Kathleen Sebelius’s April Fool’s Joke

Published April 1, 2013

Consumer Power Report #367

So it turns out the whole Arkansas Medicaid expansion alternative is looking more and more like one big April Fool’s joke, and one in poor taste to boot. The restrictions indicated by the administration’s newly released rule on the subject illustrate the problems. What’s inside it? Unfortunately, a lot of buzzkilling.

A few weeks ago, the Obama administration set out to entice Republican governors and state legislators to expand their Medicaid programs under the federal health reform law by floating a novel approach. The option to use private health plans instead of the government program for low-income residents was very appealing in theory, intriguing politicians in Arkansas, Ohio, Tennessee, Texas, and other states.

But on Friday, the administration dampened that enthusiasm by laying out strict rules for the program that will interest only a few states. … The details will reassure many Medicaid advocates, who were worried that the current administration would weaken long-standing protections of the entitlement program in exchange for Republican buy-in. But the rules also could discourage some on-the-fence states from pursuing a Medicaid expansion at all, leaving more Americans without health insurance after the health law’s biggest provisions kick in next year.

Avik Roy is disappointed, and with good reason.

The Good Friday memo from HHS makes clear that it will only go along with state variations on its coverage expansion that are “comparable” to what HHS would have spent otherwise. Basically, what HHS states in its memo is that its deal with Arkansas is not that different from its traditional endorsement of the use of private managed-care plans to administer the Medicaid benefit. But HHS explicitly states that these private plans cannot modernize the design of Medicaid insurance to make it more cost-effective.

A big problem with Medicaid, since the program was first enacted into law in 1965, is that its design encourages wasteful health spending. The law explicitly prohibits the use of significant co-pays to steer Medicaid enrollees into more cost-effective practices. For example, many states charge co-pays of less than $5 if a Medicaid patient goes to the emergency room to receive routine care. Remember that many Medicaid enrollees have a hard time finding a doctor who will see them. Is it any wonder, then, that many Medicaid patients get their routine care in the emergency room? …

The HHS Good Friday memo maintains this insistence on preserving Medicaid’s wasteful design. “States must have mechanisms in place to ‘wrap-around’ private coverage,” HHS writes, “to the extent that … cost sharing requirements are greater than those in Medicaid.” What this means, in practice, is that the kinds of plans that insurers will offer on the Obamacare exchanges–which will be able to use tiered co-pays and other instruments of modern health insurance in order to drive cost-efficient care–will not be available under the faux-exchange plans that Obamacare assigns to the Medicaid expansion population.

Michael Cannon has more thoughts:

The first reason states should not pursue the Beebe plan is that, like a straight Medicaid expansion, it would inhibit the pursuit of low-cost health care for the poor. The second reason is that it would cost even more than putting those new enrollees in the traditional Medicaid program. Economist Jagadeesh Gokhale, who advises the Social Security program on how to make these sorts of projections, estimates a straight Medicaid expansion would cost Florida, Illinois, and Texas about $20 billion in the first 10 years. And that’s in the wildly unrealistic event that the feds honor their commitment to cover 90 percent of the cost. President Obama has already proposed abandoning that commitment. Congressional Budget Office projections suggest the “Beebe plan” would increase the cost of the expansion by 50 percent. That too should be enough reason to reject the Beebe plan. Neither the state nor the federal government have the money to expand Medicaid at all. Volunteering to make the expansion even more expensive is lunacy.

Personally, I have no problem with the cost involved here only because this is going to be a matter of exploding the deficit either way. The Beebe administration’s ridiculous claims as to cost equivalency are soundly rebuked by Cannon on that point. But I do have a problem with not getting anything for that costly step in terms of positive reforms that could set the system up for future overhaul and even repeal. Medicaid expansions are sticky things, very permanent in nature, and the possibility of shifting the poor toward a premium support model was certainly tempting.

That said, my prioritization of state choices remains the same: First, oppose the expansion if you have the votes; second, delay the expansion until after the exchanges go live in January to see what happens if the vote counts are unclear; third, if expansion is inevitable given the votes, at least bargain with the feds to get something in return that lays the groundwork for future reform. The third option had started to look better had Arkansas lived up to its promise – but unless HHS changes their tune, it simply has not.

— Benjamin Domenech



Congratulations, generous Illinois taxpayers:

In January, Illinois launched an effort to scrub ineligible people from the state’s Medicaid rolls. The process is loosely similar to election officials purging voter rolls of ineligible names: Legislators anticipated that the Medicaid audit would help them achieve $1.6 billion in budget cuts designed to rescue the financially ailing program and preserve its vital health care coverage for lower-income residents.

The initial results of this audit are … astonishing:

Of the first 20,500 recipients screened by an outside contractor, the auditors recommend that 13,709 be removed from the rolls. Yes, that’s two-thirds of the first group screened, flagged as ineligible to receive their current Medicaid benefits. How so? In some cases, the recipients make too much money to qualify. In other cases, they don’t live in Illinois.

Illinois Department of Healthcare and Family Services chief Julie Hamos tells us that the first crop of screened recipients was “low-hanging fruit,” accounts red-flagged by her department as suspicious. She says that, as the auditing continues, the percentage of those found to be ineligible will drop.

Full stop.

You may ask, as we do: Why didn’t state officials pluck this low-hanging fruit long ago? Some of these Illinois recipients evidently didn’t even live in this state. If Illinois officials knew, or suspected, that thousands of people were improperly receiving Medicaid coverage, why didn’t they act years ago to save hundreds of millions of taxpayer dollars? And … how much more fruit is dangling, waiting to be plucked?

Hamos’ department doesn’t yet know. But all of us do know how this situation came to be: For years, state lawmakers pushed expansion after expansion of Medicaid eligibility and services. Since 2000, Illinois Medicaid rolls have doubled, from fewer than 1.4 million people to nearly 2.8 million, or more than 1 in 5 Illinoisans.

Once a person gains coverage, it has been nearly impossible to lose it. You moved out of state? Your income increased beyond the eligibility ceiling? No problem! Illinois generally didn’t make much of an effort to purge the rolls.

The coverage kept flowing to recipients. Just as health providers’ bills kept flowing to Springfield, until Illinois had more than $2 billion in unpaid Medicaid charges at the end of the last fiscal year.

Hamos says her department didn’t have the resources to scrub all those ineligible recipients before now. She has a point. For one thing, the state’s computers were woefully outdated and are only now being updated. But it’s also true that Illinois politicians didn’t want to divert adequate resources to bump ineligible people – aka voters – from the rolls.

So Illinois taxpayers were – and are – spending large sums to provide Medicaid services for people who don’t qualify for those benefits.

SOURCE: Chicago Tribune


This is not a good sign:

Trudy Lieberman of the Columbia Journalism Review uncovered a problem in the Nutmeg State that is likely to become more prevalent in states as premiums go up with the additional market regulations required under the ACA. She asks the question: What happens when your “benchmark plan” to be sold in a state exchange, and outlines the essential health benefits that will be required of all plans, is no longer competitive? Connecticut faces just this problem. Here is the story:

“Right before Christmas, the governing board of Connecticut’s new health insurance exchange – named Access Health CT– turned to the question perhaps most crucial to the success of Obamacare: Can the public afford the policies that insurers will sell through these new state exchanges that the law requires?

“In designing the policies that carriers can sell, states were to supposed to pick from a menu of options a “benchmark” plan – outlining essential benefits that all other plans must include. In late September, after contentious discussions, Connecticut chose as its benchmark one of the state’s most popular plans sold to small employers. It had been sold by ConnectiCare, an insurer that once operated as a nonprofit but now is part of EmblemHealth, a New York City regional for-profit conglomerate. This plan was similar to others the exchange considered though it offered somewhat richer benefits.

“But: the biggest news of the December meeting came when board chairman Kevin Counihan announced: ‘We have a benchmark plan that is uncompetitive. When we adopted it, it was [competitive]. It isn’t now, because it’s too expensive.’ In fact, according to board minutes, ConnectiCare currently doesn’t even sell it. What? The benchmark on which all other policies sold in the exchange will be based is too costly for people to buy?”

When Lieberman asked an exchange spokesman for an explanation, she was told:

“… health insurance is unaffordable for “all the US,” and “in Connecticut, it’s unaffordable for most residents.”

SOURCE: Forbes.com


Feeling free to criticize:

A big political story this year is likely to be Democrats turning on their White House minders as the harmful and unpopular parts of the Affordable Care Act ramp up. On the heels of the recent 79–20 Senate uprising against the 2.3% medical device tax, now comes the surge of Democrats pleading on behalf of Medicare Advantage.

Liberals have claimed for years to hate this program, but by now Advantage provides private insurance coverage to more than one of four seniors. And those seniors like it.

However, the ObamaCare true believers who run the Health and Human Services Department don’t answer to voters, and they have written draft regulations that cut Medicare Advantage even more deeply than Congress mandated in the Affordable Care Act. Those cuts will bite hardest in states like Oregon (where 42% of Medicare beneficiaries use Advantage), or Florida (37%), New York (33%), California (37%) and Arizona (38%).

The extra cuts stem from HHS’s discretion and were dropped from the sky with no warning in February. More than a few Democrats seem to have caught the anvil. Some 139 Members of Congress have formally objected in 16 letters to HHS so far, and the signers include 26 Democrats in the House and 13 in the Senate.

The latter include both Senators from New York (Chuck Schumer and Kirsten Gillibrand), Colorado (Mark Udall and Michael Bennet), Minnesota (Al Franken and Amy Klobuchar) and Oregon (Ron Wyden and Jeff Merkley). Aficianados of irony may recall that Messrs. Franken and Bennet were among the leading supporters of the so-called “public option” – traditional Medicare for every American – during the ObamaCare debate.

SOURCE: Wall Street Journal


A new PRI roundup of the top ten myths about Obamacare, three years on:

Myth 2: Obamacare will reduce cost.

Reality: The U.S. annually spends about 18 percent of GDP or $2.6 trillion on health care. The original Obamacare cost estimate from the CBO was $940 billion over ten years. In early 2013, the CBO revised the estimate up to $1.3 trillion between 2013 and 2022. Since most of the cost drivers (Medicaid expansion, the individual mandate, the employer mandate, and the subsidies) in Obamacare do not go into effect until 2014, the cost will probably exceed $2.6 trillion between 2014 and 2023. The cost curve will not “bend down.”

Myth 3: The average family will see the cost of its health insurance premium decline by $2,500.

Reality: The CBO estimated in the days leading up to the law being passed that the premium for the average family will increase by $2,100. The Kaiser Family Foundation predicted that in 2012, a family plan would cost $15,745, up 4.6 percent over 2011. The IRS estimates that a family plan in 2013 will be $20,000.

SOURCE: Pacific Research Institute


A dozen attorneys general are pushing for an exemption:

Ohio Attorney General Mike DeWine, along with 12 other attorneys general, has urged the federal government to broaden religious exemptions under the Patient Protection and Affordable Care Act, or Obamacare, claiming the policy violates religious freedoms.

Put simply, the group believes any employer who says he or she objects to contraception should not have to provide contraceptive coverage.

The group issued a letter dated March 26 accusing the Department of Human and Health Services’ proposed mandate of violating religious liberties. The proposal would require employers to provide contraceptive coverage to workers with the exception of some non-profit religious organizations, primarily houses of worship, that object to contraception on religious grounds. The coalition asserts that this exclusion should be extended to all conscientious objectors.

“In the administrative rule process, federally, there is a comment period,” said Dan Tierney, a spokesman for DeWine. “And the attorneys general were using that comment period to reiterate their ongoing concerns that the rules as proposed and amended violate religious liberty of many employers.”

The proposal would require non-profit religious groups to identify themselves to insurers as objectors, after which they would be granted an accommodation that provides separate preventive coverage at no cost to the organization.

But DeWine said this method will still cost money, and the exemption should apply to all detractors, including those such as small business owners who may object to contraception.

“These regulations will force many Ohio employers to choose between harsh penalties and violating their conscience,” DeWine said in a news release. “This is another example of why Obamacare is bad policy, and it is another reason why I have joined attorneys general across this county to protect American families from its illegal overreach.”

SOURCE: Cleveland.com


Michael Flagg in the Chicago Tribune:

Unfortunately, far from supporting the bioscience industry, federal lawmakers may be on the verge of squashing it. A proposal being floated would undermine employment growth in biopharmaceuticals – both in Illinois and across the country.

Drug firms directly employ over 32,100 workers in the state. Drug research indirectly supports 135,000 jobs in industries like construction, administrative services and manufacturing.

Likewise, Illinois drug firms depend on many local specialty vendors to support their work. In 2011, 17 major biopharmaceutical firms had 16,600 vendor relationships.

My company, The Meeting Group, is one of those local companies. Based in Bannockburn, we have many years of meeting planning and travel industry experience. Contracts with drug companies have been integral to our growth. Many of our positions are high-paying and knowledge-based.

Any legislative efforts that threaten the Illinois bioscience sector threaten those jobs as well.

One such effort is gaining steam on Capitol Hill. Some Democrats are pushing for Medicaid-style “rebates” in Medicare Part D. In essence, this move would force drug companies to reimburse the federal government a preset amount for every drug sold to low-income Part D enrollees.

With these rebates in place, investors will face diluted financial incentives to pour capital into drug research. New development projects would dry up, leading to fewer new jobs. The Battelle consulting firm found that a $20 billion drop in industry revenue could lead to up to 10,700 lost jobs in Illinois.

This rebate proposal would also undermine Part D’s market structure, which empowers patients to choose their own coverage. The government doesn’t directly provide one-size-fits-all insurance. Instead, many private companies fashion plans compliant with basic Part D rules and vie for beneficiaries’ business.

The competition for enrollee dollars has led to massive cost savings. Part D’s 10-year cost projection is a stunning 43 percent less than originally estimated. Premiums have stayed flat.

This rebate proposal would compromise these market forces and likely lead to higher prices and fewer options for many patients.

SOURCE: Chicago Tribune