AHCA- it’s the Senate’s turn. What should they do?

We have had a couple of weeks to digest the AHCA bill passed by the House. The Senate is now going to go through a process of developing their version. They are promising to have a more deliberative process including hearings and an actual scoring by the Congressional Budget Office. So, in the spirit of a deliberative process, I have a few thoughts.

First let’s remind ourselves: why we went on this journey.

I think it is worthwhile to pause a minute and discuss the goal. If you listen carefully to how the President and House Republican leadership frame success, you will note that they say that they want to maintain access to coverage for those with preexisting conditions, lower premiums and lower deductibles. They don’t seem to care much about how many people actually enroll. This is quite different from the goal that drove the ACA- to achieve affordable access to care through coverage for a substantial proportion of the population. As I wrote in a previous post, for a 60 year old with modest income, the ACA guarantees coverage that costs a relatively small percentage of their income. However, the AHCA, due to the very small subsidies provided, our 60 year old with modest income would be expected to pay a very large percentage of her income and so will probably not be able to buy coverage, thereby largely losing access to care. So, the House bill moves the goalposts. Hopefully, the Senate will move them back to where they belong. This is about people’s health care.

What do we need to fix in the ACA?

Next, I think we need to lay down a reasonable fact set based about what is working and what is not working in the ACA. Ideally any replacement bill would fix what is not working and not break what is working.

For example, the expansion of Medicaid to very low income people is working quite well in the states that have chosen to implement it. The number of positive reports of people who have been able to finally get the care they need is very large. Despite this track record, the AHCA phases this program out by stopping access to newly qualified expansion people starting in 2020 and decreasing payments to states over time. The AHCA response seems to be driven by the desire to fund tax cuts rather than a fact based review of the ACA Medicaid expansion and its positive impact on people.

On the other hand, performance of the ACA’s individual marketplace approach is mixed: working well in some states and poorly in others. With some exceptions, the struggling states tend to be rural in their nature, relied on the Federal exchange rather than creating their own, did not expand Medicaid and had state leadership that was at best ambivalent about the whole ACA idea. In many states the risk pool has not been balanced. Most of those with medical conditions have joined, but others who are generally healthy have enrolled in fewer numbers. As part of a deliberative process, I think it is important to have a reasonable theory about why some states have succeeded and some have not. My working hypothesis is that a lack of success in some states is a combination of a lack of political will and ineffective marketing to attract lower risk enrollees. In some cases it also reflects a poor fit of the ACA model. For example, it is very possible that a model based on competing health plans may not work in rural areas because of issues in building a viable underlying delivery system network. Substantial innovation may be necessary to produce the access to care in some of these struggling states. So, if our goal is to improve the ACA, it may be important to pursue different models in different states. In my review of the AHCA, there is no sign that its approach will actually address the root causes of difficulties in the individual market under ACA. In terms of risk pools, the weak poorly targeted subsidies and the elimination of the tax penalty will lessen the incentive for lower risk enrollees to join. The AHCA’s 30% surcharge for enrollees that have not maintained coverage will not offset those negative changes. The risk pool will be worse and probably not sustainable if the House bill becomes law. And if the ACA competitive market approach has not worked in some states, there is nothing I see that would indicate that the more poorly designed market approach in the AHCA would do better.

So, what should be the agenda for the Senate?

The Senate needs to erase much of the House’s approach to Medicaid. These are people who need access to care. The expansion population should continue to be covered into the future. Sufficient financing should be provided to support the program with reasonable adjusters for cost increases over time. I think allowing for more state flexibility will be important. Even some kind of per capita payment to states is worth trying, but it must not be designed in a way to essentially dump the program onto the states without sufficient funding over time.

In terms of the individual market, there must be modification of the AHCA approach to the tax credits. The bill combines a much lower total amount of money allocated to help people and a crude distribution of those funds. So we need to restore funding for the subsidies at a similar level as exists today. Secondly, the Senate must change the ACHA’s heartless approach to distribution of funds. We need to spread those funds so that people in most need of care, those over 50, can afford it. The ACA has a sliding scale of the percent of income that is targeted. Perhaps that can be revised and a scale that considers both income and age be created. We also should consider some subsidies for those with incomes above the current 400% of poverty threshold in ACA. Getting the subsidy approach right is the most important element of ensuring the stability of the insurance pool. We need to stabilize and improve the risk pool if we are going to ensure health plan participation.

The Senate should rescind the AHCA’s elimination of product design features in the ACA that create the proper incentives for insurers to compete on the right basis. For example, the AHCA eliminates the use of the “metal” plans in the marketplace. The ACA created this approach so that enrollees could compare plans that have approximately the same levels of average cost sharing thereby allowing enrollees to make an apples to apples comparison on price. I see no evidence that this element of the ACA is failing. In fact, California, which has gone even further to standardize benefit offerings than other states, has had great success with this strategy. The metal plans should remain. They are part of the creation of an orderly market.

In an earlier post, I already discussed the essential benefits requirements. Again, these essential benefit requirements directly connect to our goal of getting people the help they need. Allowing products that exclude some of these essential benefits will inevitably lead to those excluded benefits becoming unaffordable. The Senate should not create the flexibility for states to do that. I have seen no evidence that the essential benefits strategy is causing any of the difficulties that have been experienced.

The Senate should pursue approaches that allow for substantial innovation in providing coverage and care for rural areas. These could include ways to reduce the uncertainty that insurers face, approaches built upon care delivery models that use telemedicine and other modern internet based communication and expansion of Medicaid to higher income patients.

Lastly, the Senate should put real energy into the underlying problem of high cost trends in healthcare impacting the entire population no matter whether they receive their coverage through Medicaid, Medicare, employers or individual plans. It is time for a sober look at the lack of competitive markets in healthcare whether they be for prescription drugs, imaging, devices, hospitals or other providers. We must reduce barriers to competition where they can be identified and introduce price regulation where markets just cannot function efficiently due to market concentration. And we need to address another fundamental problem of the American healthcare system- fee for service. The ACA introduced some experimentation with bundled payments in Medicare. We need to build upon that work and find ways to expand it to more conditions and the other major payers- Medicaid, employer sponsored plans and the individual market.