It’s Time for a Bipartisan Approach to Health Care Reform
By Dr. David C. Pate, News and Community
We all watched as the House of Representatives passed the American Health Care Act (AHCA).
It was hugely unpopular.
The bill then went to the Senate, where senators said they were going to start with a clean slate and instead tweaked the AHCA to come up with the Better Care Reconciliation Act (BCRA).
It soon became clear that the BCRA would not attract enough votes to pass, so Senate leadership made some further changes to the bill.
Still not enough.
Most recently, the leader of the Senate has indicated that a vote on a bill to repeal the Affordable Care Act (the ACA, known as “Obamacare”) without a concurrent replacement bill will be undertaken and Republicans will have two years to come up with a replacement bill.
It appears that there will not be enough votes to pass this repeal-only bill, either.
So, where do we stand, and where do we go from here?
Although it appears that Republicans have run out of options, I’m not counting them out. They are under tremendous pressure to repeal the ACA – and the fear of what will happen during the 2018 midterms if they don’t.
On the other hand, the prospects are dim, and I wonder whether the calculus of their risk with voters for the upcoming elections weighs in favor of doing something in a bipartisan manner. Republicans have the opportunity to be heroes and let their constituents know that they were the ones who “fixed” Obamacare.
In hopes of a bipartisan possibility, here are my recommendations. For this purpose, I am assuming that the ACA will remain the law of the land, simply because neither party has the desire, will or votes to scrap the ACA and start from scratch.
First of all, let’s be clear. Health care reform may consist of insurance reforms that regulate how the insurance market works (this is primarily what the ACA, AHCA and BCRA do) and/or it may consist of delivery system reforms that regulate how health care is delivered, which is a significant challenge facing the country but which was only cursorily addressed by the ACA and was not addressed in either the AHCA or BCRA.
Let’s address insurance reforms first. A bipartisan approach is possible if Republicans admit that their attempts to repeal the ACA have been unsuccessful and that the goal must now be to provide constituents with relief from increasing premiums and a limited choice of insurance plans in those counties where there is only one plan or no plan on the public insurance exchange.
Here, then, are the critical decisions to be made:
Commit to enforcing the individual mandate.
This is a bitter pill for the Republicans, but if they keep their eye on the prize – lowering insurance premiums – this is one step that would reduce premiums somewhere in the range of 7 percent to 20 percent, according to estimates I have heard from insurers. It can also be a good-faith gesture toward the Democrats, who would be likely to support this in exchange for concessions.
Commit to the cost-sharing reduction payments.
All businesses dislike uncertainty, and this is no less true for insurance companies. In times of regulatory uncertainty, they will increase premiums to decrease their risk. The cost-sharing reduction payments, which assist those who are below 250 percent of the federal poverty level with their deductibles, copays and co-insurance, are critical to the stability of the plans sold on the public insurance exchanges. The Trump administration has been making decisions month by month as to whether to pay these payments.
If the administration were to commit to making these payments and Congress would appropriate the funds for them, this would stem the losses of insurance carriers from markets and might entice some companies to return to the public exchanges. More insurance companies offering plans on the exchanges means lower premiums and lower annual increases. The Republicans have been making these payments anyway, and Democrats will readily support this measure. I would propose that we return stability to the market, commit to these payments and let Republicans take the credit.
Eliminate the employer mandate.
Here is a win for the Republicans, for whom mandates are anathema, and an opportunity for Democrats to make a concession.
The employer mandate was implemented because of the fear that employers would abandon coverage for their employees and send them to the public exchanges. This fear never was realized, and employers continue to understand that employee benefits are important and essential in being competitive for workers and talent. Let’s just get rid of it and let Republicans take the win.
Induce more insurance companies to offer plans on the exchanges.
There are several ways to achieve this. First is to enforce the individual mandate and commit to the cost-sharing reductions that I mentioned above. I offer up these additional ideas:
- In those counties that have no insurer or only one insurer on the public exchange, offer reinsurance for a period of three years. This would minimize the risk for insurance companies to offer plans in those markets and encourage more participation.
- Require that, if plans want to offer a Medicaid plan in a given state or individual plans in other counties in that state, they must participate on the public exchange in all counties of the state so that all counties end up with one or more insurance plan options.
- Offer a public option through a private Medicare Advantage plan that allows enrollment starting at age 50 to take higher-risk patients out of the risk pool for commercial plans in those markets, pay the plan the average Medicare per capita fee for that market (which should be attractive to plans) and separate this population from the plan’s age 65 and older enrollees for purposes of calculating the plan’s star rating so that payments for the traditional Medicare enrollees are not diminished.
Enact changes that will reduce insurance premiums.
Enforcing the individual mandate and committing to the cost-sharing reduction payments I discussed above will decrease premiums. There are four more things we can do to lower insurance premiums:
- Increase the age rating band.
Generally speaking, an insurer will spend five times more on its oldest subscribers as its younger ones. The ACA instituted a fee cap of 3:1, meaning insurance companies could not charge more than three times the premium to older subscribers as they do to younger ones.
Republicans are in favor of increasing that age rating band to 4:1 or 5:1 and doing so would lower insurance premiums for younger, healthier individuals needed in the insurance risk pools.
The downside would be that premiums for older individuals will increase, and Democrats would be likely to oppose this. I would propose that we increase the age band but provide additional subsidies to older individuals through the advance premium tax credit to help offset those premium increases.
- Create invisible high-risk pools.
In most all populations, 5 percent of people account for nearly 50 percent of health care spending. Insurers have to increase premiums significantly for the remaining 95 percent of the enrollees to cover the costs of caring for this 5 percent.
An invisible high-risk pool would allow these higher-cost individuals to remain under the insurer’s health plan, but would cap the insurer’s liability and use state or federal funds to pay for all the costs above the cap. This could significantly reduce premiums.
Republicans are in favor of high-risk pools and included funding for them in the AHCA and BCRA, so this should not be a stretch. Democrats have generally been opposed to high-risk pools because of the experience with traditional high-risk pools, but an invisible pool would alleviate most concerns as there would not be a waiting list, a waiting period, decreased benefits or an inadequate network of providers.
- Create an early buy-in for Medicare.
We could lower Medicare eligibility to age 50 or 55 and require those beneficiaries to pay the average Medicare per capita spending amount for that geographic area as their premium until they reached age 65. These are the highest-risk enrollees in commercial insurance plans, so removing them should improve the risk pool and lower premiums.
At the same time, these patients would be the lowest-risk patients in the Medicare risk pool, so if they paid the average Medicare beneficiary per capita spending amount as their premium, they should cover their costs in aggregate and not pose a negative financial impact to the Medicare program. The expansion of Medicare eligibility should be attractive to Democrats, and the ability to lower premiums and not add to the deficit should be acceptable to the Republicans.
According to Politico, “Obamacare has helped reduce the overall growth of health care costs to the lowest rate in half a century, but prescription drug prices have continued to soar.” Many plans now spend more on drugs than hospitalizations.
There are many possible ways to reduce drug prices. Here are two:
- Implement the equivalent of a medical loss ratio. The ACA put in place a medical loss ratio (MLR) for insurance companies that requires that 80 percent to 85 percent of the premium must go to providing medical services. The remaining 15 percent to 20 percent can be used for administrative purposes and profit. Any amount less than the 80 percent to 85 percent spent on medical services must be refunded to subscribers. Congress could impose similar limits on pharmaceutical companies and require that a certain percentage of their revenues be devoted to research, development and production of medications. Another percentage of their revenues could be used for marketing and administrative purposes. Revenues in excess of the limits on marketing, administrative costs and profits would have to be refunded to the health plans, employer-sponsored health plans and individuals who purchased their medications.
- Tie profits to the length of pharmaceutical companies’ patents. Currently, pharmaceutical companies obtain patents that allow them to be the sole producer of a medication for a period of years. During that time, they can price their medications at levels as high as the market will bear. I would propose that as soon as the aggregate sales revenue reaches the amount a company has invested in research and development of the drug, the patent expires. This would discourage high prices that bear no relationship to the R&D costs, and firms not discouraged by this approach would pay for it in loss of patent protection. Their higher prices additionally would attract competitors.
Get rid of the Cadillac tax.
Neither party likes this. It is a tax on the richest employer-sponsored health plans. Republicans hate it because it is a tax. Democrats hate it because it is unpopular with unions. The reason it was implemented was to discourage rich health plans that encouraged health care spending and because it was a minor attempt toward equalizing the tax treatment of employer health benefits, which are excluded from income taxation, and health plans bought on the individual market, which are bought with after tax dollars.
Let’s get rid of it and replace it with a limit on the exclusion from tax exemption of employee health benefits. This could be set at the 90th percentile of benefits, which are typically received by those who are in higher-paying jobs and can afford the tax. The benefit of doing so is to achieve the purposes of the Cadillac tax, but not lose the revenue anticipated with that tax.
Roll back Medicaid expansion
(a win for Republicans), but replace it with tax credits and cost-sharing reduction subsidies for those below 138 percent of the federal poverty level, so that instead of being eligible for Medicaid in expansion states and not eligible for anything in non-expansion states, all of these low-income individuals and families could be covered under commercial plans on the public insurance exchanges. The latter would be a win for Democrats.
Delivery System Reform
I believe the approach outlined here could achieve bipartisan support for health insurance reform. For delivery system reform, we must first understand where the costs are coming from. I put them in three buckets:
The American health care delivery system does not do a particularly good job in this area. In its defense, until the ACA, insurers did not spend a lot in this area, even though prevention of disease is much less costly than treating the disease. Of particular concern to me is the rising epidemic of childhood obesity and the huge health care costs that will be associated with these children’s care as they become adults. I am also concerned about the opioid and other drug/alcohol addiction problems in this country and the corresponding health care costs and costs to society.
We need to identify and invest in programs that are effective in combating these health threats, and we need value-based insurance benefit design changes that not only provide prevention and screening services not subject to the deductible and copays, but also lifestyle medicine interventions for at-risk patients.
It is estimated that 30 percent of health care services are of low value or no value. These range from treating patients with antibiotics for viral illnesses to futile care, or surgery when a patient is just as likely to achieve their goal with conservative treatment.
To address these problems, we need to change the reimbursement system from fee for service to pay for value so that providers are accountable for the outcomes of care and the total cost of care.
Here is an example from another sphere of care. My beloved dog just suffered a slipped disc and loss of motor function in his hind legs. Jake underwent surgery and is expected to recover.
However, the vet has offered three additional optional services: laser treatments, hyperbaric therapy and hydrotherapy. From what I understand, there is little research to support these treatments, but I love my dog and want to do everything that is reasonable to promote his recovery. From the fee-for-service standpoint, are they recommending these services because each one comes with another charge, or would they get some or all of these services if it were their dog, the way I would like for the decision to be made under pay for value?
Patients with multiple chronic diseases.
Twelve and a half percent of the American population has five or more chronic illnesses, and half of these patients account for half of all health care spending in the U.S. It is also in this population that a lot of mental health, behavioral health and substance abuse disorders coexist, at least doubling the cost of caring for this population. Under fee for service, care is fragmented and poorly coordinated, and there is huge opportunity to reduce spending and at the same time, improve outcomes, care and health.
To address all of this, we need to move from fee for service to pay for value to encourage health care providers to take accountability for patients across the continuum of care, better coordinate care, manage transitions of care, develop disease management programs and address underlying mental health issues.
For high-risk/high-cost procedures, I think commercial payers and the government should develop centers of excellence programs, where the use of those providers who are able to offer the best outcomes at the lowest total cost of care are encouraged by waiving out-of-pocket expenses and providing for travel expenses. A beneficiary could still choose to get care locally with the standard deductible and copays and co-insurance if they desired to, but they would be provided with a financial incentive to get care for high-risk/high-cost procedures at those hospitals with the lowest mortality and complication rates for that particular procedure.
We’ve seen multiple runs at the Gordian knot of care and costs in America now for decades, most recently with Obamacare and all the recent attempts to revise that law. Politicians of all stripes now have a unique opportunity to work together on behalf of millions of Americans. I hope they rise to the occasion.