(This is an unedited transcript. For accurate quotes and presentations, please refer to the full-event video.)
SARAH DASH: Well, good afternoon. It seems like everyone is ready to get started. So why don’t we go ahead. Welcome. I’m Sarah Dash, I’m President of the Alliance for Health Policy and we’re very pleased, along with our partners at the Commonwealth Fund to welcome you to today’s briefing on Examining the Continuum of Coverage Proposals. The Alliance is a non-partisan organization dedicated to advancing knowledge and understanding of health policy. I would like to thank again, the Commonwealth Fund for their partnership on today’s briefing.
So it will come to a surprise to no one that nearly ten years after the passage of the Affordable Care Act, there are still a lot of different ideas and opinions about how to promote access to care and affordability of care. But there is no question that while coverage rates increased following the implementation of the ACA, there is still significant gaps in who is covered and the cost of care remains a significant concern for the American public. So today, this briefing will orient you to a continuum of reform ideas that aim to increase healthcare coverage in the United States from incremental approaches to much more sweeping reforms. We’re not here to advocate for one approach or another, but we do seek to present you with a factual basis for considering the many design elements and downstream effects of these ideas for coverage, health spending and the health system as a whole.
Before I introduce our panelists, I just want to review a couple of quick housekeeping notes. You can join today’s conversation on Twitter using the hashtag #allhealthlive and in your packet of handouts, you will see a blue evaluation form, we really hope that you’ll take the time to fill that out before you head out into the afternoon today. You also have on your tables green question cards and we hope you’ll take the time to write a question down as you think of it, so that during the Q&A period, we can get to as many of your questions as we can.
So with that, I’d like to introduce our expert panel today. Their accomplishments are considerable and impressive and you can find their full bios in your packets. First, we will hear from Sara Collins who is Vice President for Healthcare Coverage and Access at the Commonwealth Fund. Since joining the Fund, Sara has led national surveys on health insurance and authored numerous reports, issue briefs and journal articles on health insurance coverage and policy.
Next, I am pleased to introduce Linda Blumberg who was a fellow in the Health Policy Center at the Urban Institute. Linda is an expert in private health insurance, healthcare financing, and health system reform. She’s been modeling health reform proposals for over 25 years.
Next, we’ll hear from Avik Roy. Avik is the President of the Foundation for Research on Equal Opportunity, a non-partisan, non-profit think tank that conducts research on expanding opportunity to those who least have it. He is a policy editor at Forbes and manages the Apothecary, a blog on healthcare policy and entitlement reform.
Next, I am pleased to introduce Cori Uccello, Senior Health Fellow at the American Academy of Actuaries. She’s currently a member of the CBO, Congressional Budget Office panel of health advisors and serves on the CBO Health Insurance Simulation Model Technical Review Panel. She also served two terms as a MedPAC commissioner.
Finally, and certainly last but not least, we will hear from Phil Ellis, an independent health policy consultant who spent most of his career at the CBO as a leader of the health team. He worked extensively on the Affordable Care Act, specifically with regard to estimating the effects of provisions governing insurance coverage. So with that, I am pleased to turn it over to Sara Collins.
SARA COLLINS: Thank you, Sarah, and thank you to the Alliance for holding this really important briefing today. I’m just going to review the current state of health insurance coverage in the United States and also provide kind of a bird’s eye high level overview of where the health policy landscape is right now, and what the current policy proposals are under consideration.
After declining significantly following the ACAs or the Affordable Care Act’s coverage expansions, the uninsured rate has largely flattened or even up ticked in certain surveys depending on the survey that you look at. About 27 to 30 million people are currently uninsured. Seventeen states have not yet expanded eligibility for Medicaid, leaving those states with much higher uninsured rates, in most cases, than states that have expanded. About four and a half million people are uninsured in those states who would otherwise be eligible for Medicaid. At the same time, the number of working age adults who are insured all year, but who are underinsured, has risen to about 44 million people. These are people who have high out-of-pocket costs or high deductibles relative to their incomes. As you can see from the orange bar on the chart, the highest rates of underinsurance are among people in an individual market, but over the last few years, the largest growth that we’ve seen in this measure has occurred in employer-based plans and is largely driven by the increase in both the proliferation and the size of deductibles in those plans.
Across the country, in employer plans, we’ve seen an increase over time in the amount of premiums and deductibles that people are paying, relative to median income in those states. These costs were as high as 12 to 15 percent of median income in 18 states in 2017. Most families don’t actually spend that much out-of-pocket every year. People are largely healthy on average and don’t really interface with a health system that often, but I think what we’re seeing in terms of the anxiety that Sarah mentioned about voters and their healthcare costs, is the fact of their increasing risk of out-of-pocket exposures through their deductibles and uncertainty about the future.
In the individual market, premium tax credits have reduced costs substantially for families with incomes that are under 400 percent of poverty, so about $100,000 for a family of four. But if your income is over the threshold, it makes you eligible for those subsidies. The cost of your premiums can command as much as 10 percent of your income in many states, even for bronze level plans.
Several Democratic members of Congress and presidential candidates have proposed health reform plans that would both expand coverage and improve the affordability of healthcare and health insurance. And as you’re thinking about these proposals, as you’re thinking about what they mean, it’s really important to remember that the U.S. healthcare insurance system is comprised of both public and private sources of insurance coverage. So you think about employer coverage, individual coverage, Medicaid, and Medicare. And all of those coverage sources are financed by a mix of both private and public spending. So think about employer coverage. People pay premiums, but the Federal government also has a hefty amount of money in employer coverage. It is the tax exclusion is the largest Federal tax expenditure in the Federal budget. On the flip side, Medicaid and Medicare are public programs, but those benefits are often provided by private insurers like the Medicare Advantage program. The bills that have been introduced in Congress over the past year would build out the public side of our health insurance system largely, from adding more public features to private insurance like increasing subsidies for the marketplaces, adding a re-insurance program, to providing a choice of a public plan alongside private plans and even in the case of some bills, proposing that people in employer-based plans could actually buy coverage through a public plan and then at the far end of the spectrum, making a public plan like Medicare the primary source of coverage for most Americans.
The proposals that we’re hearing from the 2020 Democratic presidential candidates follow a similar continuum of coverage. They are all seeking to reach universal coverage. They just really differ in the paths to how they would get there. Vice President Biden and Mayor Buttigieg really have the most extensive proposals at this point at least and they build on the ACA, building out this public part of the system, enhanced marketplace subsidies, filling this Medicaid coverage gap, adding a public plan option, allowing people in employer plans to buy into a public plan option, and having some kind of auto enrollment mechanism to really get everybody in and enrolled in coverage. Among those plans, it would transition away from the current law to a nearly completely public system. Single payer or Medicare for all type approach. Senator Sanders has the most developed bill at this point. But Senators Booker, Harris, and Warren also support this approach to varying degrees of similarity. In general, the Sanders bill would eliminate private coverage, no premiums or cost sharing, enhanced benefits — and I think it’s important to distinguish one of those, which is adding a long-term care benefit, which is very expensive to a lot of people right now — long-term care, but it would also be expensive to the Federal government. And then importantly, everyone is included in the proposal, including undocumented immigrants.
One of the challenges facing policymakers who are wanting to expand health insurance coverage is the fact that we have extremely complicated healthcare system. I mentioned the public/private mix and trying to explain their proposals in universally understood terms is a major issue. Just recently the Commonwealth Fund published some survey findings where we asked people if they would be in favor of a Medicare for all approach and only about 27 percent said they would be in favor of such an approach, but 40 percent told us they didn’t have enough information to form an opinion about that. If we were to ask people about other proposals, like Vice President Biden’s approach, you might also see a similar level of confusion in terms of understanding what it means for them, the healthcare system, and the trade-offs that are involved. It also will be the case for many proposals that are likely to come from Republicans.
So the Commonwealth Fund, in our support of the Urban Institute’s really superb work that Linda Blumberg is going to present today, really believe that it was important that voters and policymakers understood the facts about what the range of current health reform proposals might mean for voters and the healthcare system and what the financing tradeoffs might be in terms of cost. Thank you.
LINDA BLUMBERG: Good afternoon and thank you to the Alliance for including us in the panel today and the event and we’re very appreciative of the Commonwealth Fund for the support that they’ve provided for us to do this research. Before I get into the details, I do want to note that there were ten authors on this study. A number of them are in the room with me today, thankfully, and so if there is going to be questions and details later, they can certainly help answer those questions. There’s a lot of information in these reports.
With that, we simulated eight different reform packages. The first four of them add incrementally upon each other in steps. Each one adding to the previous one. And these reforms include improvements to the premium and cost-sharing assistance that’s available in the marketplace, including expanding assistance to some higher income people, and some lower income people who are currently ineligible for that. We also have components there that bring healthier people back into the insurance pool and some cost containment provided through the introduction of a public option.
In the next two reform packages, five and six, they build on reform four, but they add in an auto enrollment component, which is a backup to lead to universal coverage for people who don’t voluntarily enroll in coverage on their own. For all of those who are legally present in the U.S. and it also adds some further improvements to affordability including for more workers. Reform seven and eight are our two single payer options. Seven is single payer light, as we call it. Eight is the enhanced version. These both include provisions to prohibit all private health insurance coverage. Everyone would be enrolled in a single government health insurance plan. The two approaches different from each other in the level of benefits, the levels of cost sharing, and whether or not there’s coverage for undocumented immigrants.
So as we go through some of the results here, we’re going to highlight today our comparisons between each reform and what the situation would be under current law. We’re going to focus on the number of uninsured, the changes in federal spending, which you can think of as impacts on the federal budget, and also changes in national health spending. So that’s the sum of health spending by households, employers, state government and the Federal government. And there’s an enormous amount of information in the full report that’s available online, so I encourage you to look at that for other information and details if you’re interested. In these sets of reforms, we include a number of ways to achieve universal coverage. What we’re trying to do here is to highlight the tradeoffs across different reform options and some of the big ones there include that the more savings that you create for households, the more you reduce their spending, the greater the increase in federal spending is going to be. That you can get to universal coverage, but that’s going to require that some people do something that they don’t otherwise want to do. Whether that’s paying premiums into a system or paying additional taxes. And that the greater the savings in national health spending, the greater there’s going to be a need for regulation of provider prices if you’re trying to increase coverage and household affordability at the same time.
I also want to note — I don’t have a lot of time to go into methodological details with you today, but I want to note that all of the reforms have been estimated as if they are fully phased in an in a steady state equilibrium, as economists say, in 2020. Obviously that’s not an accurate assumption, but it allows us to compare things apples to apples, which is very useful. And we have estimated the government revenues that would be needed in order to pay for each of these reforms, but we did not pick specific revenue sources to fund them. But the tax side, how these dollars would be raised, is not in the current set of work. Just the benefits and that overall cost.
Due to the time constraints, I’m going to give highlights on a subset of the reforms. Obviously we can talk about any of them afterwards if you like. So in the first four reforms and four steps, we show how spending and coverage would be affected by a set of reforms including making marketplace premiums and cost sharing subsidies more generous for those that are currently eligible and also for extending them to higher income people. We added a permanent reinsurance program, we restored the individual mandate penalties. We reversed the expansion of substandard or short term plans. We filled in the Medicaid coverage gap in the 17 states that have not expanded eligibility for Medicaid under the ACA. We added a limited auto enrollment policy that pulls in all folks eligible for Medicaid who are most of the folks that are eligible for Medicaid and are enrolled in either SNAP or TANF. And we added a public option and we also have — are alternatively capping provider payment rates for insurers that offer health insurance coverage in the individual market.
The combined effects of their reforms are what’s shown in the chart here as reform four, and what we found is that these reforms taken together would lead to an increase in insurance coverage, a decrease in the uninsured of almost 11 million people. Filling the Medicaid gap is actually critical in getting this level of increase as are the enhanced subsidies in the marketplaces and the limited auto enrollment approach that we include here. We show that the expansion of coverage to 11 million more people can be done by keeping total national health spending basically constant. However, the only way that that’s accomplished is by the introduction of the public option or capping the private payment rates of the insurers in the non-group market. Under the set of reforms, spending by the federal government increases to pay for the higher enrollment in Medicaid and in subsidized insurance coverage and we estimate that the federal spending would increase by $46.7 billion in 2020 or $590 billion over ten years.
Now, reform five builds on reform four, but it also eliminates the employer-sponsored insurance firewall, which keeps those who are deemed to have an affordable employer-based insurance offer from getting a subsidized coverage through the marketplaces. We lift that. And we also add a component that we call CARE which is basically an auto enrollment backup for any people who are legally present in the U.S. who have not enrolled in insurance coverage during the course of the year that gets them enrolled in coverage. Now this set of reforms reduces the uninsured by about 80 percent or 25.6 million people. Employer coverage does fall at the same time by about 10 percent however, as more mostly modest income people leave employer coverage to get the subsidized insurance that they are now allowed to get in the marketplaces. And the additional coverage and subsidization of more people increases federal spending by $122 billion in 2020 or $1.5 trillion over ten years. National spending would fall here by just a little bit, less than one percent, and this overall system savings comes from more people coming into the individual market to get lower priced health insurance coverage.
I’m going to skip over reform six, which is identical to reform five, but increases the subsidies even further than we have in the first five reforms. So that is available in the materials that you have.
So the next slide here is — takes us to reform seven, which is our single payer light option. Again, this is coverage for all legally present U.S. residents. It covers standard ACA essential health benefits and the insurance package. It does have some income related cost sharing. The standard coverage is like an ACA gold package, so 80 percent actuarial value, but lower income people have higher actuarial value coverage. Again, we prohibit here private health insurance coverage, so everybody is in the same plan. And what we find here is that like under reforms five and six, 25.6 million legal residents gain insurance coverage. However, unlike reforms five and six, an additional 4.2 million people who are here as undocumented immigrants would lose their health insurance coverage because we are eliminating private health insurance under this approach and they are prohibited from entering into the single payer plan under this configuration. And so as a consequence, the number of uninsured on net goes down by 21.4 million people, leaving 10.8 million people all undocumented residents uninsured. Federal spending under this reform would increase by 1.5 trillion dollars in 2020 or 17.6 trillion over ten years. Now this is over 11 times the increase in federal spending under reform five, that I just talked about. And the reason is because under this reform, we’re taking almost all of the spending by households, employers, state governments, under reform five, and moving it onto the federal bill under reform seven. Direct household spending on healthcare would drop dramatically though, by about 72 percent overall, and national spending would decrease by over 210 billion in 2020 or about six percent. This savings comes from moving all legal residents into a lower cost plan in the government approach.
So reform eight is our last reform package, it’s another single payer approach, which we call singer payer enhanced. That one covers all U.S. residents whether here legally or not, it adds additional benefits beyond those included in the ACA, essential heath benefit package, for example; adult dental, vision, hearing, and a new community-based long term services and supports benefit. It eliminates all out-of-pocket costs for households, again, eliminating all private health insurance. And here the U.S. would have no remaining uninsured, although there’s some additional uncertainty around the undocumented population; we could talk about later if you’re interested. But all household healthcare spending and state healthcare spending is eliminated, except for a small fraction that goes towards institutional long-term services and supports care which remains in the Medicaid program and still maintains that structure. Federal spending would increase, however, under this approach by $2.8 trillion in 2020 and 34 trillion over ten years. This is about 87 percent more than under single payer light.
In addition, nation health spending would increase instead of decreasing as it did in the other universal coverage approaches by $720 billion, about 20 percent in 2020. And national health spending increases here because of the broader benefits provided, the higher use of care resulting from elimination of almost all out-of-pocket costs, and the additional coverage for about 11 million undocumented residents.
So I’m going to wrap up here with just highlighting a number of issues that I feel like could take another full conversation, but I just want to make sure that people are thinking about this because they are really important in terms of thinking about designs and moving forward with additional reforms. First of all, reforms including a public option are reforms one through six, and single payer options are seven through eight. All rely on price regulated insurance markets. Four through six are the ones with the public option and then seven and eight. In all of these cases, in the case of the public option reforms, we are talking about a regulated price market for all of those in the public option under single payers for the entire population. However, the optimal level of prices for all providers and all services and getting the right balance between access and quality and cost savings is really unknown at this point, but it has huge implications for cost. I want to put that out there. In addition, phase-in periods become much more important the larger the reforms and the bigger the changes there are to the health system. We didn’t simulate phase-in periods here for ease of comparability, but that can have very big implications for the ten-year budget window. As employer health spending goes down, it doesn’t mean that as health spending goes down, doesn’t mean that employer’s total spending goes down. As the economic research indicates, that at least over time, the vast majority of dollars going to health spending now by employers would be transferred into higher wages for workers. And I also want to remind people that we haven’t simulated the distributional implications of the way in which these reforms would be financed and how that would be distributed would be on the revenue side, is likely to be very different than it is on the benefit side. And so that’s important to consider.
And finally, you know, we just want to make sure that we’re highlighting some of the important trade-offs here again in terms of household costs versus government costs, voluntary reforms versus universal coverage, and that the more national cost savings that are achieved through lowering prices paid to providers, the greater the potential is that there will be disruptions to the health insurance system — the health delivery system, that need to be taken into account. So I will stop there.
AVIK ROY: Thanks everyone, it’s great to be here and it’s great to follow Sara and Linda, whose work with greatly respect in many ways. A build off with our own reform ideas. I’m going to give you a high level description of our reform proposal to expand coverage, and if you want details, there’s a lot of wiring under the hood, you could email me. You also have some handouts at your tables that describe some of these ideas in more detail.
I’ll tell you a little bit about the Foundation for Research on Equal Opportunity. Our mission, we are a non-profit think tank that focuses on expanding economic opportunity to those who least have it. We exclusively focus on policy ideas that improve the lives of Americans whose incomes or wealth are below the U.S. median. We’re trying to break the polarization curve that we’re on and try to find ideas that can get 60 votes in the Senate. Well, how do you do that? You find ideas that both conservatives and progressives can champion. And how do you do that? Well, by focusing on social mobility from a market-based perspective. Thereby, you can attract progressives who care about social mobility and conservatives who care about market-based ideas, are views that it’s not necessarily about splitting the difference, it’s about finding ideas that both progressives and conservatives can champion as advancing their values.
When it comes to healthcare, we’re hearing a lot on the Democratic side about the unaffordability of healthcare for so many Americans, but the important thing to remember is that the reason why tens of millions of Americans are uninsured and why tens of millions more struggle to afford the insurance they actually have, is not because insurance is public or private or because it isn’t subsidized enough. It’s because the underlying prices that healthcare services and suppliers, drug companies, hospitals, doctors, are charging, are unaffordable in the United States. So the debate — Linda was very careful in her presentation to say well, we don’t know what cost controls will be in a Democratic plan, because the Democrats haven’t specified how they will try to reduce costs. In fact, it’s just been a debate about how much we can tolerate private insurance or how much we might subsidize more the coverage that’s already out there. But very little specific discussion about how to actual tackle the problem of the high underlying cost of healthcare and that’s obviously incredibly important because whether you have private insurance or not, we can’t afford the system we have unless we get at those underlying costs.
Here is a chart that really describes or drives away we think about this problem, which is, you’re all familiar with the fact that America spends more on healthcare than any other country, but you may not be as familiar with the fact that America spends more on public subsidies for healthcare per capita than almost every other country. Third highest in the world before the ACA went into effect and this doesn’t even account for the subsidies in the employer-based system, the tax good. If you add that in, we’re by far number one in how much we subsidize health coverage. So whether it’s a single payer system or a market based system, a true market based system or a true single payer system could actually spend a lot less than we spent on subsidies for healthcare. And yet, cover everyone. But most of the approaches we see proposed by the Democrats and the presidential campaign are about subsidizing coverage more, not trying to find ways to cover people by subsidizing it less, by getting at the cost problem.
Here is one way to think about the urgency of the cost problems: So after the passage of the Tax Cut and Jobs Act in 2017, the median household in America gets about $62,000 in income. Their tax rate, both payroll and income tax, is about 13.5 percent of their income this year. That’s what they send to the IRS. Here is their share of national hospital spending. The average household in America is sending more of their income through out-of-pocket costs, insurance premiums, and the part of their taxes that pay for other people’s hospital care. More of the share of their income has gone to that, the hospital industry, than the IRS. That’s how bad this problem is getting and it’s getting worse every year. It doesn’t matter how much you cut household’s taxes, if we do not solve the problem of rising unit prices for hospital care in the United States — and by the way, this is just hospital care, this does not include physician care, this does not include drugs, medical devices and the rest. This is how urgent the problem of attacking the problem upon cost has become.
So we’ve developed a proposal that we call Affordable Healthcare for Every Generation. And what’s the basic idea? The basic idea is we want to make health insurance affordable for every American living today. But if we do so in a way that makes health insurance unaffordable for future generations, we have not made healthcare actually affordable. Because at the end of the day, if it’s unaffordable in in the future, we are only solving today’s problem and creating a bigger problem for tomorrow. So we have to solve both at the same time and not every proposal that’s been presented in the Democratic presidential campaign I would argue, achieves that goal.
A second principle that we’re trying to advocate in our proposal or advance in our proposal is personalized options. You’ve heard of the public option, which would in a sense provide a government-run public insurance option as an alternative to your employer-based insurance or maybe the insurance in the usual market in the exchanges. Our argument is, you shouldn’t just have one additional choice, you should have dozens of additional choices and all those different suppliers of coverage options should be competing for your business as a worker or as an individual. And that’s how you will have a much better and more patient-centered health insurance system. We should have a system that’s fair to taxpayers. I mentioned that we subsidize health coverage more than any other country in the world. The big part of why is because we spend an enormous amount of money subsidizing health coverage for the wealthy and not enough arguably subsidizing coverage for the working poor. So we need to do a lot more to reallocate our subsidies in a way that’s more progressive and not as universal as it is today. The other thing we have to do is we have to really take on the problem of healthcare monopolies, particularly in the hospital and pharmaceuticals sectors where monopoly pricing power is the biggest driver of the rising cost of healthcare.
So how do we do this? Again, a lot of wiring under the hood here. Going to boil it down to four basic steps. The first is you really have to make the individual market for health insurance work. The only way you’re going to have a market-based system that’s affordable is if more people can successfully buy affordable coverage for themselves instead of having it bought for them by either their employer or the government. So how do we do that? First, we make regulatory changes to the ACA so that healthier people can have affordable premiums and younger people can have affordable premiums. Those are two big problems in the ACA. It basically forces young and healthy people to pay much higher premiums — young, healthy, and uninsured, by the way, so that sicker and older uninsured people can get affordable coverage. We want sicker and older people to get affordable coverage, so through reinsurance and adjustments to the age subsidies, we achieve that, but also reduce premiums for younger and healthier people. We also expand the size of the individual market by building on the Trump administration’s health reimbursement arrangement rule to require that start-ups, new companies founded after 2021, if they want to sponsor health coverage for their employees, they have to do so by funding health reimbursement accounts, arrangements that allow the individual to buy insurance on their own, instead of getting it from their employer. And we merged the federal employee health benefits program, which serves eight to nine million people today, into that individual market. So all of a sudden the individual market is three to four X the size that it is today, which makes the risk pool better, it makes the economies and scale better, encourages more competition, more participation in the individual market.
Once you do that, then you have to build on top of that to actually reduce the underlying cost of healthcare and we do a lot in our proposal to tackle in particular the high price of monopoly pricing power of drug companies and hospitals through reducing barriers to entry and increasing more competition, in particular more price competition in those markets. Then we build on the same principles to reform Medicare and Medicaid. Introduce competitive bidding into Medicare Advantage, so that program becomes less costly, more competitive and enables more people to enroll in Medicare Advantage plans that cover the same benefits as traditional Medicare, but at lower cost. We give states the option of replacing their Medicaid expansion with expansion of the exchanges, with the individual market down to the same level. So basically, if you imagine the Medicaid expansion of today, whether a state has or has not expanded Medicaid, having the option to replace that with an individual market, a private competitive market, in which the ultimate physical cost is the same for reasons I can get into later if you want, in ways that allow that individual to — whatever their income is month to month, they don’t have to re-enroll and disenroll from different insurance plans, they are on the same insurance plan with the same doctor network, just the level of the financial assistance may be adjusted from time to time based on their income. That also would expand the individual market and make it stronger. And we do a lot in our plan to accelerate innovation, to reduce regulatory barriers to new competition in pharmaceuticals, digital health reform, modernizing a lot of laws that prevent the sharing of information between patients and providers, and also to do more to enhance the value of a utility of primary care through more direct relationships with patients and payers. What are the policy outcomes by 2020? We don’t have a microsimulation, so we can’t — I can’t provide you with the charts, with that level of accuracy or specificity that Linda has done. But we believe that the reductions in premiums based on prior work that we’ve done is at least 25 percent and that the coverage expansion is within the range of the reformed plans one through six that Linda described but with the reduction in Federal spending, because we do a lot of things to reduce both the underlying cost and also reformed public programs to achieve that goal.
There’s a bill that’s a handout at your table. So you might ask, what is the legislative possibility of some of this happening. There’s a white paper that published that analyzes a legislative proposal that reflects some of these policy concepts and principles and this is the basic outline, five titles. It’s called the Fair Care Act of 2019, and again, you can read more about it with the packet that you have in front of you. And you can go to our website to read the very detailed version of this proposal at our website Freeopp.org and it’s called Affordable Healthcare for every generation. Thank you very much.
CORI UCCELLO: Good afternoon everyone and thank you to the Alliance and the Commonwealth Fund for inviting me to participate today.
So my role today is to highlight the key design features that need to be considered when developing proposals to expand access to public insurance plans. Now both Linda and Avik discussed a wide range of options between them and many of them would continue to rely on the individual health insurance market as at least one part of the coverage source available. So I want to first remind everybody about what’s needed to maintain a stable and sustainable individual market. And that includes individual enrollment at sufficient levels and a balanced risk pool. A stable regulatory environment, sufficient insurer participation, and slow spending growth.
So I want to focus a little bit more on the importance of the balanced risk pool. Having a balanced risk pool helps ensure market stability and more moderate premiums by allowing the higher cost of the unhealthy people to be offset by the relatively lower costs of the healthy. But here’s what can happen if a risk pool attracts only unhealthy enrollees; for instance if people are given the choice between ACA coverage that provides pre-existing condition protections and alternative coverage that doesn’t meet the ACA requirements. People who are healthy would tend to migrate to the non-ACA coverage plans, leaving the unhealthy people with ACA coverage and much higher premiums. Of course, this graphic really shows the extreme case, but what’s important here is the idea that adverse selection can occur when different plans follow different rules. Which is relevant for some of the public plan expansion proposals.
So now I will move to some of the key design features when expanding access to public plans. A plan’s details should reflect the goals of the program as well as the type of approach. And the goals of the program can include increasing access to affordable coverage, increasing plan availability, particularly in those areas that have few participating insurers, reducing the number of uninsured, and lowering provider prices, again, in those particular areas with less provider competition. The types of approaches can vary. They can include having a public plan option that operates as part of the ACA marketplaces, having a Medicare or Medicaid buy-in, or expanding Medicare for all.
So one of the first decisions that needs to be made is, who is the eligible population? Is it everyone? Or is it just a subset of the population? For instance, it is people of certain ages, say those age 55 and over? Is it individuals without access to other coverage? Or perhaps individuals in particular geographic areas? Other questions that need to be answers include: Can employers enroll their workers in the public plan? And are there any individuals are groups automatically enrolled?
Another question is whether coverage in the public plan would be the sole source of coverage available or whether it’s an option among other coverage choices. If it’s just an option, how would competition between the options be structured? Would the public plan follow the same rules that govern the private market? Or would they be subject to different rules. And if their rules differ, there could be selection effects between the public plan and the private markets or the other markets. And depending on how the rules differ, either the public plan or the private plan could be at risk for adverse selection. Making a public plan mandatory could reduce those selection issues, but it would create additional disruption and less plan choice. So we see here there’s a tension or tradeoffs between plan choice and selection risk.
Now some proposals note that coverage would be offered through the ACA exchanges. But it’s not always clear what exactly that means. Is it that the exchanges would be used as an enrollment mechanism only? So is it a single, one-stop shopping kind of market? Or would that public plan actually be part of the ACA single risk pool? Well, including that public plan as part of the single risk pool would be difficult unless that plan follows all the rules that govern the ACA plan. So including those issue and rating rules, the benefit requirements, the health insurer requirements and so on.
Another question is: What benefits would be covered and what would patient cost-sharing be? Benefits need to meet the needs of the target population. So would benefits follow the ACA essential health benefit and actuarial value requirements? Or would they be based on the Medicare or Medicaid structures? Most Medicare enrollees have supplemental coverage. So if benefits are based on the Medicare structure, would supplemental coverage such as Medigap be available? Would cost sharing subsidies be available to low income enrollees? If so, how would that be structured? Some have proposed applying those ACA cost sharing subsidies to the public plan option, but I think that’s more complicated than it sounds, especially if plans don’t follow the ACA benefit structure and actuarial value structure.
Another question of course is how would premiums be set? Would premiums be self-supporting or would they be subsidized by the government? Would there be any cross subsidies between people who are already enrolled in that public plan coverage and the newly enrolled people or would they be separate? Would premium assistance be available to low or moderate income enrollees? If so, how would that be structured? Would it be structured based on say, the ACA premium subsidy framework or would it be more akin to how low-income people are subsidized through Medicaid for Medicare coverage? How would premiums vary by age, geographic area, or other factors? Or would they vary at all?
Now as Sara noted, even public plans have private plan participation. So in a new public plan option, would private plans be available? Would Medicare Advantage or Medicaid Managed Care plans be an option? Or mandatory? And if so, would there be separate plans and bids for the newly eligible and the currently eligible populations? And would private insurers have to cover both? And would they be pulled together? How would that all work?
So those are a lot of the key questions. There are more, including how would the enrollment process work? How would the program be financed? How would the provider payment rates be set? And last but not least, how would their transition be handled? And I think Phil is going to cover some of these, so I will pass this on to him.
PHIL ELLIS: Thank so much. Very nice to be here. This panel is a hard act to follow. I will do my best. It’s a great day for civilization that we’re here talking about some big health policy issues and tradeoffs between coverage and costs. I guess I will start out by saying I used to work at CBO, I don’t speak for them anymore, but I would guess — well, first of all, CBO is probably not going to come out with estimates along the lines that Linda and company have done. At least not until they become moving legislation. But the CBO’s estimates would be in that ballpark. So kudos in particular to the urban institute team and the Commonwealth group that funded them, for putting this information out for debate. So roughly similar, don’t hold me to that too closely, but roughly similar is helpful.
Let me make a few quick points and I want to leave plenty of time for robust discussion. Touching on three areas, just the coverage, cost, and financing under the proposals. And just give you — you’ve had a lot to think about already from all the different presentations, I’ll just give you a few more things to think about. So under coverage, I guess one question is, what do you mean, “universal”, is it everybody or almost everybody? And just a tradeoff in general, covering those last few percent of people can be relatively expensive to get everybody in the system. Not everybody is in the social security system, how can you track people down and sign them up, can be relatively expensive. And what do you think about people who are eligible for coverage but not enrolled? In particular, there are millions of people right now who are eligible for Medicaid but not enrolled in the program, if they got hit by a bus, God forbid, they would get signed up for coverage. So in a way, they have some protection against high healthcare costs. We don’t treat them as being insured, however, so you need to think about that when you are thinking about different proposals, depending on the rules for how you sign up. If you have to wait until the next open enrollment season, and you get hit by a bus, then you are out of luck, obviously.
The last thing, leading into cost, which I’m from CBO so I’m going to talk about costs. All those equal, total spending is going to go up, the more people are covered. It’s true that — I know we heard a lot of this debate around the ACA. Yes, maybe some people will no longer go to the emergency room to get care, and will get care in a more efficient setting, but in general, spending goes up 40 or 50 percent for uninsured people when they gain coverage. To some people that’s a feature, not a bug. You want them to get the healthcare that they need. But that’s just an important consequence to keep in mind.
Turning to cost, there’s inevitably going to be the question, are we bending the cost curve? And this came up during the ACA too. We always would ask people, which curve? Federal spending or total assistant spending? Linda and company have done a nice job of showing that you can raise on and lower the other. They don’t necessarily go in the same direction. But there’s a lot of money on the table here by my rough calculation, we’re going to spend health consumption expenditures, which exclude a couple of categories from National Health Expenditures, are going to total about $45 trillion dollars over the next decade. About 24 billion is financed by the federal government directly or indirectly. So how much of the rest of that are you going to want to take on? That’s obviously one of the key trade-offs here. And in terms of bending the curve, it’s not obvious to me, at least, we can open this up to debate, that single payer plans are necessarily better on retraining healthcare cost growth. The U.S. is quite an outlier on the level of spending, but if you look over the last 20 or 30 years across OECD companies, the U.S. is pretty much in the middle of the pack on growth. So reducing growth is a hard challenge. The kind of common issues of technology and aging populations that effect all of these countries.
On the cost dimension, a crucial question — I just think it can’t be emphasized enough, is how much are providers going to get paid? Right? This is one of the two reasons that the single payer plan in Vermont came to grief is they were sort of cutting provider payments, raising payroll taxes as fair bit, and people couldn’t agree on going in that direction, even though there was a fair amount of momentum behind that movement. And it’s just important to look at the basic facts here; analysis found by CBO and MedPAC that private insurance plans pay substantially higher prices for hospital care, for physician services, then does Medicare. Medicare’s prices were about 53 percent of the rates paid under private insurance. Physician prices were about 75 percent under Medicare compared to private insurance. Medicaid and the VA pay a lot less for prescription drugs than do Medicare or private payers. And so again, this could be a feature, not a bug, but just an important policy parameter. If you’re going to pay Medicare rates or Medicaid rates, to providers, that’s going to be a substantial payment cut for many providers.
My final point on costs. What is going to happen with utilization management? As you know, private insurers generally use various techniques to control utilization of services. Medicare generally doesn’t do this. Or at least fee-for-service Medicare doesn’t. Prior authorization, referrals for specialty care, step therapy, et cetera, and just to illustrate the implications here, we have a little bit of an experiment, and look at the Medicare Advantage system, those plans have cost about at least ten percent lower. I have seen some estimates that the gap is bigger, but at least 10 percent lower than traditional Medicare to get the same package of benefits to the same population, and that’s even after accounting for the fact that Medicare Advantage plans have a higher administrative cost and have profits. And the payment rates are similar. This is what they achieve, at least in terms of savings from utilization management. People don’t like these things. People don’t like these hoops. That’s understandable. Getting rid of them, again, could be a feature rather than a bug of a proposal, but it’s important to understand there’s a lot of money at play there.
The final point I’ll make has to do with the financing of the system and in particular something that sometimes gets lost in the shuffle, is what’s going to happen to employer contributions? As you may know, for people with employer coverage, the employer typically pays about three-fourths of premium. Economists generally agree that workers pay for that through lower wages than they would otherwise get. So if a proposal crowds out some private insurance employer coverage, economists including CBO and other places generally estimate that workers get that money back in the form of higher wages. I believe there’s evidence for this. I believe this in my bones. Not everybody believes economists. To put it mildly. So it’s important to follow the money here. I mean, we’re talking like ten or twelve trillion dollars in employer contributions over the next decade. And so depending on what you think happens to those, that’s going to play a key role in figuring out the distributional effects, as Linda said. They didn’t analyze it, but it’s an important question: who wins and who loses from a given proposal. It can be strongly affected by what you think about those things. With that I will conclude and look forward to a robust discussion. Thank you.
SARAH DASH: Great, well, thank you to our panel for giving us a lot to think about this afternoon. So it’s time for the Q&A session and we hope that you’ve been thinking about your questions. You can write them on a card and someone will come around. There are also two mics on either side of the room if you’d like to ask your question in person.
Let me kind of start off. Phil, a little bit where you left off. One of the big points of contention or “gotcha” points in the debates, if you will, has been, are you going to eliminate private insurance or not? Private payers and public payers have somewhat different ways of looking at how they contain healthcare spending, as you just mentioned. Utilization management versus more sort of price setting, if you will. I want to get the panel’s thoughts on that point and maybe I could just start off — the provider community has been already very concerned about the idea of rates getting cut and concerns about hospital closures, rural hospitals, that kind of thing. Is there a better way to find out what is the right balance? How do we begin to think about that?
AVIK ROY: I can take that if you want. So we’ve spent a lot of time thinking about this in the context of hospital competition where obviously in rural areas, you’re inherently going to have a lot less hospital competition than you have in urban areas. And also of course the amount of spend and population that’s being served in rural hospitals is lower. So the focus of our reform effort is on the more metropolitan and suburban areas where there really should be competition. And so what we have proposed and is now reflected in a number of pieces of legislation that are out there, is the system in which if you are in a metropolitan or competitive market and you have a highly concentrated market measured by FTC and DOJ metrics, you’re required to take Medicare Advantage rates from all payers as a way of strongly incentivizing those payers to say, hey, either restore a competitive market in that city or that metropolitan area, or accept that we’re going to regulate you like a utility. One or the other, as a way of restoring competition. But in rural areas, the problem is very different, which is to say, we’ve had this for 50 years, a secular decline in the number of hospitalizations per 100,000 people, the length of a stay in a hospital because of advances in medical technology. Fewer and fewer people need to be in the hospital. And what’s often happening is that those rural hospitals have not reduced their fixed cost, their bed counts, et cetera, to reflect the fact that fewer and fewer people need to go to the hospital, along with the demographic changes that led for fewer people to live in rural areas. So rural hospitals in general have not wanted to make those hard choices and instead said, we just have these high fixed costs, we want to charge more, but we can’t because of other considerations. And so they then sell themselves to the larger metropolitan systems that take advantage of their positioning to engage in anti-competitive practices. So all of that to say that the rural problem is challenging in large part because the rural hospitals themselves have generally been reluctant to do things like downsize to reflect the actual needs of their populations. That’s a hard thing to do. A lot of times communities feel like, well, if we downsize our hospital, maybe that means our community — there’s a self-esteem component to that maybe where the community feels like somehow it’s less robust if you downsize the hospital. Jobs are affected. And so it’s a real public policy challenge. Our approach has generally been to say, let’s, in a short term, help those rural hospitals survive by adjusting the critical access hospital formulas that affect so many of those rural hospitals. And really focus our cost effort on the more urban and metropolitan areas. And that’s why I think an all-payer approach where you say to all hospitals, we’re going to whack you to Medicare rates, is going to be challenging because those rural hospitals will have a tough time in their current structures aligning with that. So you have to be more targeted I think.
SARAH DASH: I see Linda and then Phil.
LINDA BLUMBERG: I think there are real challenges with regard to the rural hospitals and in all likelihood, whatever rate caps or limits that you might want to put in place are going to have to vary geographically. But also agree that at some level with the situation in rural areas, you may need to kind of restructure some of those hospitals to be more accommodating of urgent care and things that people need to have very close by in order to maintain their care, but then make them much more like hubs for outpatient care and have more transportation of people to some of the urban areas for other kinds of complex high-cost care. But I think it is in the short run, it is, you know, like all of the other kinds of reforms, what we’re talking about is the bigger the change, the more of the population that is affected by whatever limits that you might want to put on payment rates, the slower your advised to move from where you are now to get there, to make sure that you have the opportunity to be measuring access, measuring quality, making sure that what you’re doing is not going too far in order to reach the goal that you’re looking for.
PHIL ELLIS: Just briefly, I mean, on the rural hospitals, Medicare pays them differently. They are exempt from PPS. They get paid on the basis of their cost. So it’s not obvious to me that Medicare is the problem for those hospitals. In the more urban areas, and I think the horse is out of the barn on hospital concentrations, unless you’re going to break up systems. That’s going to be hard to do with just more FTC enforcement. So you’re basically talking about price regulation, which is a reasonable option to put on the table. But it doesn’t strike me as a totally free market. But I think that’s what your proposal yields.
AVIK ROY: To clarify, the proposal is that above a certain index of market concentration like the Herfindahl-Hirshman Index, if your hospital system in a particular region exceeds that threshold, Medicare Advantage rates will be applied to all payers, which means that you have actually incentives that divest. So it’s kind of auto antitrust, where you have two choices: you can continue to charge 4 X Medicare, as some of these hospitals do. But — well, you can’t. You won’t be able to do that because you’ll be brought down to Medicare rates. Or you can divest and have more of a commercial reimbursement environment, which is more favorable than Medicare. So you create a powerful economic incentive to restore a competitive market instead of relying on FTC enforcement, which to your point has not succeeded in breaking up this hospital systems up to this point. So in our proposal we actually quintuple funding for the FTC to go after hospital monopoly markets, but also we use this economic incentive to say to hospitals, we are going to end the way you merge to just have more pricing power. Instead, that pricing power is being taken away for future mergers and also for the existing consolidated systems. You now either will face lower unit prices or restore a competive market in which case you can charge more than Medicare if you want, if payers are willing to pay that.
SARAH DASH: Thank you. We could have a whole conversation on that. We do have a couple of questions that are somewhat related, and a little bit more focused around the public options. So the first is a little bit of a clarifying question for Linda to perhaps start with. In the options that you mentioned that do include a public option, what mechanism did you envision for provider prices? What percentage of Medicare do you envision? Can you clarify what was underlying your assumptions there? Then the second question which was somewhat related mentions that Washington State has been moving forward with a public option on its exchange, which sets provider rates at 160 percent of Medicare. And the question is: Do the panelists see the Washington effort that’s underway as a model for national reform?
LINDA BLUMBERG: In our estimates, we did a couple of different things. In the public option case, what we did was we assumed rates would mimic those in a very competitive insurance market. We did that not as a — these are basically as a proxy for roughly Medicare rates in that non-group insurance market. Non-group insurance claims data is very difficult to come by, so our proxy for it was what those rates would be. We have a model to estimate what those premiums would be in those markets if there were at least five or more insurers competing in the marketplace, and the Hirshman-Herfindahl Index for hospital concentration was no more than 5,000. So that was basically our proxy for Medicare rates in the public option. In the single payer case, what we did, because there was the entire population would be in that market, we didn’t feel that Medicare rates strictly were sufficient necessarily or that that would be necessarily attainable politically. And so what we did was we assumed because in the hospital markets, research evidence indicates that hospitals on Medicare rates are paid slightly below cost. We increased hospital rates by 15 percent above Medicare rates in the single payer options in order to say, okay, we’re at least — when we’ve got the whole population in there, we’re going to cover current costs. But we left physician payments at the Medicare level. We also did a sensitivity that’s in the full report, not in the brief, where we increased hospital payment rates under the single payer options further, to Medicare plus 40 percent to indicate if you can’t get all the way down to Medicare plus 15, here’s potentially what the cost consequences are.
In terms of what’s going on in Washington, I’ve looked at that legislation a little bit, but I don’t consider myself to be an expert on it. But my understanding of it, it’s not really a public option. It’s a request by the state that the marketplace insurers use these rates. But it wasn’t entirely clear whether or not any or all of the insurers would be able to get the providers to participate at those rates. So it’s not exactly the kind of thing that we’re talking about in the reforms that we modeled, where these were capped rates that we’re applying to either all of the insurers or a public option that was providing that. So it was a little bit different. You know, I think it’s an interesting experiment that’s underway there and I think it is worth seeing what happens if you go pretty high. You’re not trying to get all the way down to Medicare rates, but you’re putting a marker down and you’re starting and you’re seeing the ability of the insurers and the providers to come to agreement to get to that level, but I think it remains to be seen whether it’s a model or not because there wasn’t a real heavy enforcement mechanism if the providers weren’t willing to participate with that.
CORI UCCELLO: I just want to add as a reminder — my understanding is that it’s plans are going to be operating in exchanges. So this is individual market, right? Is it small group as well? Or large group? Washington? So in any case, I think there are a heck of a lot of people in Washington State that are not going to be part of this. So I think we have to keep in mind, the individual market is a pretty small segment of the total insured population. Where the employer group market is really the large share here. So if we’re talking about having just a small segment subjected to those different rates that are presumably not a big share of any provider’s patient base, I mean, that’s a much different question than if this is a larger expansion, a kind of a Medicare for all and where do we set those rates. So I just want to kind of highlight how big of a deal kind of this is.
SARAH DASH: Along those lines, both Avik and Linda talked about different proposals or options in which kind of the employer-sponsored insurance market gets — some of that gets transitioned into the non-group market, the individual market. So can you each say a little bit more about that? Why were those a feature of the proposals that you talked about?
LINDA BLUMBERG: Sure, the reason that we lifted the employer-sponsored insurance fire wall and a couple of the options that we modeled, is because one of the issues with the Affordable Care Act is a clear inequity in the way people who have employer-sponsored insurance offers are treated, compared to those who do not, even people who would look very similar otherwise. Similar incomes, similar family structures, et cetera. So because of the income related subsidies in the marketplaces, people without employer-sponsored insurance offers have access to sometimes to a lot more financial assistance, particularly if they are quite low income, then people in the employer-sponsored insurance market. And so by lifting the firewall, what it does is it addresses that inequity, it also brings more people into the non-group insurance market to help make those markets larger, more robust, more attractive to insurers that might want to compete there and it allows individuals who are modest income, who are facing employer insurance contributions or cost-sharing requirements and their plans that make that coverage either inadequate or unaffordable to them, to have another subsidized option.
AVIK ROY: So in our proposal, we also eliminate the firewall and so I’d echo all of Linda’s comments as to the policy rationale for that. We go beyond that by doing a number of different things and in particular, I highlighted two in my presentation. One is to build on the Trump HRA rule, which allows instead of employers funding group insurance the way they do today, or sponsoring group insurance, they can give their workers say, $5,000 to go buy insurance on the individual market. All excluded from taxation, just like the employer-sponsored system today. But it gives the worker control of those dollars to make the choices that are right for that worker. And we require — this is the important part, we require businesses that are new — newly founded after 2121 to deploy that approach if they want sponsored coverage. So what that does is for people who have employer-sponsored coverage today, nothing changes. Their employer-sponsored coverage is basically the same. Obviously, it will get more expensive over time. Some of those employers may voluntarily decide to move to this defined contribution model, you could say, of the HRA funding. But for new companies, the Googles and Facebooks of the future, they would use this HRA system to deliver insurance. So over a 30 year period, we believe that that transition could be very, very significant. In a ten-year CBO style window, we estimate that the combined impact of both the Trump HRA rule and this additional element is a transition of about 15 to 20 million more people being in the individual market and about five to ten million fewer being in the employer market. And then on top of that we take the Federal employee health benefit system, as I mentioned, about eight to nine million, and put it in. So why is that important? First of all, it’s important because if we want the individual market to work — and those of us who want a market-based system, the only way we’re ever going to have a market-based system is if people are choosing their own insurance plans and there’s price transparency around the prices they paid for that insurance. We talk a lot about price transparency. Eighty cents of every dollar we spent on healthcare goes through insurance so you have to have price transparency around insurance. The individual market allows you to do that. The other piece of it is, by expanding the size of the market, the risk pool is healthier, it’s more stable, there’s more competition, more participation by insurers and there’s a lot of studies show in the exchanges today where there are more insurers participating, prices are lower than when they are fewer. So for all those reasons, making the health insurance work in an individual market is very, very important. And then on top of that, by the way, let’s not forget that we’re only talking about the non-elderly population here. We also have a robust individual market for people over 65, it’s called Medicare Advantage. Medicare Advantage is the only part of Medicare that’s growing. Fee-for-service Part A, Part B enrollment is basically flat. Medicare Advantage enrollment has doubled in the last ten to fifteen years and continues to rise, because as Phil mentioned, Medicare Advantage is delivering the Medicare benefit at about 10 percent lower cost than traditional Medicare. So all that to say that if you combine what we’re doing on the non-elderly side with what’s happening with Medicare Advantage and the enhancements we propose, we could see about 60, 70, 80 million people shopping for their own insurance within 10 to 15 years. And that would really be a very different healthcare system, the one we have today, and it would be a very gradual, incremental and voluntary evolution into that system.
SARAH DASH: Great, thanks. So there was a question on a card around the Medicare Advantage; so I just want to follow-up to what you’re saying, since we’re on that point. So first of all, can you explain a little bit more your ideas around the auto enrollment, the competitive bidding in Medicare Advantage? This person in particular asks how it would impact Medicare Advantage plans, overbilling, or up charging traditional Medicare, which is a little bit of a finer point. But can you just for the purposes of clarity talk a little bit more about what that looks like?
AVIK ROY: Sure, I’ll do my best to do so in a brief window since I know we want to get to lots of topics. So the auto enrollment piece. So right now the way it works is if you’re eligible for Medicare, but you have not enrolled, so you’re receiving Social Security benefits, you are effectively auto enrolled into Medicare Part A plan and Part B is a little bit more complicated. So our idea is, why not auto enroll into C instead of A for those individuals? It’s a pretty small population, but the idea would be for those individuals actually in general, Part C plans are better for lower income people because the premiums are lower and the benefits are broader than with the traditional fee-for-service. Actually, wealthier people who like fee-for-service, because they get better — they get a certain better network design from a wealthy person standpoint. In terms of the competitive bidding piece and Jim Capretta has written a paper for the Mercatus Center which describes this idea in a lot of detail and we actually borrowed from a lot of his work. But the basic idea is this, and the (indiscernible) Proposal from 2012 also has some of these concepts — the idea is this: right now, what Medicare Advantage does is CMS basically says, okay, here is what we think fee-for-service AB Medicare would cost in this county or this region and we’re going to pay Medicare Advantage plans that amount, regardless of what Medicare Advantage plans actually deliver. Which means that Medicare Advantage can be very profitable for those companies. We say instead, make it work more like the ACA exchanges where the different insurers bid and the subsidy you get is basically an average or some formula that incentivizes those plans to bid and deliver MA at a much lower cost. And then share those savings with seniors so seniors and tax payers both benefit from the competition that comes from bidding on those plans. So it’s basically a way of essentially tightening the profit margins of MA plans and making that more competitive. But also as a result making MA more attractive and less expensive than it currently is today, both whether it’s Medicare or Medicare Advantage.
SARAH DASH: Let me just follow-up briefly on the auto enrollment just more broadly. Linda, you had a few of the options you mentioned involved auto enrollment. How important was that in the coverage and cost estimates? Can you say a little bit more about that?
LINDA BLUMBERG: Sure. So the auto in the reforms starting with our reform three, going through reform four, we have what we call a limited auto enrollment in those plans and that limited auto enrollment is really designed to bring in individuals who have not enrolled voluntarily in insurance coverage and who are eligible for zero premium dollar coverage. So it’s very difficult to first of all identify people, find uninsured, and then to enroll somebody automatically when they are going to owe money, is also very complicated and difficult to do. So what we did is our limited auto enrollment to increase coverage was to say, listen, what we can identify is we can identify people who are already enrolled in SNAP or TANF, as some states are actually doing on their own already. And those folks who are now under these expanded subsidies, eligible for zero premium coverage either through Medicaid or through the marketplaces, those are the people that we can find, identify, auto enroll, make sure that they get into a plan that is potentially going to meet their needs. And that is important in the level of coverage that we achieve starting in reform three. There’s quite a number of people who are eligible for Medicaid, for example, today, that remain uninsured. And then as we move forward on reforms five and six, we added a set of reforms that we call CAER, Continuous Auto Enrollment with Retrospective Enforcement. So what that does is, if you’re going to try to get to universal coverage or near universal coverage, as we do in these reforms, you’re going to have to look at the people who are left out and do something in order to get them into coverage. Again, it’s very difficult to identify them apriori if they are not already engaged in one of the other public systems. So what we did there is we said, listen, if people come in late, or if they get sick during the year, if we’ve got a public option in place, then we don’t have to worry about the selection. Which plan are they going to get into? Is the private insurer going to be upset that they are getting somebody, because at that moment in time in the year, they actually need serious medical care. And so we can enroll them in the public option, absorb any adverse selection into basically the federal cost of the system, and get them in late. People will be told and it will be well-publicized, and this issue should kind of wan over time, that if they never voluntarily enroll during the year, by the end of the year, at tax time they will owe the full premium that would have paid, given any subsidies that they would be eligible for, through the tax system. That means that that they will have been insured for that year. So if they had incurred some cost during the course of that year and now they have been auto enrolled at the end of the year into the public option, if they have claims that they want to submit to the public option, that they can do that. These pieces were really very critical in moving us from the high levels of coverage we were getting with the enhanced subsidies, but that wouldn’t take you all the way to universal coverage for the legally present population. We can’t get there without those kinds of mechanisms/
SARAH DASH: We don’t have time to talk about the politics of auto enrollment, but given some of the challenges around the individual mandate and the enforcement there, I just wonder if you have any quick comments about going from the individual mandate, which has been sort of unenforced, if you will, to an auto enrollment.
LINDA BLUMBERG: I think it’s one of the things that we try to highlight in the tradeoffs that I was talking about in the beginning and the end of my remarks, is that people talk about universal coverage as a positive and a goal and I don’t disagree with that, but the tradeoff is that you’re taking at least a slice of the population — may not be a huge slice — but you’re taking a slice of the population that otherwise would prefer not to contribute to something and requiring them to contribute. It is not a different equation than single payer, right? It’s either you’re requiring them to pay a premium to get their coverage under a hybrid approach like our five or six, or you’re requiring them to pay more in taxes, which you would under seven or eight. So it’s really very much of a values trade-off, and Phil touched on this a bit, which is, how much coverage is enough? And I think that is obviously a societal decision. The difference in these programs from the individual mandate penalties is that the individual mandate penalties were strictly penalties, they didn’t provide you with coverage. Here, these are not penalties, these are contributions that you need to make in order to have insurance coverage and then you’re insured. And so what the political calculus there would be relative to the penalties, I think, you know, we don’t really know. But I think it would be very challenging.
AVIK ROY: We have an auto enrollment plan in our proposal, a provision in our plan. It’s more limited than some of the other ones you see where it only applies in situations where the subsidy that you’re eligible for allows you to buy a plan for which there is a zero premium. So there’s a couple of tweaks that were necessary to get to that. First of all, the broader regulatory restructuring that leads to lower premiums is very important in driving that in the proposal that we put out. Another piece of it is to create copper plans so that there is another tier of lower premium plans where whenever one may think of copper plans in terms of the high cost sharing, it is at least some form of insurance for which there would be auto enrollment. Zero premium, you’d have to have a zero premium for auto enrollment. The creation of copper plans and a broader effort through reinsurance and regulatory reforms, widening age bands, so that there are lower premium options in the market.
LINDA BLUMBERG: So you don’t have to auto enroll people in a very high deductible, low value plan like a copper plan at a zero premium in order to give them coverage. If you want to provide them with meaningful, adequate coverage. You can auto enroll them in a plan that has an actuarial value that’s consist with their financial needs. So that is a policy decision that you’re making. The other issue is that the copper —
AVIK ROY: It’s the maximum one they are eligible right? It’s not like they are only copper plans. The auto enrollment is for whatever — copper, bronze, silver, gold, that — where your subsidy allows you to have a zero premium.
LINDA BLUMBERG: The provision of the copper plans in general are a risk segmenting device. So you introduce into the market more plans that have very high cost sharing, are going to lower affordability and access to care for people who have high medical needs. And that really ought to be taken into account when you are thinking about, does it make sense? Is it a value to somebody to be insured with a plan that may have a $6000 deductible.
SARAH DASH: So I think Sara Collins had a point and then I want to ask a follow-up.
SARA COLLINS: And I just want to point out too, in the Urban Institute’s longer report, and it’s not in the issue brief, is table 5, which actually shows the decrease in average premiums for people who would get these enhanced subsidies. So it’s really important too to think about just what that margin is, and I’ll just give you an example: For someone who’s earning just a little over 400 percent of poverty, so about $100,000 for a family of four, the decrease in premiums if they were to buy a plan on the individual market, would drop by $11,000 for that family. So these are major cost decreases for families. So you can expect that there would be a lot fewer people who are uninsured, out of choice, rather than affordability. So I think that’s a key point and over time, as Linda said, that number would actually go down.
SARAH DASH: And I want to turn a question to Phil and Cori. We haven’t talked a lot about benefit design, plan design, too much on this panel, but obviously benefit design, actuarial value and such was a major component of the conversations around ACA in the years since. So can you just kind of share a high-level how actuarily and from the CBO perspective you would look at things like plan design, the comprehensiveness of the benefit?
CORI UCCELLO: So one way to think about it is the trade-offs between premiums in generosity of the plan, right? So if you want to have a more barebones policy, a copper type plan that still has an out-of-pocket limit, but may have high deductibles, the premium can be low, but your total out-of-pocket costs, including the premium and your cost-sharing, could be high and will be high — it could be very low for the people who are healthy and could be very high for the people who need to actually use coverage. So it’s partly about striking the right balance here. One thing to also keep in mind, when we have — if it is that the copper plan is going to attract the healthier people because they get the lower premium and they don’t see a big risk in terms of having high out-of-pocket costs, the risk adjustment program can somewhat level things off a bit. I don’t think it can do it completely, but in a sense if the copper plans have to have a little built-in premium in them to reflect that positive selection they’re getting, because those plans are going to have to pay the other plans to offset the sick people in the other plans. So I think again, it really just comes to striking the right balance and as Avik said, you could have wealthier people that can handle a higher deductible. And as Linda said, if you try to kind of more calibrate which plan you’re sending people in — so if you have an income related deductible or cost-sharing, in a sense is what the ACA does, right? You have a more generous plan if you qualify for the cost-sharing deductions, that’s partly working to set an appropriate balance between premiums and cost-sharing for people.
PHIL ELLIS: I will make two points. First of all, on cost-sharing, a little goes a long way. If you look back at the Rand Health Insurance experiment, which basically more recent studies have generally validated, a lot of the savings came from just going from free care to a moderate deductible. The additional savings from going to a high deductible, you know, existed, but they weren’t huge. So you can really just get a lot of action. As a health economist, I just don’t believe that zero cost-sharing is the right price point when people need to have some assessment of what’s the value of the care to them. In terms of how this played out in the ACA, basically the ACA tied subsidies to a 70 percent actuarial value, because that’s what they could afford. Those were the policies that they could afford to subsidize. I don’t know that they were specifically shooting for having relatively high deductible plans. So this loops back to, this is all good, but let’s see the financing side of these proposals. Because if you can’t afford to sort of subsidize free care or almost free care, it’s a bit of a moot argument. So that’s all I have to say.
AVIK ROY: If I could add a quick point about this risk selection point, because it came up from both Linda and Cori. So right now, the individuals we’re talking about are either going uninsured or they are buying short-term, limited duration plans. So the idea is by bringing them into a true catastrophic option through copper plans, they can participate in the risk adjustment. There is more of an ability to account for that in the true individual markets; what happens now where only sick people enroll in the ACA exchanges, that’s not good risk collection. So we actually want to restore a system in which healthy people have an option that they don’t have today to make the system work a little better. So there’s tradeoffs and there’s choice and we can all debate which is the — where empirically the best result is. But that’s the thinking behind it.
SARAH DASH: Linda, quick point and then we’ll —
LINDA BLUMBERG: So what you need to look at, and also in the context of the other reforms that are part of our package that you really didn’t get to today. So the restructuring of the premium tax credits to increase the percent of income caps that apply to older adults who tend to use more medical care and need more to increase their costs at the same time to then broaden the age bands from three-to-one to five-to-one. All of these strategies combined with the cooper plans are all directed towards increasing costs for people who are going to need more medical care and reducing it somewhat for those who are healthier and younger, though there’s a pretty big hit on people who get Medicaid today that would then be put in these marketplaces and would not have the same benefits or cost-sharing that they have under Medicaid. So as more people are coming in from the employer-sponsored insurance market from the tax changes, you’re putting more and more people in a situation where those who need more medical care are going to be hit with higher costs. And so we need to be thinking about the risk pools and how it’s going to change because risk pools may improve as a consequence of this in terms of the average person and what their healthcare costs are going to be. But it may be excluding a lot more costs from a lot more high need individuals.
AVIK ROY: Just very quickly, I would disagree with that description of the plan. The broad goal is so that both young and old people, healthy and sick people will achieve lower premiums under this approach and we believe that — I know it’s early in terms of the evaluation, but I think you’ll see that if you look at the plan more, in more detail.
SARAH DASH: Thanks. So hard to believe, but we’re almost at the end of our time. Clearly, I think what we’ve heard today on the panel is there is just kind of a microcosm of the kinds of conversations that might be forthcoming. Lots of questions around how generous coverage should be, how provider rates should be set and many of the other considerations that were raised today. There were also — I just want to acknowledge a lot of questions on cards about further downstream effects, what would be impacts on things like value-based care under sort of different scenarios. Questions about, can we move more towards preventative care and so forth, that I just want to acknowledge, were asked and probably need a whole other session to answer. So maybe what I’ll do is since we’ve covered a lot of ground today, is just in the remaining few minutes is just to ask each of you — you have a key takeaway that you would want to share with the audience, briefly, what would that be? And maybe, Sara, do you want to start us off?
SARA COLLINS: I just think the discussion between Avik and Linda illustrate the need for estimates and that Avik’s plan is another approach to covering people. Linda and her colleagues at Urban have modeled an extensive number of alternative proposals, so we really need, in order to make a good judgement about what the effects are going to be, what the tradeoffs are, a good robust set of estimates from other proposals.
LINDA BLUMBERG: I would just say that what we learned was that there are multiple ways to get universal or near universal coverage. They all have interesting characteristics and advantages and disadvantages. I think the challenge is going to be figuring out how to move the social conversation in a direction that takes into account that there is no heaven on earth, there’s places to move to improve things, but how we’re going to pick among those tradeoffs is a real challenge to find the path to get us to where the society wants to be. But I think having intelligent conversations about the positives and negatives of all of these proposals is very worthwhile.
AVIK ROY: First of all, I’d like to thank Sarah for the invitation to apply for a grant to the Commonwealth Fund to fund microsimulation of our proposal. We’ll be happy to send that your way in a month or two. Broadly speaking, I would say my big takeaway is that all the proposals that Linda evaluated here, they all increase coverage and they all increase federal spending. And our takeaway is you don’t have to increase federal spending, increase coverage. In fact, we should be reducing federal spending, reducing the underlying cost of healthcare and expanding coverage and if we don’t do those things at the same time, we’ve really failed future generations.
CORI UCCELLO: So my point is that the details matter. There are so many components that need to be specified in order to really understand how these proposals would work. I don’t think we need to know all the details right now, but I think we need to be thinking about them. So when down the road, the rubber meets the road more, that we have a better sense of the specifics of a plan and how they all work together. And how they affect the risk pools. I’m like the risk pool adverse selection lady. But I think different combinations of things can affect things differently and I’m adding on this, like five seconds, the one thing about the five-to-one or three-to-one or those things of things, I think something also to keep in mind is, you want healthy older adults in there and if moving to five-to-one is going to get some of those unhealthy older adults out, that that could be problematic. But I think that’s also why you need to consider the rating rules, the age bands, along with how the premium subsidies work and all of that kind of stuff together, to really understand how something would work.
PHIL ELLIS: And just briefly, I think I will just put a sharper point on the upshot of Linda’s analysis — single payer plans are extraordinarily expensive for the Federal Government. There is just no two ways about it. That’s a very expensive way to achieve universal coverage and financing that kind of plan is going to be difficult.
SARAH DASH: Thank you, and I will add my own editorial that I think what’s clear about this discussion is that the solution that you choose depends on the problem you’re trying to solve. So getting really clear on that from the get go is really important. So with that, I would like to thank all of you for joining us this afternoon. Please don’t forget to fill out your evaluation form before you leave. I would like to thank the Commonwealth Fund for their partnership and please join me in thanking our panel.