David Anderson

The state of North Carolina will start paying Medicaid claims for enrolled individuals ages 19-64 who earn under 138% Federal Poverty Level (FPL) as of December 1, 2023.

 

This will mean a lot of folks who likely would have been determined to be ineligible for full benefits for Medicaid will be redetermined to be eligible for Medicaid Expansion as of 12/1/23. It will mean a lot of folks who are currently eligible for zero premium Silver CSR plans with $500 deductibles will be moved to Medicaid as of January 1, 2024. Medicaid has been shown to have substantially lower cost-sharing than Exchange plans for folks who are barely eligible on either side of the income switch line.

North Carolina Medicaid Expansion for December 1stPost + Comments (3)

Last spring, North Carolina passed a law that would expand Medicaid to 138% FPL as part of the ACA.  Medicaid Expansion’s start date was up in the air.  The law did not set a date.  Instead Medicaid Expansion start was dependent on a state budget getting passed.  The state government took steps to make the gap between initial authorization and go-live as small as possible.  But even with front-running, the binding constraint was the state budget.

As of this morning, that is not the case any more.  The state has a budget and Medicaid Expansion is going live.

From WRAL:

 North Carolina Gov. Roy Cooper announced Friday he would let the state budget bill coming to his desk become law without his signature, opening the way for Medicaid coverage for 600,000 low-income adults, with some receiving the government health insurance within weeks.

There is no definite go-live date.  I know the state will do everything it can to make the go-live date as early as possible.  I have heard rumbles of ambitious 2023 start dates.  I would be shocked if the go-live is later than January 1.

10 more states to go.

 

Medicaid Expansion in North Carolina is finally comingPost + Comments (19)

A few weeks ago, we talked about the wildly varying and conflicting eligibility limits that a single family or household could have for Medicaid eligibility.  We worked through an example for a family of 4 in North Carolina.

Mom and Dad are both 40.  Kid 1 just turned 6 and Kid 2 is 11 months old.

Dad loses coverage if family income goes over 41% Federal Poverty Level (FPL) and/or assets are over $3000.

Mom loses full coverage if family income goes over 41% FPL and/or assets are over $3000 AND she loses limited post-partum coverage if family income goes over 196% FPL.

Kid 1 loses full coverage if family income goes over 133% FPL.

Kid 2 loses full coverage if family income goes over 210% FPL.

This matters. Right now, the nation is currently redetermining eligibility for Medicaid for tens of millions of people who gained coverage during the public health emergency. Millions are losing coverage, and millions more are expected to lose coverage.

States SHOULD be redetermining each individual’s eligibility. In North Carolina, if the above household’s income goes to 42%, Dad loses coverage, Mom bumps to post-partum coverage with limited benefits and the kids keep what they have. That is how it should work. That is how it is working in North Carolina, at least until the state legislature passes a budget that expands Medicaid to 138% FPL for adults. North Carolina is doing the re-determination process right.

Yesterday afternoon, the Department of Health and Human Services released a report stating that states are consistently not running their redeterminations correctly:

Thirty states and territories (including the District of Columbia) indicated they are not conducting automatic renewals at the individual level or are still
working to reinstate affected individuals. Impact of this issue varies widely from state to state, and many states are continuing to assess their programs and the impact of the
issue. States that provided estimates reported a wide range in the numbers of individuals impacted or potentially impacted.

Those thirty states are big states, and small states. Those thirty states are red states and blue states and purple states. Those thirty states have generous Medicaid programs and skimpy Medicaid programs. There is no obvious order as to why some states are doing redetermination correctly and others are not.

The states that are screwing things up need to re-redetermine disenrolled individuals at the individual level and hopefully play catch-up to get the likely to be eligible folks back into coverage.

Medicaid Redetermination MulliganPost + Comments (5)

In Health Affairs Forefront, Paul Shafer, Michal Horny, Stacie Dusetzina and I published a short blog post on the challenges of commercial plans requiring monthly deductible resets instead of annual resets.  Paul, Michal and Stacie have been playing with these ideas for a couple of years and I had been in the peanut gallery heckling the authors on pragmatic considerations.  So we tried to work out what we’re all thinking together.

We’re in an era of substantial first dollar cost sharing.  People have big deductibles.  The median American does not have the liquid assets to pay off their deductible.  We have fragmented policies that address some of the affordability challenges for some situations and some diseases.

For years, proponents of value-based insurance design have tried to make patients’ out-of-pocket costs more directly related to the value of care—with higher-value care costing less. For example, the Affordable Care Act (ACA) made certain high-value preventive services free to patients, although this policy is currently under threat in Braidwood v. Becerra. Another example is the monthly copayment cap on insulin costs for Medicare beneficiaries in the Inflation Reduction Act, which has helped nearly four million Americans. The White House is pushing Congress to make this policy applicable to all insured individuals, and nearly half of all states have passed insulin copayment caps to date.

Deductibles are intended to make individuals far more cost and value conscious users of healthcare.  This is problematic on a pragmatic basis as people are bad shoppers. When faced with a deductible, people just stop using services without considering the value of those services.  Additionally, there are substantial information gaps between what people think they are paying and what they actually are paying.  Finally, there is a simple problem.  Most people don’t use much if any healthcare services in a year.  Deductibles barely do anything to change incentives for folks in the bottom half of the spending distribution.  Deductibles also don’t bind or change incentives for people in the last quartile as their spending is often too damn high.  Deductibles may influence spending for people in the 3rd quartile of spending but there is not a ton of money there.  And most of this spending is likely to occur in a single event:

In a prior study of commercially insured US patients, we found that a hypothetical $500 monthly cap on in-network services would lower in-network out-of-pocket costs for nearly a quarter (24.1 percent) of commercially insured Americans, with those affected seeing their median annual out-of-pocket costs cut almost in half (-45.5 percent). For those in high-deductible health plans, the benefits would be even greater.

Monthly caps are simpler.  A number resets at the end of the month.  We also think it improves the incentive features as right now, people have a bad event early in the year that maxes out their deductible and then they schedule a lot of services for December at no marginal cost.  Monthly caps could change this dynamic.  It also improves equity as the current patchwork and caps rewards some conditions and diseases while a monthly cap treats all conditions the same.

We think that this makes the most sense in the commercial, self-insured market which is mostly large group employers.  These plans are regulated by ERISA so there is substantial benefit design flexibility. They also don’t have to worry about risk adjustment or actuarial value.  We are worried that if we hold actuarial value constant, maximum out of pocket expenses for individuals with chronic conditions could plausibly increase.  If we hold maximum out of pocket limits constant, premiums likely increase as actuarial value increases.  This is a tough trade-off.

We’re not sure if this is the way forward.  We think that this could be a way forward.

 

Challenges of paying monthly?Post + Comments (24)

There are two major flavors of private, commercial health insurance contracts.  The first is “fully insured” or “FI” where the health insurance company takes on the full risk of claims coming in above expectations.  If that happens, the insurer loses money.  If claims come in low, the insurer makes money.  The ACA individual market, the ACA regulated small group market, Medicare Advantage, and Medicaid Managed Care are all fully insured products.  The other contract structure is “self-insured” “SI” which is also known as as an “Administrative Services Only” (ASO) contract.  An SI plan has a plan sponsor contract with an insurer to run a plan and administer the claims but the sponsor takes on the full risk of unexpected expenses.  The most common plan sponsor is an employer like Duke University or Ford or Intel.  Unions are also common plan sponsors.

Insurance companies routinely offer both FI and SI plans.  From a consumer’s point of view, the only difference might be a few letters on their ID card.  But these contract structures might create different incentives for the insurance company when they build out networks and contracts.

Does this matter on how much a given service costs?

There had been evidence from Massachusetts that there was modest within hospital-insurer differences in prices paid for SI and FI patients.

We measure negotiated prices for hospital-payer pairs in Massachusetts and characterize price variation. Between-payer price variation is similar in magnitude to between-hospital price variation. Administrative-services-only contracts, in which insurers do not bear risk, have higher prices.

And now there is some new evidence from a much broader data set. Sen et al in Health Affairs looks at national hospital-payer prices to see if there is a difference between FI and SI contracts:

Using the Health Care Cost Institute’s data set of claims for one-third of the US population with employer-sponsored insurance, we found that unadjusted prices were higher in self-insured plans for most of the services we studied, with the largest differences found for endoscopies (approximately 8 percent higher in self-insured plans), colonoscopies (approximately 7 percent), laboratory tests (approximately 5 percent), and moderate-severity emergency department visits (4 percent). When patient characteristics, plan type, and geography were adjusted for, differences were generally smaller but were consistent with these findings.

What does this mean?

The short take-away is that insurance companies negotiate harder against hospitals when their profitability is on the line.  SI/ASO contracts are situations where insurers merely act as pass-through entitites for the plan sponsors.  An extra 2% on the charge does not change the profitability of the insurer.  That 2% on a FI contract could be the difference between breaking even on a contract or making enough to pay for good hookers and lots of blow.

Backing this out a bit more, this offers another reason to think that there is a space for Individual Contribution Health Reimbursement Accounts (ICHRA).  An ICHRA is basically a 401-K for health insurance.  Employers allocate a lump sum distribution that can vary on the basis of age, family size, geography and work group to employees for the express purpose of buying a health insurance plan from the ACA.  ACA plans are fully insured designs so insurers make money if they can keep costs low.  Some of that costs low component is per-unit cost control.  We know that there are a lot of ACA plans which offer narrow networks priced at a bit above Medicare while standard commercial SI/ASO rates are 150% or 200% or 250% Medicare in a given area.

I think that most of the past 15 years of health policy has been moving towards putting more dollars at risk of gains and losses to entities that plausibly can assert some control on spending and have enough expertise to actually do something.  Most employers fail on one or both of those counts.  I think movement to more fully insured products is likely on the margin.

 

 

Risk bearing and commercial prices in health insurancePost + Comments (10)