How much are Republicans willing to pay to move Medicaid enrollees into private insurance?
What would happen to the 11 million low-income adults who have gained coverage under the Affordable Care Act's Medicaid expansion if the Senate GOP's efforts to repeal and replace Obamacare pass and the expansion is phased out?
That's a crucial concern for healthcare providers nervous about increased uncompensated care and patients going without needed medical services, as well as state and local officials fearful of the costs of caring for many more uninsured patients. Even though the current bill lacks enough Republican votes for now to move forward, GOP leaders may try to revive it.
Backers of the Senate bill argue that people with household incomes under 138% of the federal poverty level—about $16,643 a year for an individual—would be able to shift to private insurance using the bill's premium tax credits.
"The advantage of moving the expansion population into the individual insurance market is the system is more dynamic and access to care and health outcomes are better," said Dr. Avik Roy, a conservative health policy analyst who reportedly helped Senate Republicans write their bill.
Even if that's true—and there are sharp debates about that—there is strong evidence that covering low-income people through private insurance instead of Medicaid would cost taxpayers significantly more if the same level of benefits were preserved.
The Senate bill, called the Better Care Reconciliation Act, would phase out enhanced federal funding for the Medicaid expansion by 2024. Experts predict many if not most states would end their expansion programs because they could not or would not pick up the cost of the expansion themselves.
In his latest weekly address, President Donald Trump claimed the Senate bill "expands the opportunity for people on Medicaid to purchase a private plan with federal financial assistance."
But there are big questions whether people with low incomes would be able to afford to buy private plans in the individual market even with the help of a premium tax credit. The Congressional Budget Office said last month that few low-income people would buy insurance starting in 2020 because the health plans they could buy using the premium subsidies would have significantly higher deductibles than current plans. That's because the subsidies would be pegged to the price of benchmark plans with much lower actuarial values—58% versus the ACA's 70%.
The CBO projected that under the Senate bill, 22 million fewer Americans would have insurance by 2026 compared with current law, and that the coverage losses would fall more heavily on lower-income and older people.
Under the Senate bill's premium subsidy calculation, a single person with income at the poverty level, now $12,060, would have to pay a little more than 2% of income, or about $250, in annual premiums for a private plan, according to the Kaiser Family Foundation. In most of the 31 expansion states, Medicaid enrollees currently pay no premium.
Even more significantly, the tax credit those people would receive would buy them a plan with a deductible of $6,105, more than half their income, noted Larry Levitt, a senior vice president at the Kaiser Family Foundation.
Under the ACA, people with incomes under 250% of poverty who sign up for silver plans receive federal subsidies sharply reducing their deductible and coinsurance shares. Those with incomes up to 150% of poverty have to pay only $255 a year in total cost-sharing with the subsidies.
But the Senate bill would eliminate the ACA's cost-sharing reduction program starting in 2020. In its place, the Senate bill would offer states $182 billion over 10 years to pay for various initiatives to stabilize the individual insurance market. It would be up to each state whether and how it helped low-income people with out-of-pocket costs.
Whether or not congressional Republicans pass their repeal-and-replace legislation, some GOP-led states already are moving to shift Medicaid expansion enrollees into private insurance. Arkansas recently asked HHS for a waiver to move people with incomes from 100% to 138% of poverty to private insurance, affecting an estimated 60,000 Medicaid enrollees.
"Many won't be able to afford deductibles and copays, and we'd anticipate a large number of people will just not enroll in coverage," said Marquita Little, health policy director for Arkansas Advocates for Children and Families.
Roy acknowledged that out-of-pocket costs are a key issue that must be addressed if Medicaid enrollees are going to be successfully moved into private coverage. He advocates capping those costs on a sliding scale based on income. "The way you address that is more robust financing assistance for the lower-income population," he said.
But neither the House or Senate Republican bills offer any targeted financial help for these out-of-pocket costs, while abolishing the ACA's cost-sharing reductions.
Levitt points out that the billions of dollars the BCRA allocates for market stabilization would have to cover a number of different needs, including reinsurance payments to health plans and subsidies to people with pre-existing medical conditions who otherwise would face spiking premiums. There likely won't be enough money to also provide cost-sharing subsidies, he suggests.
Nevertheless, Roy and other conservatives urging elimination of the ACA's Medicaid expansion argue that low-income people would be better off with private insurance because Medicaid patients have a hard time finding physicians who will accept Medicaid's low payment rates.
"Medicaid is terrible at offering access to providers," Roy said.
But a new study published in JAMA Internal Medicine based on CMS survey data from 270,000 Medicaid enrollees in 2013 doesn't support that view. It found enrollees were very satisfied with their coverage. They gave the program an average rating of 7.9 out on a scale of 10.
Eighty-four percent said they were able to get all the medical care they needed in the previous six months, and only 3% said they could not get care because of long wait times or because doctors wouldn't accept Medicaid. The survey did not include Medicaid expansion enrollees, since the ACA expansion mainly started in 2014.
Even if commercial health plans do offer better access to providers than Medicaid does, there's little doubt that's a more expensive way to provide coverage. The Urban Institute found that total healthcare spending for a typical low-income Medicaid adult enrollee would be 26% higher in a private insurance plan. A major reason is that Medicaid pays providers substantially less than private insurers pay—30% to 65% less, according the Government Accountability Office.
Indeed, when Democrats were crafting the ACA in 2009, they considered covering the population of people with incomes from 100% to 138% of poverty through private plans offered in the insurance exchanges.
But they decided to cover them through Medicaid after the CBO told lawmakers private coverage would be much more costly to the government, said Billy Wynne, a healthcare lobbyist who formerly served as a Senate Democratic staffer.
The bottom line, many experts say, is that Senate Republicans would have to accept a significantly higher price tag for their bill if they want to shift the 11 million Medicaid expansion enrollees to private health plans with comparable affordability and benefits.
"From a federal spending perspective, maintaining Medicaid coverage is the cheapest way to go," Wynne said.
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