What Now?: A Four Step Plan For Bipartisan Health Reform

As I concluded in my Health Affairs Blog post last Monday, it should be clearer now than ever that new steps to improve our health care system must be pursued on a bipartisan basis. In the past week, several Members of Congress and the President himself have expressed interest in finding consensus solutions to the challenges we face. Democrats, meanwhile, have responded in kind. While it will not be easy, we ought to applaud these gestures and, as health care stakeholders, demonstrate our preparedness to support efforts to improve health care access and reduce costs. With that in mind, I have compiled here a range of sensible measures that policymakers might consider to address flaws and build on successes in health care. The vast majority of these have been recommended by a variety of policymakers from the right and left, as well as major trade associations, think tanks, and experts, constituting a chefs’ menu of options that might expedite action. In four broad steps, each component of which—by themselves—would constitute solid improvements, we have an opportunity to move past partisan bickering and put our health care system on stronger footing.

STEP 1 – ENHANCE THE INDIVIDUAL MARKET

Maybe I’m just tired of the word “stabilize,” but I don’t think we need to look at this as an exercise in resuscitation of the market for individual consumers. We’re here to prevail, not just endure, so we can afford to think a little bigger. There are some obvious, relatively low-cost measures to consider at the outset. Head and shoulders above the rest would be to fund the cost-sharing subsidies currently available to individuals in the exchange markets. This assistance is the subject of the ongoing House v. Price case, where the Trump Administration must soon decide whether it will continue to defend it. For the sake of the 80 percent of Exchange enrollees currently benefiting from this policy, they should. Better, though, would be for Congress to appropriate the funding for this program, removing any doubt about its legality and stability. Also, instead of halting advertisements for HealthCare.gov, the Administration should actively market and support enrollment in available coverage options. As the President and now Health and Human Services (HHS) Secretary Tom Price have acknowledged, the Affordable Care Act is the law of the land and its governance is the obligation of the Executive Branch. Additional policies that are broached by either the American Health Care Act (AHCA), separate legislation passed by the House Energy and Commerce Committee, or the recent market stabilization rule from the Administration, include reducing the grace period for non-payment of premiums from the generous 90 days currently allowed; enhancing verification processes for special enrollment periods; and funding, fixing, and potentially extending the so-called “Three R” premium stabilization programs. While funding for a key component of that third item—the risk corridor program—was restricted in a fairly deft maneuver by congressional Republicans to undermine the ACA’s success, the AHCA’s $125 billion Stabilization Fund is a testament to the political viability of fixing it now. Beyond these more mechanical options are some more substantial changes that would improve competition and reduce costs. As suggested by several moderate Democrats in a 2014 op-ed, “copper plans” could be added to the array of Exchange products consumers can buy. While this would be somewhat similar to the catastrophic coverage already available to those under 30, that current program does not offer any subsidies, excludes its enrollees from the broader insurance pool, and is being accessed by less than 1 percent of customers. With an actuarial value of 50 percent, copper plans could offer a cheaper option to younger, healthier consumers while balancing costs across the market. As frequently recommended by actuaries and included in another recently passed Energy and Commerce Committee bill, expanding the age rating band from 3:1 to 5:1, or even to just 4:1, would further help target plan options and premiums to the appropriate audiences. As the Urban Institute notes, so long as premium subsidies are maintained (or perhaps expanded — see below), this change should not unduly disadvantage older consumers. Two more options that have strong conservative support are to repeal the health care industry taxes in the ACA, which contribute to price increases because they are passed through to consumers, and facilitating multi-state markets via the existing ACA section 1333 waiver program. Section 1333 allows states to form compacts to merge their markets, which is a version of allowing insurance to be bought across state lines that maintains states’ rights to regulate health insurance products sold there. So far, no states have formally pursued combining their exchanges, but I suspect a Trump Administration, with Secretary Price, could help them figure out a way. There is a lot more that could be done, not just to stabilize markets but to help them thrive. In lieu of the initial AHCA approach of delivering tax credits of equal value to individuals at different income levels, the existing subsidy structure could be expanded to all households so that none are required to pay more than 9.5 percent of their income for coverage, which de facto phases out the subsidy at high income levels. While ensuring affordability for the middle class, this will also entice a broader array of consumers to get into the market. Similarly, as recommended by the Commonwealth Fund, subsidies for young people could be enhanced, perhaps, I’d add, in the form of a one-time “sign-on bonus” to quickly boost enrollment, spread risk, and limit adverse selection. Additional cost-sharing support could be offered via reimagined health savings accounts. Current cost-sharing subsidies phase out for households above 250 percent of the poverty level. The government could match HSA contributions for families making from 250-400 percent, with traditional contributions of course still permitted at higher income ranges. This would help ease health care costs for middle class families while promoting saving and more prudent health care spending. Another tool for limiting adverse selection, which could potentially replace the underperforming (and widely loathed) individual mandate, would be to establish default enrollment, perhaps into the lowest cost plan available with an opportunity to opt out, a concept supported by conservative commentators and proposed in recent legislation from Republican Senators Bill Cassidy and Susan Collins. Not only would this significantly boost enrollment, it would enhance the incentive insurers have to compete on price. Competition also could be enhanced by reducing barriers to entry for the multiple start-up plans looking to enter these markets. Building on the recent Administration rule that would allow states to soften network adequacy requirements, additional regulatory constraints could be loosened, perhaps on a short-term basis, for new market entrants to stem the tide of dwindling plan participation. The last item in this step is really important. Our health care market is currently severely fragmented. We have large group, small group, and individual systems, with the last divided still once more into on-exchange and off-exchange (including grandfathered) plans. This fragmentation increases gross health care costs. Competition would be better served by gradually converging these disparate markets, which I will address more in the next section, but it would begin with finally ending the now four-year extension of plans that do not comply with the consumer protections enacted in the ACA.

STEP 2 – RATIONALIZE THE EMPLOYER MARKET

By what is essentially an historical accident, the majority of Americans with health insurance acquire it via their employer. If we accept that fact as the norm for the foreseeable future, two key changes could be enacted to improve that market’s condition. First, the so-called “family glitch,” which denies subsidies to family members if one of them has access to relatively affordable individual coverage from their employer, should be fixed to allow those family members to acquire subsidized coverage elsewhere. This is among the several strong recommendations from Georgetown’s Center on Health Insurance Reforms. Second, access to the small business tax credits in the ACA could be expanded to assist more workers in this market. But, here too, we have a chance to think bigger and create a pathway to consolidate these disparate markets that undermine the basic insurance principle of pooling risk as broadly as possible. Restrictions on small business employees from accessing the individual market could be lifted, or they could simply be merged into the individual market completely over time. Relatedly, many large employers, joined by conservatives, would like to see greater opportunity to provide their employees a fixed allotment with which they can purchase insurance in a private exchange. These companies would also like to limit their liability for health care expenditures. Perhaps there is room to compromise: relax restrictions on these arrangements, but require participation in the statewide exchanges (rather than “private” ones), while phasing in traditional Federal premium tax credits for employees at lower income levels. In that vein, you can’t escape discussing the employer market without addressing the elephant in the room — the tax exclusion for employer sponsored insurance. This is the most costly tax expenditure in the Internal Revenue Code, weighing in at around four trillion dollars over ten years. It is also remarkably regressive, generating massive tax cuts for highly paid executives. There’s a reason preliminary discussions around both the ACA and AHCA explored capping or eliminating this subsidy. It is not a wise use of taxpayer dollars. Ultimately, employers (and unions) cannot have it both ways. They cannot bemoan the burden of health care expenditures while fighting tooth and nail against any modification of the tax exclusion for employer-based insurance. But, well, they do, which is why this type of bold change must be done on a bipartisan basis, which protects both parties from shouldering the blame from interest groups that will object.

STEP 3 – EMBRACE MEDICAID

It’s time to drop the ideological divide over Medicaid, a program that covers 74 million Americans who truly have nowhere else to turn. For one thing, this means setting aside paternalistic views that the benefit somehow impinges on the dignity of its enrollees. I don’t hear them complaining. In fact, surveysshow that Medicaid enrollees are more satisfied with their coverage than those with commercial insurance. But it’s true that a number of eligible Americans don’t enroll because of the stigma some associate with it. As politicians reinforce that stigma, these families’ medical bills pile up, at best, or their health conditions go untreated, at worst. There are 19 states that have not yet expanded Medicaid as authorized by the ACA. Given the 90 percent Federal match for state contributions and the considerable economic multiplying effect of these dollars, it’s hard to find a better deal. The two most frequent objections that these states have clung to are now gone. The first has been that the expansion funding will be repealed, and we know how that went. The second is that states didn’t have enough flexibility to design their expansion programs the way they’d prefer. Well, states, meet new Center for Medicare and Medicaid Services (CMS) Administrator Seema Verma, who built her career on designing Medicaid programs in conservative states. Only blind ideology stands in the way of over 6 millionAmericans gaining coverage via this route. Unfortunately, as recent developments in Kansas show, we still have a way to go. Medicaid offers another strength: States already have considerable latitude on how they shape their programs, expansion or otherwise. The well-worn path of section 1115 waivers lets states cover services and establish benefit designs that are outside the norm. Some states have focused on leveraging managed care organizations, while others are pursuing new payment and delivery models such as the care collaboratives in Oregon, Colorado, and elsewhere. There’s plenty of room to innovate in Medicaid right now.

STEP 4 – DON’T FORGET THE BIG PICTURE

Everything I’ve discussed so far relates to coverage, really. It is important, and it’s the place where the government has the strongest, most direct influence via Federal health care programs and the tax code. But coverage is really just a method for helping consumers address the underlying issue: their health. To do that, we need focus on patients and the providers who take care of them. With regard to providers, I’m going to take a bit of a detour here and suggest the best thing to do at this moment is to essentially leave these folks alone. Their businesses and professions have undergone massive transformation in recent years, preceding the ACA and continuing through the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which super-charged quality reporting and value-based payment programs. Dozens of other new payment and delivery reforms are currently being tested at the ACA-created Center for Medicare and Medicaid Innovation (CMMI). While it is tempting to continue to tinker with these ideas, it would be wiser to carefully collect the evidence generated from deployed models and thoughtfully consider which are best practices before multiplying them further. With regard to the commercial market, the best thing the government can do is create a truly competitive environment that puts pressure on insurers to bring down underlying costs. Meanwhile providers are also continuing to absorb the administrative burden related to complying with electronic health record requirements, the ongoing implementation of ACA-enacted reimbursement cuts, and the funding cliffs facing hospitals, due to pending Medicaid Disproportionate Share Hospital (DSH) cuts, and community health centers. Congress has averted these cuts previously and should do so again this year. With regard to patients, really these political shenanigans and economic theories are not going to amount to much if we can’t change the underlying culture of health. Conservatives have rightly emphasized the importance of prevention and wellness, as did the ACA. There is ample opportunity for innovation in this space as well. Just for example, innumerable digital start-ups across the country are trying to find the right balance between consumer-driven and evidence-based care. Who will find it and help people stay where they belong — outside of the health care system? Finally, it’s worth noting that what the health care system does to our bodies is far less important than what we put in our bodies. In this arena, unlike the political one, there really is a bogey man, and it’s called sugar. No other substance, including heroin, does more harm to our collective health than the fruit of this cane crop. It kills millions of people every year and costs our system as much as a trillion dollars per year through primary and secondary diseases, like diabetes and cancer, according to Credit Suisse. I understand how controversial this is, but it’s time for our government to look at the sound science and support policies that protect the public from these ills, starting with our kids. That means depoliticizing periodic updates to the standards applied to our child nutrition programs. But we ought to go further. Building on the new labeling transparency for added sugar, we could begin to reconsider sugar’s inclusion on the Food and Drug Administration’s Generally Recognized as Safe list. So we started small and ended with a bang. The bottom line is that there are a host of policies that lawmakers and regulators can embrace to start drastically improving the condition of our health care system. This will not be easy, nor will it happen quickly. Policymakers of all political stripes can come together now, though, to begin the arduous process of identifying evidence-based solutions and building the necessary consensus to enact them. It’s a winning strategy for politics and for the public.