Ensuring Successful Reform Follow-Through, Part 2: Affordability

jacobi-176x220_1Cross-Posted at HealthLawProf Blog

Health reform is an ongoing project.  In my last post, I noted that the success of ACA enrollment frees up some bandwidth to grapple with other outstanding implementation tasks – tasks that are vital to supporting the goals of the Affordable Care Act.  I tried to focus on issues with a short- or medium-term horizon, and which could be tackled largely by state or private-sector actors – that is, without change in federal law.  In this post, I’ll talk about affordability (the first “A” in the ACA).  First, the good; then, the problems; finally, some potential solutions.

 The good

 Almost five million new Medicaid enrollees, of course, have affordable care.  There are indications that Medicaid expansion will gradually come, in some form, in many red states, including Indiana, which is proposing what sounds like a mash-up of the Basic Health Plan and an 1115 waiver.  Beyond Medicaid, several affordability provisions support access in private insurance:

 Modified community rating, with 3:1 ratio limit.

  • Abolition of most annual/lifetime limits on coverage.
  • Annual out-of-pocket limit of $6,350/individual and $12,700/family (2014).
  • Actuarial value requirements for QHPs.
  • No cost-sharing for preventive care.

Low-income purchasers on the exchanges have additional protections:

  • Premium support, limiting the effective cost of coverage for people at or below 400% of FPL to 2% to 9.5% of income.
  • Further reductions in out-of-pocket caps by two-thirds for those at or below 200% of FPL, by one-half for those at or below 300% of FPL, and by one-third for those at or below 400% of FPL.
  • Reductions in cost sharing (point-of-care copayments and deductibles) for those below 250% of FPL, raising the actuarial value of their coverage to as high as 94%.

The bad

This protection is real and substantial – a tremendous improvement from the pre-ACA days when, as chronicled by Melissa Jacoby, Teresa Sullivan, Elizabeth Warren and others,  medical debt played a large part in personal bankruptcy filings, and, significantly, the majority of those filing with medical debt were insured.

The limits on cost-sharing directly address many of these concerns, but problems remain for the lowest-income folks.  The actuarial value standards provide very useful touchstones for evaluating the richness of coverage, and further supports for low-income persons help.  For example, a person at 180% of the FPL ($21,006 per year) is eligible for much very rich coverage with a 87% actuarial value.  But this measure is an average, and a chronically ill person could be faced with higher – perhaps much higher – out of pocket costs than the average person.

The backstop for that problem is the out-of-pocket cap.  The ACA shrinks the out of pocket limit for our guy making $21,006 per year by two-thirds, to about $2395. But is his care now affordable?  Maybe not.  Plans can mix and match their patient cost-sharing as between the copayments and deductibles that go into the patient share.  So, while on average an individual making $21,006 per year will pay only 13 cents per dollar of service provided, in any individual case his out-of-pocket costs might practically bar him from service.  Michelle Andrews explained this last year in Kaiser Health News:

Insurers have some flexibility in how they structure their plans to meet cost-sharing reductions. But in states that will require plans to standardize deductibles, copayments and coinsurance amounts, it’s possible to see how out-of-pocket costs may vary.

In California, for example, a standard silver plan will have a $2,000 deductible, a $6,400 maximum out-of-pocket limit and a $45 copayment for a primary care office visit. Someone whose income is between 150 and 200 of the poverty level, on the other hand, will have a silver plan with a $500 deductible, a $2,250 maximum out-of-pocket limit and $15 copays for primary care doctor visits.

That $500 deductible could loom large when the rent bill is coming due.  And in many states, there is far less uniformity and transparency, allowing for even greater barriers.

Potential solutions

It is clear that the ACA solves a raft of affordability problems.  But, problems remain for those over-income for Medicaid and hard-pressed, notwithstanding subsidy, to meet the costs of care.   The ACA’s goal is to connect folks to care, and the “near poor” are still in a precarious position.  What can be done short of unlikely improvements in federal law?

First, and most obviously, states and advocates should be examining the Basic Plan Program, which will finally be ready for roll-out  in 2015.  The Program, authorized by § 1331 of the ACA, is a public health insurance program intended to bridge the gap between Medicaid and subsidized private insurance for people with income between 138% and 200% of FPL.  It could serve two purposes:  It could reduce “churn” between Medicaid and private insurance as insureds’ income fluctuates in the low range, therefore minimizing disruption in ongoing access to providers.  It could also improve the affordability of coverage by allowing states to piggy-back on their Medicaid provider networks and premium structure, allowing Program participants rich coverage with little or no out-of-pocket cost.  There are downsides: the Program would reduce the exchange’s pool, perhaps increasing per-enrollee costs and threatening actuarial destabilization of the individual plan market; and Medicaid provider networks are already fragile in many states.  But faced with the risk of cost-based attrition and/or low service utilization by low-income exchange enrollees, states will want to consider this option.

Second, states could create “wrap-around” support for low-income exchange enrollees without adopting the Basic Health Program.  As Heather Howard and Chad Shearer have described, states can use their own funds to fill the gap left for the very poorest individual exchange enrollees.  Wrap-around programs flow from the experience of states that had, prior to the adoption of the ACA, used Medicaid waivers to expand affordability supports beyond the reach of traditional Medicaid.  It is likely true, as Howard and Shearer note, that “[g]iven general state resource constraints, . . . the use of state-only dollars is unlikely in all but a few unique circumstances.”  The confluence of two factors might allow advocates to prevail on states to (re)consider such supplemental programs: most state economies are on the upswing, and we will soon have experience on the extent to which continuing affordability problems are causing very low-income exchange insureds to either drop coverage or forego medically necessary care.  Where data are available and states are willing to take a long-range view to the importance of maintaining as many as possible in meaningful coverage, the expense of a wrap-around program might represent state money well spent.

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Medicaid ACOs in New Jersey: At the Starting Line at Last

Kate Greenwood_high res 2011 comp

Cross-Posted at Bill of Health

Nearly three years ago, in July of 2011, Tara Adams Ragone wrote a blog post for Seton Hall Law’s Health Reform Watch blog entitled “Community Based Medicaid ACOs in New Jersey: A Signature Away”. As Professor Ragone explained, a month earlier the New Jersey legislature had passed Senate Bill 2443, which established a Medicaid accountable care organization (ACO) demonstration project, but Governor Chris Christie had not yet signed it. “It’s an exciting time for growth and innovation in the Garden State,” Professor Ragone wrote, “if we just get that signature.”

Governor Christie did go on to sign Senate Bill 2443 into law, in August of 2011, but the implementation process has been protracted. The act required the Department of Human Services to “adopt rules and regulations” that provided for oversight of the quality of care delivered to Medicaid recipients in the ACOs’ designated geographic areas and set standards for the gainsharing plans that participating ACOs must develop. The deadline for adopting the regulations was in June of 2012, but they were first issued, in draft form, in May of 2013. The final regulations were not adopted until earlier this week, one day before the proposed regulations were due to expire.

As Andrew Kitchenman reports here, with the regulations in place, the three community-based organizations that have been preparing to launch Medicaid ACOs, one in Camden, one in Trenton, and one in Newark, can finally get started. Unlike the State, they will have to move quickly; the deadline for applying to participate in the three-year demonstration is July 7th.

There is, in Kitchenman’s words, “a final piece to the puzzle”—the participation of managed care organizations (MCOs). In 2011, when New Jersey’s Medicaid ACO statute was passed, many of the State’s Medicaid beneficiaries were covered on a fee-for-service basis. The expectation was that ACOs’ efforts to coordinate care and reduce waste would be rewarded with a share of any resulting savings to the State. In 2014, however, the landscape has changed.  Nearly all of New Jersey’s Medicaid beneficiaries are now enrolled in Medicaid MCOs, and it is uncertain whether Medicaid MCOs will be willing to enter into shared savings arrangements with Medicaid ACOs.

Recently-released data from the second year of operations of Colorado’s Accountable Care Collaborative Program suggest that, if New Jersey’s MCOs can be persuaded, incentivized, or required to work with its nascent ACOs, there are both cost savings and quality gains to be had. Colorado has not yet enrolled individuals with disabilities or those who are dually eligible for Medicaid and Medicare in its Program, but the Program nonetheless achieved gross savings of $30 per member per month in its second year, adding up to $44 million. The State’s net savings were $6 million, after paying the Program’s regional ACOs and participating primary care providers for care coordination and other services, as well as a contractor charged with providing “actionable data at both the population level and the client level”.

The quality gains Colorado achieved in the Program’s second year were substantial, including a 20% reduction in hospital readmissions, a 22% reduction in hospital admissions among members with chronic obstructive pulmonary disease, and “[l]ower rates of exacerbated chronic health conditions such as hypertension (5%) and diabetes (9%)[.]” Emergency room utilization, on the other hand, increased, albeit at a slower rate than for Medicaid enrollees not participating in the Program.

As Diana Rodin and Sharon Silow-Carroll explained in a March 2013 report on Colorado’s approach to Medicaid accountable care, the State wanted to move away from fee-for-service but did not want to return to traditional capitated managed care, which had led to “nearly all Medicaid managed care plans [leaving] the state as a result of conflict over rates.” Colorado currently makes a portion of the payments it makes to the regional ACOs and to participating providers contingent on the achievement of certain quality improvements. Eventually, the State intends “to increase the portion of the monthly fee that is at risk, as well to pilot payment reforms that test alternatives to the fee-for-service component.”

It will be interesting to see if Colorado succeeds at moving away from fee-for-service without returning to traditional capitated managed care, and if New Jersey succeeds at moving towards accountable care within a managed care environment.

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Commonwealth Study Finds Access to Health Care for Low-Income Populations Varies by State

September 26, 2013 by · Leave a Comment
Filed under: Disparities, Health Reform, Medicaid 

Doctor's OfficeThe Commonwealth Fund (“Commonwealth”) has recently released its first-ever Scorecard, which provides a state-by-state comparison of the health care experiences of the 39 percent of Americans with incomes less than 200 percent of the federal poverty level. The report, titled Health Care in the Two Americas: Findings from the Scorecard on State Health System Performance for Low-Income Populations, finds striking disparities by income within and among states, and many news sources have quickly made these findings known to the public.

The purpose of the study was to identify opportunities for states to improve how their health systems serve their low-income populations and to provide benchmarks of achievement tied to the top-performing states. The report is based on thirty indicators of access, prevention and quality, potentially avoidable hospital use, and health outcomes, but does not analyze the potential effect of the 2010 healthcare law, the Patient Protection and Affordable Care Act (“ACA”). This law was designed, in part, to guarantee healthcare access for all Americans no matter where they live and the study’s lead author and Commonwealth’s senior vice president Cathy Schoen has suggested that “[w]e ought to be able to close the geographic divide … There is potential for a real leap forward.”

More specifically, the study finds that the poor in the highest-ranking states are more likely to be covered by health insurance, to have a regular source of medical care, and to get recommended preventative care. Health system performance for low-income populations in leading states is often better than the national average and better than it is for high-income populations in other states. Several news articles have pointed out that Texas is the state with the largest rate—55 percent—of uninsured low-income adults. Nine of the ten states at the bottom were in the South–other states at the bottom include Alaska, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Virginia and Wyoming, all of which have refused to expand their Medicaid programs. New Jersey is ranked number 26. It is also among the states that will participate in the Affordable Care Act’s Medicaid expansion.

Significantly, Commonwealth notes that having low income does not have to mean below-average access, quality, or health outcomes. Further, the Scorecard finds much less state-to-state variation in health and health care experiences among people with higher incomes.

As the ACA continues to take effect, the report is optimistic that the Act “represents a historic opportunity for states to provide better health care to economically vulnerable people by providing resources to overcome the geographic and income divide—especially for states with high rates of poverty.” In light of the Senate’s recent 100-0 vote to avert government shutdown, the date on which health care exchanges set up under the Affordable Care Act will go into effect, October 1, looms ahead.

Photo, of a doctor’s office in New Orleans, courtesy of Bart Everson.

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Adventures in Health Care Cost Cutting

March 17, 2013 by · Leave a Comment
Filed under: Health Reform, Medicaid 

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Expect to keep hearing more talk about health care cost cutting, despite charts like this. It’s an idee fixe of the Wall Street/Washington corridor, and will only be implemented more vigorously over time.  So perhaps we should take stock of a few cost cutting initiatives. Medicare Part D, it seems, is coming way under its projected budget.  But maybe that’s because of ”a sharp fall in the number of breakthrough drugs,” a sign that innovation in pharma is stalling.  Cost cutting triumph, or logical outgrowth of a system that fails to reward actual contributions to health?

There’s also been a lot of pressure on skilled nursing facilities to hold the line on costs.  What are we getting in return? Here’s a summary from OIG:

Skilled nursing facilities (SNF) are required to develop a care plan for each beneficiary and provide services in accordance with the care plan, as well as to plan for each beneficiary’s discharge. . . For 37 percent of stays, SNFs did not develop care plans that met requirements or did not provide services in accordance with care plans. For 31 percent of stays, SNFs did not meet discharge planning requirements. . . . [R]eviewers found examples of poor quality care related to wound care, medication management, and therapy. These findings raise concerns about what Medicare is paying for. They also demonstrate that SNF oversight needs to be strengthened to ensure that SNFs perform appropriate care planning and discharge planning.

I’m sure the health care cost cutters will use this evidence to demand the SNFs be paid even less–rather than, say, investing real funding in proper training and pay in this vital service sector.  At some point, though, costs get cut so much that Medicaid will become little more than a meaningless plastic card, and “SNF” will stand for “Scarce Nursing Forever.”

This post first appeared on HealthLawProf Blog.
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Professor John Jacobi in The Record on ‘How Medicaid expansion will help New Jerseyans’

jacobi_johnProfessor John Jacobi published a feature Op-ed in The Record, New Jersey’s most awarded newspaper, on the impact Governor Chris Christie’s decision to expand Medicaid under the ACA will have.

Professor Jacobi writes:

GOVERNOR CHRISTIE’S decision to expand Medicaid coverage to more residents will improve the health of many low-income New Jerseyans, and save the lives of some. In addition, the expansion dovetails with other reform efforts in the state, furthering implementation of innovative programs for the poor and vulnerable.

The governor’s announcement is great news for low-income individuals. The Rutgers Center for State Health Policy estimates that the expansion will lead to an enrollment increase of about 234,000 in NJ FamilyCare, which combines New Jersey’s Medicaid and Children’s Health Insurance Program.

The expansion addresses gaps in the current Medicaid system, under which many poor people were ineligible even if they had absolutely no income or assets.

The expansion will plug those gaps, allowing people to enroll so long as they are lawful residents with an income of no more than about $15,414 per year, which is about the gross income of a full-time minimum wage worker.

Health insurance coverage is important to personal health, and it is simply not true that all Americans have meaningful access to health care. As the Institute of Medicine of the National Academy of Sciences has found, people who have health insurance — including Medicaid — have better access to a regular source of health care. Those with no coverage, in contrast, are more likely to do without medically necessary care, particularly for chronic conditions, and to not fill prescriptions due to cost.

As a consequence, the uninsured are more likely to be in “fair” or “poor” health — and to die before their time. Medicaid expansion will keep people healthy and even save lives.

 

Read the full feature, “How Medicaid expansion will help New Jerseyans

 

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