions.
I’m curious what people’s experiences are with these kinds of plans? I’m not exactly sure how I would be expected to do the research to make these kinds of “informed” decisions, or where I’m supposed to find the time with a job that’s effectively 60-80 hours/week. I don’t think it’s what would be first thing I’d want to be thinking about if I’m e.g. dealing with a cancer diagnosis, I’d be looking for the person most likely to save my life.
One argument being pushed for this is that the better options are going to eventually hit the Cadillac tax, which I was dumbfounded to hear is not inflation-indexed. What horse’s ass put that in ACA? Or am I being more naive than usual this morning?
If this sort of plan has already been discussed, I’d appreciate a pointer. We are not talking HSA for now, due to IRS rules they want to ease people in with HRA and employee contributions in FSA (which I figured out was a con years ago).
Ohio Mom
@Taylor: Rolling my eyes at the MRI example. Does your boss really want you to spend your time doing research on where the cheapest MRI facility with an opening that fits your schedule is, or would he/she rather you do the stuff listed in your job description?
Externalities! They are a real thing.
Steeplejack (phone)
@Richard Mayhew:
You should stick with the Mayhew byline. It’s your brand, man!
David Anderson
@Steeplejack (phone): The issue is national press… I’m a resource for enough people with much bigger audiences than Balloon Juice that trying to get their editors on board with “Richard Mayhew who is actually Dave Anderson at Balloon Juice said XYZ” is a pain in the ass. I am trying to leverage my knowledge for the most impact. And if that means allowing Richard to join the choir invisible everywhere except Twitter, that is a worthwhile cost. Anyways, I intend to keep Mayhew on Insurance as my category tag.
Steeplejack (phone)
@David Anderson:
Well, okay, I guess. But I still feel a little like my favorite indie band sold out. Guess I’ll go listen to the early bootleg tapes again. I Can’t Get No Satisficing: Mayhew Live at the Juice.
Raven Onthill
@Taylor: “One argument being pushed for this is that the better options are going to eventually hit the Cadillac tax, which I was dumbfounded to hear is not inflation-indexed. What horse’s ass put that in ACA? Or am I being more naive than usual this morning?”
As far as I can tell the point always was to destroy, or at least damage, good employer health care, especially that negotiated by unions. This was mooted at the time.
Raven Onthill
Richard, could you provide a color key for your chart?
David Anderson
@Raven Onthill: Pretty standard stop light chart — green good, yellow meh, red bad
Raven Onthill
@David Anderson: Ooops! My computer’s “make it yellow, don’t wake him up” app, made me effectively colorblind. Turning it off made the chart much clearer.
Raven Onthill
Cassidy-Sessions 3 does not look like a bad deal. Problem is, most red states are probably going to go C-S 2 — complete withdrawal. It seems likely to set up a “slave states/free states” dichotomy, with political results that are hard to predict but probably painful.
Since C-S 2 is the default, and states have to opt in to 1 or three, there would probably be referendum battles, and these would be unimaginably hard fought.
mai naem mobile
I feel really dumb because my first thought when I saw the David Anderson name was Mayhew must have invited somebody else to write on insurance over the weekend and I missed the introduction to David Anderson.
David Anderson
@Raven Onthill: I don’t think Option 2 will be chosen in more than a few states as there are too many stakeholders who benefit from some coverage and they are no longer accepting the money from Obama. I could see Option 3 being quite common south of the Mason Dixon Line and throughout the Gulf of Mexico watershed and Option 1 being a Yankee/West Coast option.
dr. bloor
@Taylor:
Richard can point out exceptions, and probably correct me, but here’s my take:
Comparison shopping is oversold bullshit if you’re insured and going with in-network providers. Let’s take your sales critter’s particularly egregious example, as applied to Real Life:
Hospital A: $8000 for an MRI
Hospital B: $2000 for an MRI
Both bill Mayhew Insurance at the amounts above. Both Hospitals receive $1894.65 for the MRI, per their provider contract with Mayhew. That’s it. You are responsible for, and have deducted from your HSA/deductible, exactly $1894.65. Unless the Mayhew provider contract is unlike every one I’ve ever signed, Hospital A is not allowed to balance bill you (i.e. hold you responsible for the remainder to $8K). And if Mayhew is dumb enough to pay providers the whole $8000, Hospital B is most assuredly not going to be charging $2000 for that procedure.
The premium/HSA balance is a gamble. Each year, you’re going to have a floor (Premiums + $0 out of pocket because you’re miraculously healthy) and a ceiling (Premiums + annual out-of-pocket max). As a self-employed worker, when shopping for insurance I take Annual Premium (adjusted for tax deduction) + Out of Pocket Max (Adjusted for tax deduction–which varies considerably if you’re planning on deducting HSA contributions v. medical expenses on Schedule A of your 1040).
My family has a number of ongoing medical expenses, so I assume we’re going to max out, and am accordingly most sensitive to the ceiling number. This year, we went with a high deductible HSA silver plan. The “floor” number was about $600 over the Gold Plan floor, but the “ceiling” number was about $2500 lower compared to the Gold. YMMV.
David Anderson
@dr. bloor: pretty much… although the hospital MRI contracted rate will often vary from the stand-alone clinic contract rate…. so it might be $1823 vs $1524 depending on location.
JCJ
@David Anderson:
Another thing to consider in MRI’s is what imaging do they actually do? When I was in medical school there were axial T1 and T2 images, but that was about it. Now there are sagittal and coronal images, with and without contrast, flair images, etc. It is not unusual for a person to have had an MRI done without all of these which can be an obstacle to proper delineation of an abnormality. Then there are special images like relative cerebral blood volume (RCBV).
dr. bloor
@David Anderson: True enough–forgot about that distinction. Sales guy still pitching them a load, though. :)
Raven Onthill
@David Anderson: This cynical old bird thinks that that was what they said about the Medicaid expansion. I also fear that what we finally get from this Congress and this administration will not be nearly as good as what you describe.
elm
David/Richard, is it intentional that you reversed the order of Male/Female for the last two rows? The pattern of Male/Female goes MFMFFM. The graphic suggests that women will see greater benefit than men under the Cassidy proposal, which seems counter intuitive as I believe the current Cassidy proposal (pamphlet here) would remove the mandate for insurers to cover birth control and well woman checks.
David Anderson
@elm: not intentional… I was writing the post/creating the stoplight while watching the Patriots beat the Steelers and having a beer or two.
elm
@David Anderson: Only one or two beers? That seems insufficient.
Did you intend for the different shades of green in Male vs Female lines to be significant?
Taylor
@dr. bloor: Thanks, that’s very helpful.
Raven Onthill
@Raven Onthill: BTW, next chart, please do provide something for colorblind viewers. Plus and minus signs perhaps?