Let us make the following assumptions about a potential Obamacare Improvement Act of 2017: The exchange and Medicaid coverage expansion both go live on 1/1/14 There are known and unknown glitches with both programs On Jan. 21, 2017, Democrats control at least one veto point (The Senate is the easiest veto point. The 2016 terrain is …
Obamacare Improvement Act of 2017Post + Comments (88)
I think we can divide the changes into four major categories. Bug fixes, cost sharing, pilot projects being brought to scale and coverage expansion.
The first and I think the easiest set of changes to incorporate will be bug fixes. There are four notable bugs at the moment. The first is Congressional staffers have to go on Exchange for their insurance, but there was ambiguity as to whether or not their employer contribution followed them to the Exchange. OPM made a rule saying the premium subsidy from the employers followed the employees. A simple fix could clarify this. Another example is clergy can’t apply subsidies to some church sponsored plans that don’t qualify as adequate coverage for Obamacare regulations. Sen. Coons and Sen. Pryor have a bill to tweak the regulation. The bug that will get the most headlines over the next three years is the family coverage glitch. Right now, if an employer offers “affordable” insurance to the employee but not the family, the family is unable to get subsidies on the Exchange. That needs to change. The final issue is PPACA was passed with the assumption that all states would quickly expand Medicaid and therefore individuals who made less than 100% FPL would never see the Exchange and thus should not receive subsidy. Tweaking that language so that anyone who qualifies for the Exchange can get subsidy is a straightforward fix. There are other small known issues. There will be a laundry list of other issues that pop up during the next three years that can be fixed.
Currently subsidies are on a sliding scale up to 400% FPL. The maximum the second lowest silver policy can cost is 9.5% of modified adjusted gross income (MAGI). In most cases this works out very nicely. However there are a few corner cases where the second lowest silver for an individual who makes just more than 400% FPL is significantly above 9.5% of FPL. Good social welfare policy making should not have explicit or implicit marginal tax rates of several thousand percent. That messes up work incentives a bit. The policy change should be subsidies apply to any and all situations regardless of income to bring the cost of the second lowest silver down to 9.5% of MAGI. If that means someone with an income of 512% FPL gets a $1,200 subsidy, oh well, they need it.
Conservatives could campaign on a marriage penalty correction as currently two unmarried adults who have lived together for a decade, share a mortgage and two cats (and no I’m not thinking of my friend who is an irrational Jaguars fan and her girlfriend) can qualify for significantly more subsidies than a married couple with the same income level.
The next three change drivers are inter-related. The PPACA/ACA negoatiations left a lot of money on the table from a variety of rentier interests because those players were able to be involved veto actors if they were threatened. However, there is still a lot of money on the table that can be used to finance coverage expansion and benefit enrichment.
My first major change as a liberal would be to tweak the federal funding share of both legacy Medicaid and Expansion Medicaid. The Feds would offer to pay 95% instead of 90% of the costs of Expansion Medicaid and 75% of the costs of Legacy Medicaid for any state that operates Expansion. Yes, this is a massive bribe to get Texas, Georgia, Alabama and Missississippi et al to expand Medicaid but I think it has policy relevance on a few areas. First, as counter-cyclical economic policy, the federal government can and should run very large deficits during bad times. States are pro-cyclical spenders so they slash Medicaid spending just as demand soars. Secondly, if a couple extra billion dollars per year is needed to get Texas buy-in, that is worth it. Significant cost savings can be anticipated as subsidy and premium levels will decrease as the Exchange risk pool gets healthier.
My next major change would be to start offering incentives to Qualifying Health Plans to adapt Accountable Care Organizations and bundled payments and reference pricing and any other system that has demonstrated cost saving and health enhancing impacts on the Medicare population. Enhanced subsidies of $10 or $20 per month for plans that adapt pay for performance and pay to avoid hospitalization schemas should drive significant business to higher quality systems of care. I would also encourage Medicare/Medicaid to take any pilot project that is working to at least regional if not national scale.
This set of projects should be close to self-financing. If it not, there are a couple big pools of money to pay for them. The easiest pools are durable medical equipment and Medicare drugs. Currently Medicare only puts some DME contracts out for bid in some locations. Expanding DME bidding to cover more products and the entire country should generate $100 billion over a decade. Medicare gets a significant discount on Medicare Part D drugs in the donut hole, but otherwise Medicare has to buy drugs at average wholesale price plus six percent. Medicare can’t be like the VA legally and tell suppliers that Medicare is the biggest buyer in the world for drug X so a good deal is necessary. Both of these steps leverage sheer buying power to get good prices for the American people. Reforming Medicare Part D and allowing a Veterans Administration like formulary would free up a couple hundred billion dollars as well.
The next round of coverage expansion would be to embrace the exchanges for all companies. Right now the Exchanges will be open to large companies (over 100 FTE) in 2017 if the state approves. I would remove the state approval and open the federal exchange to all large companies. Additionally, I would allow states to offer Medicaid buy-in at the same metallic bands as other qualifying health plans. Finally, I would lower Medicare eligibility age from 65 to 62. The three years of expanded Medicare eligibility would be offered as Gold Plus coverage at cost on the Exchanges with the normal subsidies available. Conservatives could get Bronze and Silver HSAs with favorable tax treatment as a policy accomplishment
These are primarily structural changes. Subsidy and eligibility levels would be an area of argument but they are effectively a secondary area of dispute. If the structural changes go through, a few more people are under a single payer(ish) system, the government’s ability to act as a massive buyer with amazing market power is confirmed and the success stories of the first seven years of implementation are brought to scale. This sets the ground for the Health Financing Improvement Act of 2029 for another Medicare eligibility enhancement and a further sliding up the income scale of Medicaid.