Consumer Power Report #447
Now that Republicans have taken both houses of Congress, it is likely they will in the spring pass an Obamacare replacement that will land on President Barack Obama’s desk to be vetoed. That will mark a point at which Republicans must choose to embrace one or more plans for Obamacare replacement. Several have been put forward in the past, but none that actually would end up at the White House.
Congressional Republicans agree about the majority of what they want to do when it comes to replacing Obamacare. Here are eight things they agree about:
- They want to end the tax bias in favor of employer-sponsored health insurance to create full portability (either through a tax credit, deductibility, or another method);
- They want to reform medical malpractice laws in a Constitutional manner (likely through carrot incentives to the states);
- They want to allow for insurance purchases across state lines;
- They want to support or repair state-level pre-existing condition pools;
- They want to fully block-grant Medicaid;
- They want to shift Medicare to premium support;
- They want to speed up the FDA’s device and drug approval process; and
- They want to maximize the health savings account model and consumer-driven health plans, one of the few avenues proven to lower health care spending, supporting high deductible insurance + HSAs.
There are other areas of major agreement, of course – the real issues of difference are in the details of how these various aims are achieved. Of the major plans, the area where most differ is whether health insurance ought to be encouraged via a tax deduction versus a tax credit.
But one area where there is a real disagreement within the Republican Party – and, I suspect, a disagreement between policy leaders and the base – concerns the issue of Obamacare’s tax hikes, and whether they ought to be retained in order to pay for the GOP replacement. Chris Jacobs of Gov. Bobby Jindal’s think tank, America Next, outlines the issue here (emphasis mine):
A line buried in a Heritage Foundation policy paper issued just before the November elections hinted at a major fissure point in discussions surrounding a conservative alternative to Obamacare. The distinctions it raised could shape the form of any health-care alternatives the Republican-led Congress considers next year.
The policy brief, outlining the principles for any conservative health-care alternative, included the following lines:
“Replacing the current tax treatment of health benefits with a new design for health care tax relief that is both revenue and budget neutral (based on pre-PPACA levels) is the first step in transforming the American health system into one that is more patient-centered, market-based, and value-focused.”
The words in parentheses pack the most punch, for they lay down a clear marker regarding budgetary baselines – which define the parameters of many policy debates in Washington.
Consider a hypothetical alternative to Obamacare that repeals the law entirely, including its more than $1 trillion in tax increases, but then imposes new limits on the tax break for employer-provided health coverage – raising, say, $400 billion in revenue – to finance coverage expansions. Does that alternative cut taxes by $600 billion (the $1 trillion in repealed taxes, offset by the $400 billion in new revenue), or raise taxes by $400 billion, because repeal of the law should be seen as a given?
Polling data conducted for America Next earlier this year suggests that Americans believe the latter. A majority of voters (55%) – and sizable majorities of conservative voters – believe that “any replacement of Obamacare must repeal all of the Obamacare taxes and not just replace them with other taxes.”
There is likely to be a very real disagreement on the right about whether Republicans ought to retain the revenue from Obamacare’s tax hikes to pay for a new tax credit or benefit, or whether their plan should truly repeal all of Obamacare, including its tax hikes. It will be interesting to see how much the grassroots engages in this issue, as it could dictate the outcome of the argument.
— Benjamin Domenech
IN THIS ISSUE:
One in three Americans say they have put off getting medical treatment that they or their family members need because of cost. Although this percentage is in line with the roughly 30% figures seen in recent years, it is among the highest readings in the 14-year history of Gallup asking the question.
Since 2001, Gallup has asked Americans each November if they have put off any sort of medical treatment for themselves or their families in the past 12 months. Last year, many hoped that the opening of the government healthcare exchanges and the resulting increase in the number of Americans with health insurance would enable more people to seek medical treatment. But, despite a drop in the uninsured rate, a slightly higher percentage of Americans than in previous years report having put off medical treatment, suggesting that the Affordable Care Act has not immediately affected this measure.
Among Americans with varying types of medical coverage (including no coverage), uninsured Americans are still the most likely to report having put off medical treatment because of cost. More than half of the uninsured (57%) have put off treatment, compared with 34% with private insurance and 22% with Medicare or Medicaid. However, the percentage of Americans with private health insurance who report putting off medical treatment because of cost has increased from 25% in 2013 to 34% in 2014.
SOURCE: Rebecca Rifkin, Gallup
Nearly two-thirds of Americans say shopping for health insurance is at least as bad as having a tooth filled, according to the latest Bankrate Health Insurance Pulse survey.
In fact, more than 7 out of 10 adults surveyed rate the ordeal of sorting and deciphering complex health plans the same as or worse than doing their own taxes (75 percent) or being stuffed into the middle seat on an airplane (73 percent).
Searching for health coverage fared even worse against all three alternatives among those who recently shopped for health coverage. For some, the pain may be fresh from open enrollment, currently underway for many employer-based group plans as well as for individual coverage on the Obamacare exchanges.
The percentages are even higher among respondents who say they actually have shopped for health insurance in the past few years. For example, 82 percent of those previous health-plan shoppers say it’s at least as bad as doing your own taxes.
57 percent of Americans under 30 say shopping for health insurance is at least as unenjoyable as having a tooth filled, compared with 70 percent of respondents 65 or older.
77 percent of people earning more than $75,000 a year say health-plan shopping is at least as bad as getting the middle seat on an airplane, versus 72 percent of those making less than $30,000.
52 percent of Americans making $50,000 a year or more would rather have a plan with a low premium but high deductible, while just 39 percent of those earning less would make the same choice.
46 percent of young people between the ages of 18 and 29 prefer a plan with a high monthly premium and a low deductible, compared with just 33 percent of those 50 or older.
16 percent of seniors 65 or older say they like neither option, versus just 3 percent of the youngest respondents.
SOURCE: Jay MacDonald, Bankrate
The [Affordable Care Act] limits cost sharing to protect individuals from excessive out-of-pocket expenses. One of the concerns of ACA supporters revolved around high out-of-pocket limits for consumers. This amount, set at $6,350 per person in 2014, was one of the largest objections individuals had when deciding what plan to purchase. Even with a subsidized premium, having to potentially come up with such a large percentage of their income to cover claims made coverage and care unaffordable.
The Annual Limitation on Cost Sharing requires that these high out-of-pocket limits be updated annually. The formula for determining the new Maximum Out-of Pocket (MOOP) is based on the increase in average premiums per person for health insurance coverage. That means that if premiums increase annually, the MOOP will go up. For 2015, the premium adjustment percentage is 4.21 percent, which increases how much you spend on medical care to $6,600. That’s $250 more out of your pocket.
According to the September 2014 Health and Human Services Rate Review Annual Report, small-group health insurance premiums have increased substantially since 2008. As long as it continues, we will see a higher MOOP every year. Worse yet, the growth rate of insurance premiums is still rising faster than average income and inflation. The result is clear: consumers will have worse insurance every year. The chart below shows what will happen to the MOOP at a (lower than average) 4 percent premium growth rate.
Under this scenario, by 2018 an Obamacare-compliant plan will have an out-of-pocket maximum that is $1,000 more than it is today. Worse yet, plans the government currently labels Silver plans will now be Gold plans. This is because of the “Actuarial Value Drift” my friend Bob Graboyes pointed out in this video and article.
SOURCE: Patrick Paule, The Federalist
A small number of commercial insurers held the lion’s share of the individual and group markets in most states in 2013, according to a new Government Accountability Office report (.pdf) prepared for a bipartisan group of lawmakers.
The GAO study analyzed the individual, small-group and large-group markets from 2010 to 2013, before the implementation of Affordable Care Act provisions that could affect competition and market share among insurers. What remains unknown is how healthcare reform will change this overall picture, since it introduced new market variables, including CO-OPs, guaranteed issue requirements and limits on how much insurers can vary premiums.
The GAO’s data sources were payer self-reports to the National Association of Insurance Commissioners and the Centers for Medicare & Medicaid Services. The study’s overarching theme was that “the biggest gorillas in the U.S. commercial health insurance market got bigger,” according to LifeHealthPRO.
Specifically, GAO auditors found that, while several payers were present in every state’s individual, small-group and large-group markets in 2013, enrollment clustered among the three largest insurers in most places. These insurers held at least 80 percent of the total membership in at least 37 states.
Moreover, in more than half of these states, one payer had more than 50 percent of the enrollment pie. In five states, there was at least one segment where the largest insurer had at least 90 percent of the total enrollees.
Further, the individual, small-group and large-group markets remained concentrated from 2010 to 2013 in most states, the GAO found. In each market segment, major players had at least 80 percent of the total enrollment in at least 30 states for all four years. The same companies generally held their top positions throughout the study’s time period.
SOURCE: Jane Antonio, FierceHealthCare
This summer, a 14-page bill with 379 co-sponsors (193 Republicans, 186 Democrats), which is little known outside the halls of Congress, was reported out of the House Ways and Means Committee. The Achieving a Better Life Experience (ABLE) Act (H.R. 647) would establish tax-favored savings accounts, similar to “529” education savings accounts, for individuals with disabilities. Unlike 529s, which are restricted to funding educational expenses, ABLE account funds could be used for a broad range of expenses. Moreover, assets in ABLE accounts would not count against eligibility for federal means-tested programs. By eliminating the asset test for families whose children receive Supplemental Security Income (SSI), H.R. 647 would expand the welfare state.
Of the bill’s estimated $2.1 billion impact on the federal deficit over 10 years, the Congressional Budget Office (CBO) projects that $1.2 billion will arise from higher spending on means-tested benefits for eligible individuals, and that $0.9 billion will result from lower revenues …
H.R. 647 makes it easier for families to obtain SSI benefits for children by effectively eliminating the asset tests for the program. The current asset limit is $2,000 in liquid assets for an individual, and $3,000 for a couple. H.R. 647 raises the limit for both to $100,000 as long as the assets are held in an ABLE account. If a child qualifies for SSI, the bill also eliminates asset tests for all other means-tested programs, including SNAP, Medicaid, the Earned Income Tax Credit, and Section 8 housing. When a child receiving SSI becomes an adult, the asset limits on SSI and all other programs are effectively eliminated if the child is deemed incapable of gainful employment.
Fraud occurs in SSI as it does throughout the welfare system. SSI is part of 13 programs designated by the Office of Management and Budget as “high error,” referring to high rates of overpayment. Typically, a recipient will conceal earnings in order to obtain higher welfare benefits. H.R. 647 facilitates this type of fraud by enabling welfare recipients to openly accumulate savings from hidden employment.
The SSI program, like all means-tested welfare programs, penalizes marriage. Single mothers who marry employed fathers will have their benefits cut or eliminated. H.R. 647 exacerbates this problem. Access to the program is increased, and a single mother would be permitted to openly accumulate informal child support from the non-married father.
SOURCE: The Heritage Foundation
The rate of growth of health spending remains moderate. But one area where prices appear to be increasing faster than they have in the past few years is brand-name prescription drugs. By 2012, blockbusters had lost their patents, and many looked forward to a future where we could all get a month-long supply of generic drugs for $4. Well, it did not quite work out that way.
Specialized drugs for smaller patient populations were introduced with high nominal prices. In September, EvaluatePharma confirmed that the increasing cost of prescription drugs was concentrated in more specialized drugs. Of the 100 top-selling drugs in the United States:
- The median revenue per patient of the top 100 drugs has increased from $1,260 in 2010 to $9,400 in 2014, representing a seven-fold increase;
- The median patient population size served by a top 100 drug in 2014 is 146,000, down from 690,000 in 2010; and
- There are now seven treatments priced in excess of $100,000 per patient per year in 2014, versus four in 2010.
Given these facts, it may be understandable that the health insurance industry is campaigning against the high prices of specialty drugs. For its part, the brand name pharmaceutical industry emphasizes that health insurers (especially in Obamacare exchanges) often put these specialty drugs on the most expensive tier of their formularies. This requires patients to pay high out-of-pocket costs. While this is an accurate description of the situation, a government policy simply forcing insurers to cover a higher share of the price of a specialty drug does not reduce the price. It just moves it from patients’ direct payments to their premiums.
Reducing prices of specialty drugs requires improving the productivity of R&D. On that front, the news is sobering. Last December, Deloitte and Thomson Reuters examined newly introduced drugs from the twelve pharmaceutical companies with the largest research and development (R&D) budgets. It cost $1.3 billion to bring a newly discovered compound to market. However, the average forecast for peak sales of an asset declined by 43 percent, dropping from $816 million in 2010 to $466 million in 2013.
SOURCE: John R. Graham, NCPA