Why do Legislators rely on CBO estimates? Let’s take a look at the “holes” in the CBO report on the AHCA 2.0 and why their projections are so flawed.

Like so many things in Wash DC, it was a process that started with good intentions but then turned upside down and ruined by efforts for political gain! Today legislators applaud or criticize CBO projections depending on which argument it’s projections supports. So, the answer to the rhetorical question above is “The CBO is used for political advantage”.

Without casting stones let’s just look at where the CBO estimates are skewed by incorrect assumptions and projections. To support my point I will call upon several facts from a recent report issued by Doug Badger of the Galen Institute. Mr. Badger does a much more thorough examination of the facts and is more articulate laying the foundation for explaining the mistakes with in the CBO report.

Even in the most balanced effort (which seldom occurs) it is impossible to determine the outcome on the process of repealing a gigantic metastasized piece of legislation like the ACA and replacing it with any solution, even one drastically needed. To be successful the recipe to replace the ACA will take three parts “good” legislation and two parts communication. To date, the Repub’s attempts have gotten the mixture wrong on both policy and communication. But the ACA must either be truly Repealed & Replaced or it must be fixed.

The News reports last week about the CBO estimates was dominated by the headline of CBO’s projection that 23 million fewer people will have coverage by 2026 than would be covered under the ACA, if left intact. Without casting blame or bias, the CBO’s numbers are flawed and it is pretty clear to see where the CBO’s numbers went off tract. Why the CBO did not or does not correct its errors is not the purpose of this post. You can judge that! 

The CBO’s numbers start with inaccurate enrollment data for the state exchanges which creates an inaccurate baseline of enrollment projections. Then it makes its projections from that point. For example, the CBO states that the exchange enrollment as of December 2016 was 10 million members but then uses the figure of 15 million lives covered in the exchanges for 2017. That means the baseline of 15 million, from which CBO starts its projections, is already misstated by 5 million lives or 50%.

If you recall a bit of history, the CBO originally projected that over 24 million lives would be covered by state exchanges in 2014 however that clearly not true since, as reported above, the CBO states that Dec. 2016 enrollment at just 10 million lives.

But, to make matters worse, the CBO estimates that that over 18 million lives will be covered under ACA in 2018 which would be an 80% increase from Dec 2016 actual enrollment. So, the CBO used ACA enrollment numbers, incorrect by 80%, to project covered lives compared against the AHCA 2.0. The CBO projects  that 8 million fewer lives would be covered in 2018 by AHCA 2.0 simply because it starts with the flawed baseline that 18 million lives would be covered by the ACA in 2018.

Power of the Mandate overstated.
The CBO estimates that 4 million Americans will drop off their Medicaid coverage in 2018 because the penalty or Mandate to be insured is reduced to zero by AHCA 2.0. To clarify, the Mandate won’t be repealed just the penalty for no coverage would be reduced to zero under AHCA 2.0.
The question Mr. Badger raises is “Why would 4 million people covered by Medicaid suddenly torch their Medicaid cards if their eligibility and coverage under Medicare still exists”. Pretty good question, don’t you think? 

The CBO also projects that 2 million lives will give up their employer sponsored coverage in 2018. I have trouble believing this but employees will have choices to make. However, they also may choose to re-enroll once they experience life without coverage or discover that their employer’s plan was actually a better deal.

The following  shows how weak the mandate was in making Americans sign up for coverage. The IRS reported to Congress the effects of the Mandate for 2015:
* 6.5 million uninsured paid the penalty
* 12.7 million uninsured got an exemption from penalty
* 4.2 million uninsured ignored the penalty
That’s 23.4 million uninsured Americans in 2015

So, the CBO estimates rely heavily upon the power of the employee Mandate. But, it is clearly obvious that the Mandate did not get enrollment close to full coverage.

Let’s add the Press and Pundit’s misrepresentation of the AHCA’s impact on enrollment by Medicare expansion. In 2018 the AHCA 2.0 does not reduce or impact the enrollment in Medicaid caused by the Medicare expansion. Those enrollments are still valid and states that expanded their Medicare eligibility will continue to receive those “extra” Medicare support for at least 2 more years.
In fact contrary to reports by opponents of AHCA 2.0 the Federal government will continue to fund the Medicare allotments for all states at the levels in existence prior to the enactment of the ACA. Instead of the 95% funding under ACA the states will receive the percentage of funding for their Medicare folks at the levels  already in place for the past 50 years.

If you add the currently uninsured numbers to the false baseline of 8 million fewer covered by the state exchanges as well as the skewed reporting on Medicare expansion, it is easy to see that the CBO is fodder for the opponents of the AHCA 2.0.

Once again, why should anyone rely on the CBO estimates when those estimates are clearly flawed? It’s political of course.
The CBO is in a no-win situation though when it comes to making its projections. No one can project who will waive coverage or why when the decision is made by Americans who either demand choice and quality or who are honestly dependent on support by the government to survive or who feel entitled and choose to live off the effort of others. That is not meant as a criticism. It’s merely stating the obvious as we have all seen how a entitlement mentality can impact government programs. 

To close, I don’t know if we have ever seen so many distractions in Wash DC. Most seem like deliberate attempts to fragment the efforts to improve healthcare, lower taxes and improve national security for political gain. But some is caused by the inaction of the controlling party that does not seem willing or capable of governing.

So, let’s keep watching and talking because I know we all hope for better outcomes than we are getting currently.
And, because we’re all in this together.

Talk soon,

Mark Reynolds, RHU
559-250-2000
mark@reynolds.wtf

AHCA 2.0 – Why can’t we see the text of the bill and its revisions? Will it even get written into “bill form”?

What happened to the serious, more like whimsical, promise by the GOP leadership that we would have time to read and debate each bill proposed? The biggest problem the GOP faces on their efforts to Repeal & Replace the ACA is that they are too proud to trashcan the first version and start over. If you want a race horse but all you own is a pig: putting a saddle and jockey on the pig won’t make it any better.

Sorry for the swine reference but in a way it fits, doesn’t it? The GOP railed for 8 years that the Pres Obama made one bad deal after another because getting a signed deal was more important than the content of the deal. Well, the GOP effort in the House is no better.

We have not seen the revisions in their entirety but the Pre-existing condition issue is getting bantered around and probably misleading everyone. Your author is in favor of a smart 6/12 pre-ex clause to help keep prices down and people covered. Remember that AHCA 1.0 had no enforcement mechanism to make folks get covered. It had a provision to allow insurers to charge a bit more for late enrollees but no increase could cover the adverse selection that policy would battle.

So, it’s May 2nd, they are suggesting a vote is possible by May 4th and everyone is leaving Washington on May 5th for another extended vacation. Again, the process is rushed and very few in DC ever show courage to stand up for their values or promises so its anyone’s guess what we might see if they try to ram it through on Thursday.

On another note, some how a continueing resolution was concocted which is just now being flushed out. The initial opinions are that the Dems gave up nothing and the Repubs funded Planned Parenthood, Endowment for the Arts, the ACA subsidies and got nothing but a small increase for defense. Maybe the President is right: “maybe it is time for a government shutdown”. If the GOP can’t help President Trump with the border wall and healthcare reform then why does he need to sign off on a continuing resolution that makes Conservatives appear weak.

Actually every GOP member that campaigned on repeal and replace, strong immigration enforcement, tax relief, and national security should be ashamed. Sorry but it’s a fact and I bet we don’t see a vote before this week’s break!

What do you thing?
It’s a mess but we’re all in this together!

Mark Reynolds, RHU
559-250-2000
mark@reynolds.wtf

Do current discussions about Repeal and Replace of the ACA sound mythical to you? Like Unicorns- everyone’s heard of them but no one has ever seen one.

Repealing and Replacing the ACA may be more serious than Unicorns but if Republicans continue to talk about make-believe actions with make-believe deadlines they may soon cause results which likely will be negative. They may lull us all into a make-believe trance that causes us to forget just how hurtful the ACA truly is to America and our citizens!

As of this writing we have seen noting in writing from the Republicans about AHCA 2.0. We’ve heard about an “invisible reinsurance system” but no details and certainly nothing that would lead even the most avid supporter of ACA to think that the ACA is in any danger of change.

Your loyal author is trying to contain his cynicism regarding this Republican AHCA effort partly because I don’t like cynics but also because we still have tax reform and the border wall in flux which could lead to a cynic over-load. So I guess it’s healthy to maintain our optimism about the changes to our healthcare delivery system.

One of the most frustrating aspects of this matter of repeal and replace is that it just does not seem complicated to me. We’ve listed the specific items which need addressed to correct, improve and set the American healthcare system back on solid ground. If the Republicans were smart they would throw the AHCA bill in the shredder and start at least with a new title which includes “Repeal and Replace.

So, this week you won’t need to read too long because as of today I honestly believe that R&R will not regain center stage until this Fall. My theory is that then the Republicans will see the Insurer’s rates and coverage for 2018 and the elections of 2018 will flash brightly telling them they better get on it.

That’s it for this week.
Let us know what you think.
Though it is often frustrating, we are still in this together!

Mark Reynolds, RHU
559-250-2000
mark@reynolds.wtf

Federal Invisible Risk Sharing Program. Is this a smart amendment to the American Healthcare Act? It may be, let’s discuss and see!

The Federal Invisible Risk Sharing Program (FIRSP) appears, at first read, to have provisions that would allow insurers to reduce premiums from current levels and keep them lower in years to come. It lacks some detail that the Secretary “shall” determine but let’s discuss what it could provide. BTW, is it interesting to you that when the Government offers to reinsure the plan they call it “invisible”? Just wondering, that’s all.

The FIRSP amendment Sec. 2205, at its core, would establish a stop loss level for insurers offering health insurance products in the Individual market. The stop loss coverage would reimburse an insurer for claim costs exceeding $1,000,000 on any individual. It would act as re-insurance for insurers so that insurers could set premiums knowing that claim costs for individuals above $1M and costs for members with certain health conditions likely to exceed $1M could be passed off to the “government’s” high risk pool. It would tend to lower and contain premiums as the insurer would not be subjected to claims associated with catastrophic illness or accidents.

This should make pricing plans easier for insurers because, pre-ACA, insurers would often purchase reinsurance for their products to pass off  a portion of their risk, above a certain threshold. Insurers are familiar with the costs associated in these reinsurance arrangements which should help as they negotiate with the government’s actuaries on pricing.

The amendment states that a portion of the premium collected by insurers would go to the government’s pool to cover the government’s risk of paying for claims above $1M. The percentage that a plan will pay to access this reinsurance will need to be determined but it will give the government a taste of what insurers faced trying to price plans with unlimited lifetime maximum benefits. Pre-ACA insurer’s plans would have lifetime limits ranging from $2M to $6M depending on the region. That’s one reason the ACA’s unlimited lifetime benefit was so scary to offer for insurers.

What about the GROUP MARKET
Initially, it appears that FIRSP does not apply to employer sponsored plans in what’s referred to as the group market. The group market has traditionally been divided into 2 or 3 group sizes; small group (2-50EEs), mid-size (51-100EEs) and large employers having 100+ employees.  I would suggest that FIRSP is shortsighted if it only covers individual market and should be expanded. The average size of employers in the small group market is under eight (8) employees per group but employers with less than three (3) employees is common.

The FIRSP would help keep the premiums lower and stable in this market segment and therefore should be included. Of course actions to help in this market segment could cause employers to purchase their coverage directly from insurers and stay away from their state-run exchanges.

If FIRSP does not accommodate the group market then it would lead one to believe that the authors are not supportive of the small group market. That would lead one to believe that it is just a ploy to take a step closer toward single payer because the government would still be controlling the strings.

To include the small group market in FIRSP the reinsurance stop loss level could be increased above the $1M in the individual market and could be negotiated based on region of the country, size of insurer, PPO vs HMO and so forth. Again, a one size fits all approach does not need to apply.

The first draft of FIRSP leaves much to the states which is the Republican narrative these days but also suggests someone is saying “I don’t want to deal with it”. Leaving decisions to the states could be problematic for large populations like those in California or New York. It would be easy for the Feds to establish the means and manner in which reinsurance claims could be paid and thus avoid the liberal minded states tendencies toward single payer. Heck, let a good TPA handle it for the Feds and problem solved.

Your author thinks that FIRSP makes sense but at this point it is just a band aid on the overall flawed AHCA. Any amendment, all by its lonesome, is like a bolt-on accessory for your crappy car. If your car engine does not run then bolting on fog lights and flashy decals won’t help much.
Sorry for over using the metaphors.

But, what do you think? Let me know.
And remember, we are all in this together.

Mark Reynolds, RHU
559-250-2000
mark@reynolds.wtf

Should expanding ERISA be a part of Repeal and Replace? Let’s discuss it!

The Employee Retirement Income Security Act of 1974, known as ERISA,  was enacted on September 2, 1974, and set the rules to establish minimum standards for pension plans for private employers. Probably due to in part to its name including “Retirement Income Security” people often think that ERISA regulates only pension plans, not true. ERISA also provides for the rules that impact employer sponsored employee health  benefit plans.

While its often misinterpreted, especially by legislatures and insurance departments, ERISA also included guidelines for individual employers designed to protect the member’s interests in their employer sponsored health plan. The term ERISA is often overused and misunderstood but ERISA could present a huge opportunity in the effort to reform (improve) our US healthcare delivery & finance system. To do so, it needs clarified, simplified and expanded.

Basically, ERISA made/makes it possible for individual employers to self-fund their employee benefit plans because it provides the regulations for “employee welfare benefit plans” which of course include employer-provided health care plans. Those employer benefit plans are designed to provide, through the purchase of insurance or in this case self insurance medical, surgical,  hospital care and other benefits caused by sickness.

ERISA’s overly broad and general language has made it difficult  for courts to apply the ERISA preemption provisions and provide clarity to employers, insurers, and state regulators. Basically, the preemption authority that ERISA provides says it “shall supersede any and all State laws insofar as they . . . relate to any employee benefit plan.”  There’s more and  I could go on but you get the point which is ERISA has “broad preemption” authority over state insurance commissioners and legislatures that could be both simplified and expanded to help resolve the dilemma of selling across state lines, lack of competition in many regions, cost and access for small employers.

The policy-wonks in Washington, at the direction of HHS, (and us) could easily “wordsmith” the ERISA language to overcome the pitfalls or obstacles that individual state insurance departments and legislatures have created. Here are just a couple ideas for the “wonks” to ponder:

• Limit individual state’s authority through ERISA to simply monitor insurer financial stability and little else.
• Prevent individual states from implementing burdensome regulations that stifle competition such as setting minimum or maximum stop loss deductibles.
• Prevent individual states from regulating how re-insurers determine Aggregate factors in their stop loss plans.

An example of how expanding ERISA could help would be to overcome legislation such as California enacted known as Senate Bill 161. SB161 was created to stifle self-funding for employers with fewer than 100 EEs and push those employers toward the state-run exchange. SB161 mandates both the minimum Specific deductible (minimum of $40,000) and the Aggregate stop loss calculation ($5,000/covered member or 120% which ever is greater) both of which caused stop loss plans to be over priced and not competitive. SB 161 completely shut down the use of self-funding with stop loss on health plans for employers with fewer than 100 EEs. Therefore those employers no longer have access to lower cost opportunities for their employer-sponsored health plans.

There are ERISA experts, far wiser than your author, who may nay-say the ERISA expansion idea. But, why should it be difficult to modify a small piece of IRC code enacted 43 years ago. The healthcare delivery system has changed dramatically since 1974 so let’s simply add a few lines of code specifically aimed at solving the issues we face today.

Expand preemption language and other aspects of ERISA so:

• Small employers are not arbitrarily restricted access to competitive alternatives.
• Smaller insurers can compete with the big insurers.
• More insurers are competing in areas where there’s just one insurer now.
• Allow fully insured plans to easily sell across state lines.
• Competition has a serious chance of lowering premium and overall costs

Let us know what you think. It’s a big subject that’s been misunderstood by many for 40+ years, including the courts and scholars, so there is room for discussion.

As I always say, we are all in this together, even though the conversations we hear coming from Washington DC seem to argue against that sentiment.
However, I remain confident that common sense has a chance to prevail because the premium paying public is fed-up with the current status and politicians will need your support in 2018.

BTW, thanks for the emails and positive comments. Talk soon.

Mark Reynolds, RHU
559-250-2000
mark@reynolds.wtf

 

 

The need for Tort Reform is often associated with increasing healthcare costs and premiums. Is it possible to eliminate the affects of “defensive medicine” with tort reform legislation?

For the past 30 years we have heard the cry for Tort Reform. Is it true that providers practice “defensive medicine” out of fear of malpractice lawsuits and does it impact the cost and manner in which providers render care. Tort reform and malpractice awards in California have been somewhat contained because of Tort Reform legislation in 1987, often referred to as the “napkin bill” which refers to the initial process in which two CA legislators drew it up. But, has it helped hold down healthcare costs and premiums?

Don’t worry, this Post is not about that CA legislation or even potential legislative language that might be included in the new American Healthcare Act. Personally, I think it is possible to add straight forward language to the AHCA that would limit malpractice lawsuits but it might not control healthcare costs and thus might not help lower premiums.

Why would I suggest that we can create language in legislation to limit malpractice lawsuits without affecting healthcare costs? Because I am, as we all need to be, a student of human nature which helps us predict the effect of legislation intended to change behavior. Sounds silly but it’s a fact and let’s review why.

By human nature I am referring to the habits one establishes either knowingly or not in our every day life to gain or avoid a certain outcome. Providers fall into a unique category and regardless whether their actions are life-saving or preventive in nature a doctor’s practice will develop habits that may not be easily changed. In a doctor’s world a patient might be in pain plus someone else is usually paying the bill.

That isn’t to say that legislation can’t stop certain human activity completely simply by creating consequences to a certain action. For example, the risk of paying a $175 ticket and increased auto insurance rates for driving while talking on one’s mobile phone seems to have made an impact on that behavior.

However, we must also realize that a doctor’s request for more tests are often more than defensive. They may truly be diagnostic in nature to assist in treatment decisions which add a dimension not common in the habits for most of us in society. For years insurers, self-funded employers and other experts have complained that doctors run-up costs by over prescribing diagnostic tests and procedures, such as MRIs for example, simply to avoid malpractice lawsuits. This is why & where the term “defensive medicine” was  first muttered.

Doctors do have two additional variables affecting their decisions. One variable is the patient who may be expecting or even demanding a battery of tests that the attending doctor does not think are necessary. It’s  common for doctors to treat patients who are truly suffering and may have been for months or years. In those instance, how does a doctor say no to a patient’s demand or even pleading request for more diagnostic procedures. The patient wants the doctor to prescribe immediate pain-relieving treatment. Most of us will never be in that dilemma requiring us to decide the appropriate level of diagnostic cost necessary to determine the correct path of treatment.

The second variable is that in most cases a third party is paying for the doctor’s bill. Sometimes extra tests might seem worthwhile to a doctor if it makes the patient feel better emotionally. Who among us can honestly say we would not prescribe more evaluation even if the cost of that extra evaluation would not lead directly to a better decision. Saying “No” to a patient is not always easy and remember somebody else is usually paying the bill.

Imagine for a moment that you are a doctor who has been forced to practice defensive medicine for 20+ years. You’ve had your Malpractice Insurer scare you with tails of tort awards. You’ve attended countless industry seminars at which the fear of malpractice lawsuits is emblazoned on your brain. Or maybe you work for a large corporate practice that wants to avoid malpractice suits but also enjoys the extra revenues earned by extra diagnostic testing. Imagine any of those situations; then you go back to your practice Monday morning to see patients. How would you overcome the habit of practicing  “defensive medicine”?

But here’s a twist to this story about Tort Reform. I actually believe that after doctors have had time to practice their chosen “healing” profession, in a non-threatening legal environment, that the level of care as well as the cost and outcome of care would be better than it is now. I also think that, in time, patients would start to be more satisfied with the level of care they receive and may even learn to be more interactive with the doctor than they are currently.

I am sure this sounds odd coming from an admitted cynic of human nature. But, while human beings may be flawed in many ways I believe human nature, at least concerning our own healthcare, could begin to do the right thing.

We’ve discussed before that healthcare costs are the summation of the unit cost of care multiplied by the number of units of care consumed. When we talk about Tort Reform and the power of human nature it is easy to see that controlling the resulting value  of that equation is not an easy calculation.

It sounds naïve to state publicly that a solution to healthcare reform which combines patients and doctors and payers then adds big pharmaceutical & medical device companies, plus attorneys and legislators would be an easy system to reform?
However, I think it is possible as you have read in previous posts.

The hard part will probably be convincing legislators that they should want to make a difference and improve our healthcare delivery system rather than just making a difference for their own career or party. Sorry for that one last bit of cynicism.

We still need to discuss what Tort Reform language can be fashioned into the AHCA. We’ll tackle that over the next couple weeks.

Let me know what you think.
And remember, we’re all in this together!

Mark Reynolds, RHU
559-250-2000
mark@reynolds.wtf