California Health Reform. Where Should We Be Going?

Where Are We? Where Should We Be Going?

By Lucien Wulsin, JD.

 

 

In the United States public and private financing of the nation’s health care are split 50/50. In California in 2015, a total of $292 billion was spent on personal health care services. Of that total, $104 billion was spent on private insurance), $62 billion on Medicaid, $64 billion on Medicare and $61 billion comprised all other health spending (including a range of expenditures from the Veterans Administration, Prisons, personal out of pocket, Workers Compensation and Auto insurance).

In California, we have a smaller percentage of residents with private employment-based coverage and a higher share with public coverage than most states in the Midwest and Northeast with high rates of private employment-based coverage.

 

Medicare covers 5.6 million California seniors and long term disabled at a cost of $65 billion (2014). It consists of four parts:

·      Part A (hospitals and other inpatient) financed by payroll taxes on employers and employees

·      Part B (doctors and other outpatient) financed by general tax revenues plus subscriber premiums (1/4th of costs)

·      Part D (Rx) – financing comes from general tax revenues and subscriber premiums.  

·      Part C – combines all of the above in private insurance plans, over 40% (and growing) of California Medicare subscribers chose Part C. 

Most seniors purchase Medigap or Medicare supplemental coverage to eliminate the copays and deductibles which proliferate throughout the program. Others have Medicare and Medicaid, are known as Medi-Medis or dual eligibles. 80% have dual coverage. Medicare covers very limited long term care benefits.

The ACA (Affordable Care Act) made a series of reforms to the Medicare program: payment reforms, financing reforms, coverage reforms and a per capita cap.

The payment reforms included: Part C premiums to insurers were reduced to reflect the cost of the traditional Medicare programs, hospital rate calculations were reduced to reflect the rise in the cost of rest of the workforce, hospital DSH payments were cut to reflect the growth in the numbers of insured.  Bundled payments, value based purchasing and ACO’s were introduced to make care and reimbursements more cost efficient; and restrictions on reimbursements for hospital acquired infections were put in place to improve the quality and safety of hospital care.

The financing reforms included: a tax surcharge on high income (above $250,000) earners’ working and unearned income). The coverage reforms included: coverage of prescription drugs and the gradual closing of the donut hole in prescription drug coverage. In addition, a per capita cap was imposed on Medicare so per person spending would slow down; it has not been triggered as yet, and the recent House Senate budget compromise repealed it.

The ACA reforms extended financial viability of the Medicare program, but the Part A Trust Fund is projected to be depleted in 2029. The recent Medicare trustees report that Part A program spending on hospitals is projected to exceed program revenues due to baby boomer retirements and escalating rates of hospital care expenditures (6% over the last decade) that vastly exceed the rate of growth in wages (2% over the last decade).

The Republican House ideas include: 1) increase age of eligibility for Medicare to 67, 2) give new eligibles vouchers (that grow only with the rate of inflation) to purchase their Medicare coverage from private insurers on the Exchange, and 3) charge higher income seniors more for Part B coverage. The Trump administration is proposing to cut provider payments by about $7 billion in the latest budget submission.

Democrats propose: 1) allow Medicare to negotiate prescription drug prices, 2) tax higher income individuals, 3) move to a single payer American system and 4) add individuals 55 and older to Medicare.  

 

LW: recommendations

·      Consider a VAT (value added tax) to finance health care as many European countries already do.  Payroll taxes do not keep pace with the rates of baby boomer retirements, even if medical inflation can be tamed.

·      Implement and expand the ACA payment reforms and transparency to improve quality and cost effectiveness. The keys to the future of Medicare lie in taming medical inflation; we need to replace the inflationary incentives of fee for service medicine and cost plus reimbursements.

·      Use California Exchanges to purchase Medicare Part C in California.

·      Restore the per capita expenditure cap and expand it to other programs.

·      Develop financing and coverage for long term care.

Medi-Cal/Medicaid – Medi-Cal covers about 13.5 million poor and moderate income Californians and is projected to cost just over $100 billion in 2018-19. It covers about a third of all Californians, pays for nearly 70% of all nursing home residents and pays for over half of all births in California. About 5.5 million children depend on its coverage. Enrollment in the program has grown from just under 8 million at the end of 2013 to 13.5 million today. In California’s rural communities, Medi-Cal is the most important payer, accounting for coverage for nearly half of area residents and key to the financial stability of local hospitals, clinics and doctor’s offices. Medi-Cal per capita costs are well below the national average and vary quite widely by region.

Of the program’s costs of just over $100 billion, state General Funds comprise about $21 billion; FFP (federal financial participation) is $67 billion. Special funds from hospitals, counties, tobacco and health plans make up the rest of the local match.

In California, the state and federal government pay a 50/50% match for the original program; in the poorest, lowest income states, the match can be up to 83/17.  There are different matches for different populations that have been added to the program over the years.

The aged and disabled have been covered since the inception of the program in 1967. Their eligibility is 138% of FPL – about $16,000 for an individual. The aged and disabled are the most costly eligibility categories on a per capita basis, and they include lots of long term care expenditures (both in the home and in the nursing home). The recent voluntary managed care program for the Medi-Medis did not succeed in attracting the requisite enrollment and was discontinued.

Medi-Cal covers children (up to 250% of FPL), and pregnant women and infants up to 300% of FPL ($36,000 for an individual). The state federal match is 50/50 for the lowest income children, 2/1 for children of moderate income (CHIP – a child health program established under the leadership of Senators Kennedy, Hatch and Kassenbaum), and due to the ACA 88% for a time period ending in 2019 for moderate-income children (ACA). Over a million CHIP children were moved from the Healthy Families program into Medi-Cal. CHIP was just renewed for the next decade as a part of the bi-partisan budget reform package. 

Parents are covered up to 138% of FPL ($16,000 for an individual and $34,000 for a family of four).  The federal match is 50/50 for low-income parents, and 100% phasing down to 90/10 by 2020 for parents of moderate income between 100 and 138% of FPL (ACA).

The working poor, also called medically indigent adults or MIAs, are now eligible for Medi-Cal under the ACA. About 4 million Californians with incomes less than 138% of FPL (about $16,000 annually) have enrolled, a far larger number than projected. Their health care used to be a county responsibility. About 700,000 low income Californians shifted from county health programs into Medi-Cal. The program was supported initially for three years at 100% FFP then is slowly declining to 90% by 2020 and thereafter when the state must pay 10% of the cost. (ACA).

Undocumented California adults can only be eligible for a limited scope of services: emergency care and maternity care only.  There is a 50/50 match.

Under California law, undocumented children are now eligible for full scope; 180,000 have enrolled, but federal matching funds are only available for their emergency and maternity care services.

Legal permanent resident immigrants are eligible for full scope services in California. There is a 50/50 match for immigrants with legal residency for at least five years. For those with legal residency under 5 years, FFP is only available for limited scope emergency and maternity services. Legal permanent residents are eligible for Covered California without any waiting period.

Medically needy persons are an eligibility category that helps some Californians with their catastrophic medical expenses. There is a 50/50 match.  

Behavioral health refers to specialty care for those individuals with severe and chronic mental illness or serious substance abuse. The county governments pay the 50/50 match (using state realignment and other funds) and administer their own local programs. A federal 1115 waiver for California recently expanded the scope of behavioral health services to offer a full continuum of behavioral health care, as medically required. A county like Los Angeles operates three separate programs for severe mental illness, substance use disorders and physical health. The 2015 waiver gives counties the opportunity to integrate care and treatments, and some are heading in that direction.

Managed care arrangements (HMOs) cover over 80% of all Medi-Cal eligibles. There are only a few exceptions from the mandate to enroll in managed care: severely ill children, the aged and disabled with dual eligibility for Medicare and Medicaid and those who are only eligible for a limited scope of care. Counties decide and negotiate with the state the type of managed care program they prefer. In Los Angeles, Kern, the Inland Empire and many other counties, there is a choice between two managed care plans, one of which is county-administered. In Ventura, Orange, Santa Barbara and many other counties, there is only a single county operated managed care and all Medi-Cal subscribers are enrolled in that one plan, called a county organized health system or COHS. In San Diego and Sacramento, eligible subscribers may choose from among multiple competing commercial HMOs; this is known as Geographic Managed Care (GMC).  California tried an experiment to voluntarily enroll dual eligibles (also known as Medi-Medis) in managed care; it was not successful in attracting the requisite enrollment and was discontinued.

Hospitals in California are paid at Medicare rates for their care to Medi-Cal patients; they pay a tax/fee to help finance the state match. This feature of the program adds $4 billion in federal match financing.

 

Republican ideas: Eliminate expansion funding for the expansion categories, reduce it to a traditional match (50/50) in California, or reduce it and block grant it to the states with no match required; eliminate provider taxes (costs California hospitals about $4 billion in federal financing); adopt a Medicaid per capita cap on the growth in federal spending per eligible (Medi-Cal per capita spending grew at 3.6% for the last decade while the CPI grew at about 2%). Trump Administration is now using §1115 waiver authority to allow states to experiment with work requirements, premium sharing, possible time limits on coverage, and limited benefits. The Trump Administration’s recently proposed budget would eliminate funding for the expansion categories and block grant the program to the states.

 

Democratic ideas: Protect the ACA expansion and enhanced Medicaid match funding formula; fold the program into Medicare for All. The single payer proposals are more comparable to Medi-Cal than to Medicare in the sense that they cover all services and have no deductibles and very limited cost sharing.   

 

LW recommendations:

·      Clear consistent bright line delineating Medicaid and Exchange eligibility for all families; the whole family should be enrolled in same plan, same program, and with the same provider network.

·      Behavioral health treatments, plans and providers should be integrated into the local Medi-Cal managed care plans as subcontractors. Data and patient information need to be exchanged among all relevant providers treating their patient.

·      The goal should be continuity of providers and continuity of treatment. Medi-Cal managed care plans and provider networks should participate in state Exchanges and vice versa – i.e. the HMOs participating in Covered California should participate in Medi-Cal.

·      Reinstate and expand per capita growth cap in Medicare to all highest per capita cost public and publicly financed programs.

·      Covered California should contract with health plans for both Medi-Cal and the Exchange (Covered California).

·      Need to increase payment rates for MDs, particularly for primary and preventive services, using the new tobacco tax revenues and negotiating through the local managed care plans. Governor’s new budget uses tobacco tax revenues to do some of that.

·      Need a consolidated match, combining all the FFP into a common matching rate at no net new costs to the states.

·      Need to focus health plans and provider networks on improving health status and outcomes, particularly in counties with worst health status and outcomes in the Central Valley and rural North.

 

 

Private individual coverage: About 5 to 8% of Californians under age 65 have private individual coverage; these include the self-employed, flex (gig) workers, disabled and unemployed.  1.3 million Californians participate in the CA Exchange (Covered California), for the most part those with premium assistance; there may be an equal number outside the Exchanges. Flex workers are a growing part of the California and national economy, think Uber or Lyft drivers. The Republican tax reforms passed in December 2017 will increase the tax incentives to classify individuals as independent contractors.

There was some public financing for individuals prior to the ACA through the feature of tax deductibility for the self-employed. This is not available for either the employed or the unemployed purchasing in the individual market. This tax subsidy is regressive – i.e. the more money you make, the higher your tax bracket, the bigger your deduction for your premiums.  House Republicans and Candidate Trump wanted to expand tax deductibility to all purchasing individual insurance. This was not in the Republican tax measures passed last fall; however the package does contain very favorable new tax treatment for the self-employed. The tax penalties for not enrolling in Obamacare were repealed effective in 2019.

Prior to the ACA, individual coverage was unaffordable for low-income individuals and families. For a minimum wage worker, it would comprise half or more of his/her salary; while family coverage would have cost far more than his/her entire salary. The ACA made major improvements in affordability through premium assistance and cost sharing reductions.

Premium assistance helps people pay their premiums; it is highly progressive; individuals and families would at the low end pay not more than 2% of their income for premiums, increasing to 8% of income at 400% of FPL, about $48,00 for an individual. Cost sharing reductions reduce copays and deductibles to a more affordable level. An individual with low income (e.g. just over $16,000) choosing an enhanced silver plan would have coverage paying 94% of their medical costs– equivalent to a 6% copayment. The cost sharing reductions phase down and out quickly at $30,000 for an individual. The criticisms are that the premium assistance does not reach enough people (1.2 million), and the cost sharing reductions phase out too quickly.

Prior to the ACA, insurers could and did deny coverage to individuals with pre-existing conditions. Some insurers also terminated (rescinded) coverage to individuals who may have omitted information on or mis-described their medical condition on their application. Availability and reliability of coverage were twin problems in the individual markets.  Healthy individuals could buy very limited benefit packages with very high deductibles and correspondingly low premiums, while those with pre-existing conditions were excluded entirely.

The ACA solutions were as follows: guaranteed issue, guaranteed renewals, no pre-existing conditions exclusions, no rescissions and the individual mandate (shared responsibility).  Insurance premiums could continue to vary by age with in a rate band of 3:1 by age; no variations in premiums by illness or medical condition were permitted. The Trump Administration is proposing limited benefit plans with a return to medical underwriting.

Each insurer must offer and individuals must purchase 10 essential health benefits. Behavioral health, prescription drugs, and maternity services were often excluded in the pre-ACA individual market.

Geographic variations in premiums are permitted; California chose to group its counties into 19 separate regions. For example in the Bay Area, nearly every county has its own region. Los Angeles is divided in two regions.

Individuals may choose coverage from 5 different tiers (actuarial value). The most comprehensive is platinum which pays for 90% of expected medical costs – equivalent to a 10% copay; gold is 80%, silver is 70%, bronze is 60% and catastrophic plans cover 50% of expected medical costs. Most subscribers chose either the enhanced silver or the bronze.

Annual and lifetime caps are eliminated. Prior to the Affordable Care Act, carriers would limit their coverage to an annual maximum and a lifetime maximum, which left individuals with no financial protection once they hit the cap.

Annual open enrollment allows individuals to enroll during a three-month window each year. Trump Administration set a 45 day open enrollment this year for the federal exchanges. Individuals may not enroll when they get a bad diagnosis or otherwise game the system. Individuals facing discontinuities of coverage such as loss of a job or loss of Medicaid due to an increase in income may enroll mid year, but only if they do so within 60 days of the event.  

Individuals must purchase coverage or pay a tax penalty $695 or 2.5% of income whichever is higher. The tax penalty is far less than the cost of individual coverage. Financial hardship and religious objection exemptions are available. The recent Republican tax package repeals the penalties, but retains the requirements to enroll.

The ACA provided reinsurance for insurers who faced an inordinate burden of catastrophic medical costs due to the elimination of pre-existing condition exclusions; Sen. Rubio led the effort to repeal this aspect of the ACA, which has led in large measure to the recent spate of premium increases.  In any given year, 1% of subscribers account for 30% of an insurer’s medical claims. Alaska instituted a state operated and financed reinsurance fund and reduced individual insurance premiums by 20% and recently received a federal waiver to help fund its reinsurance pool with the savings. Oklahoma’s comparable waiver was denied, but other state waiver requests have been approved.

 

Republican proposals:

·      Eliminate the mandate, charge the sick higher premiums, delay coverage or charge higher premiums for those who miss the annual open enrollment cut offs or fail to maintain coverage for any time period in excess of 60 days

·      Expand the rate bands for age rating from 3/1 to 5/1. This means that insurers can charge a 64 year old five times as much as a 20 year old.

·      Eliminate the 1o essential health benefits and allow insurers to eliminate maternity coverage, behavioral health and/or prescription drug coverage, or give states the latitude to do so.

·      Authorize association health plans and/or multi-state purchasing as a way for carriers to escape and evade the ACA’s underwriting reforms.

·      Authorize time limited, medically underwritten limited benefit plans for the healthy.

·      Reduce or eliminate the subsidies for premium assistance and cost sharing reduction, or reduce and block grant these funds to the states.

·      Reinstitute high-risk pools for those with pre-existing medical conditions.  Funding might come from the federal government or the states or some combination of both.  California (AB 60) and many other states have had very bad experiences with high-risk pools; their premiums are typically very regressive and affordable only to a few, and they are often very poorly funded leading to long waiting time queues to enroll.  

 

LW recommendations:

·      Auto enrollment of the non-enrolled in the lowest cost catastrophic or bronze coverage plan. Increase the tax penalties on a sliding fee scale basis to approximate the costs of Exchange coverage so that all individuals pay for coverage and are actually enrolled.  

·      Reinsurance for catastrophic cases in the individual market. This requires financing and could be part of a bi-partisan Senate effort. Reinsurance is key to a well-functioning market because the individual market has a higher share of individuals with pre-existing conditions, and they are not evenly distributed.

·      Fund cost sharing reductions; this costs $7 billion annually and is a key component of the Senate’s bi-partisan negotiations. In California, it is equal to a 12% reduction in silver plan premiums. President Trump held back the funding for cost sharing reductions as leverage to force Democrats to embrace the Republican proposals. California and other states developed a workaround by increasing the premiums for the enhanced silver with a surcharge to reflect the lack of federal funds. This made gold and bronze more affordable and insulated those with premium assistance selecting the enhanced silver from the premium increases. Those wanting silver but not eligible for premium assistance were encouraged to purchase outside Covered California where the surcharge did not apply.

·      Extend the premium assistance subsidies to higher income individual purchasers up to and over 600% of FPL. This was initially proposed by House Republicans as a flat $2000 subsidy and could be grafted onto the existing ACA subsidies to help middle income Americans.

·      Develop an enhanced bronze plan; this would be parallel to the enhanced silver at 10% less coverage (i.e. 84% actuarial value for the enhanced bronze as compared to 94% of actuarial value for the enhanced silver) and would allow the low and moderate income subscribers who can only afford bronze to get better access to health care.  

·      Link premium assistance subsidies to 2nd lowest cost gold instead of 2nd lowest cost silver. This would help people afford a tier of coverage that gives them better access to health care and put them on more equal footing with employment-based coverage. Most employer plans and Medicare offer a gold tier level of coverage.

  • Authorize pioneering counties and other philanthropic entities to help their residents pay their share of premiums for gold coverage.

In small communities in rural California there is often only one hospital, one medical group, and thus no realistic way that competition among plans and providers can work as envisaged in the Affordable Care Act.  The result is high priced coverage with too few providers in the plan networks. Premiums are far higher than in urban areas, such as Los Angeles, where there is an infrastructure for robust competition resulting in lower prices.

 

LW recommendations: Use the existing Medicare or Medicaid managed care plans, pricing limitations and networks in the high cost rural regions without the necessary infrastructure for strong plan or provider competition.

 

 

County health programs for the uninsured: uninsured rates in CA have fallen dramatically from over 17% to about 7%. The numbers of uninsured Californians has fallen from about 7 million to 2.5 to 3 million people as a result of the ACA. Participation in county indigent programs for the uninsured has dwindled. Participation in Healthy San Francisco, the state’s most expansive county program for the uninsured declined from 70,000 to 14,000 persons. Enrollment in the Orange County and San Diego County programs for the uninsured is now very small.

Prior to the ACA, county indigent health financing consisted of realignment, tobacco litigation settlement, DSH and waiver funding. Half of state realignment was shifted from county health to beef up county social services. Federal DSH funding is on the chopping block (ACA) but delayed due in part to the failure of Southern states to adopt the Medicaid expansion. In most but not all California counties, there are very little truly discretionary county tax dollars committed to indigent health. 

Of California’s 2.5 to 3 million remaining uninsured, the estimates are: ½ are undocumented; 30% are Covered CA eligible, and 20% are Medi-Cal eligible but not enrolled.

County health programs offer patchwork quilt of coverage: different rules on eligibility, different delivery systems -- at least 24 different eligibility and delivery systems. Funding inequities are dramatic between for example the Bay Area counties and Southern California counties San Diego and Orange and the Inland Empire. There is no county coverage for undocumented individuals in either Orange County or San Diego. In counties with county hospitals and clinics like San Francisco, Santa Clara and Ventura, county facilities are available to the uninsured, regardless of an individual’s immigration status.  In counties with public facilities like Los Angeles and Alameda, care is delivered and reimbursed in county facilities and community clinics regardless of immigration status.  In counties with county clinics and private hospitals like Santa Barbara, care is delivered in the public facilities regardless of one’s immigration status. 

The major challenge facing public facilities is system transformation from care centered on the emergency room and hospital to beefing up primary care, preventive and outpatient services. Not all county facilities are well designed for this kind of transformation; for example the excellent new County/USC facility in East Los Angeles may have been better designed for the outmoded emergency room centric delivery system. The recent federal waiver is important to facilitate this transition, but an attitudinal shift throughout the county health workforce to embrace choice, quality and efficiency improvements and competition is essential.

 

LW Recommendations:

·      Public hospitals and community clinics need to become ever more competitive, integrated delivery networks like Kaiser to deliver care in the most effective manner to the uninsured and insured populations regardless of health status.

·      Counties need to either care for all the uninsured regardless of health status or transfer their health funds into a non-profit entity governed and operated by the local safety net – clinics, doctors and hospitals -- to care for the county’s uninsured.

·      Ultimately, safety net providers will need to form a statewide health plan and network and compete on a level playing field in the public and private insurance markets.

·      Counties need to consolidate and integrate their care and treatment for physical and behavioral health.

·      Counties should be authorized and encouraged to help their residents pay their share of premiums for gold coverage as Healthy San Francisco does.

 

 

Private employment based insurance Under 50% of Californians under 65 have private employment based insurance; we have a lower % with private insurance than many Northeastern and upper Midwestern states. Private insurance accounts for less than 30% of the state’s total health spending. It is 1/3rd publicly financed through the mechanism of pre-tax dollar purchasing. This public financing is highly regressive, the maximum benefits go to those employers whose employees are in the highest income tax brackets, think for example how this would work for Google employees vs. farmworkers or McDonald’s employees. The other big challenge is developing coverage for flex workers, such as part time, part year, seasonal, temporary or contract workers, who are not readily covered through their employment.

The ACA did not seek to solve the very big challenges associated with covering the low wage and flex workforces through group employer plans; it does give flex workers access to coverage in the Exchanges where there are significant subsidies for low, moderate and middle income workers and their family members. It sought to prevent employers from dropping coverage for their employees and shifting them into the Exchanges with a mandate for medium and large employers to cover their employees. It sought to deter employees from dropping their employment based coverage to move into Exchanges by denying access to premium assistance. It sets a very low bar for employer contributions; the employer need only offer to pay 60% of the premium for lowest priced bronze plans (ACA).

There is a perception that the best-compensated employees (like Wall St. banking or law firms) get the best coverage, most extensive coverage, money can buy due to the favorable federal and state tax advantages. Therefore the ACA included a “Cadillac benefits tax” of 40% on very high priced coverage, which largely negates those big tax advantages. The tax has a built in inflator (like a per capita cap) that does not keep pace with the rise in the costs of employment-based health coverage so that over time more and more coverage would be impacted. There are exceptions for firefighters and police and others whose high priced coverage is due to the high-risk nature of their jobs. Both large employers and large unions want to repeal the Cadillac benefits tax in the ACA. The ACA did little else to control the growth in per capita employment-based insurance premiums, which are going up far faster than Medicare or Medicaid.

 

Republican proposals – end the mandates, and/or increase mandate threshold from 30 to 40 hours per week. Retain the Cadillac benefits tax, but delay its implementation,

 

Democratic proposals – single payer.

 

LW recommendations:

·      Extend the mandate to smaller employers as Hawaii does,

·      Modify it to help low wage workers’ affordability; tie the employees’ contributions to a percentage of wages like Hawaii, rather than a percentage of premiums as the ACA does,

·      Require pro rata contributions for flex workers into Exchanges as Healthy San Francisco does,

·      Permit and encourage medium sized employers to purchase through the Exchange,

·      Permit small employers and their employees to jointly purchase in Covered California accessing premium assistance and upgrading their coverage from bronze to gold.

·      Retain but flip the federal and state tax subsidies 180 degrees from regressive to progressive to help low wage employers afford coverage. 

 

 

My favorite solution: At a state level, this would be the Insurance Commissioner John Garamendi’s plan of the early 90’s developed by Walter Zelman, Larry Levitt and Rick Kronick, or at the national level, the Senator Ron Wyden – Senator Robert Bennett plan of the 2000’s. The framework is as follows.

All are covered for basic benefits. You choose your health plan from the Exchange; you pay extra above the basic reference plan for more benefits or more a more costly delivery system. The Garamendi plan also proposed to fold in the health components of Worker’s Compensation and Auto Insurance to create 24 hour coverage for all.

There are many to-be-answered questions. For example, are we offering narrow network plans like Kaiser? Are we also offering broad networks like Medicare fee for service? Are regional centers of excellence like Children’s Hospitals or Cancer Specialty hospitals in all networks or only some? How do we address the need to develop more integrated delivery networks that would compete with Kaiser? How do we address rural provider shortages? How do we incentivize improved patient outcomes?

For these purposes, I assume that basic coverage would be equivalent to a gold tier plan, which is equivalent to what Medicare and many private employer plans already offer.  I think that the silver plans have too many copays and too high deductibles for the average American/Californian. That leaves the question of do you permit insurers to sell bronze, or silver plans to customers who want to pay less for less coverage? I assume that platinum would be offered but with no tax subsidies for the incremental cost difference above gold. The ACA model of an enhanced plan with lower copays and deductibles for low and moderate income citizens and residents should be retained and built upon because otherwise the copays and deductibles are too steep for these individuals to access care.

All pay and all covered! Your coverage would be financed by a health surcharge on your taxes, not more than costs of coverage. Financing for the subsidies needed to assure coverage for low and moderate-income individuals would be financed through a VAT (Value Added Tax), if enacted at the national level, or by applying the California sales tax to services, if enacted at the local level. This would move California or the nation completely away from employer financing and make American employers and employees more globally competitive. However this financing approach makes the plan appear to be far more expensive than the ACA, which built on existing financing through the employer and individual mandates. It may well be nearly impossible to persuade employees who pay only a fraction of the costs of employer coverage to agree to a tax surcharge for the full costs of coverage. The alternative financing approach is a payroll tax shared between employers and employees (75/25 or 50/50). This helps lower wage employers and employees, but disadvantages higher wage workforces unless there is a cap. If you wished instead to retain employment-based coverage, it needs to be accompanied by a Hawaii style employer mandate and to require all employers to purchase through the Exchange(s); this may well need a Congressional ERISA waiver.

This approach could be more dynamic and innovative and responsive because it would operate through plan and provider contracts through an Exchange. Making needed changes and adjustments through statutory and regulatory changes, as for example Medicare for All would do, is far less nimble than contracting in adapting to the fast paced and ever changing worlds of medical innovation.

It’s based on a competitive model among plans and providers, which if well-designed and fully transparent, can give strong incentives for excellence and cost efficiency. Where there are poor quality plans and poor quality providers or over-pricing, consumers can vote with their feet at the annual open enrollment. Competition will not work in rural communities with one hospital and its medical staff.

The system would need to remove some barriers to entry to permit more robust competition among plans.  We may need to build from nimble locally responsive plans like Sharp, Chinese Community, Western Health Advantage, LA Care, San Mateo or IEHP. The large unresponsive national behemoths like Anthem and United have not yet proven themselves to be particularly effective in California’s competitive marketplaces.

We would need an “active purchaser” exchange to assure fair competition, transparent pricing and strong information to consumers on outcomes. We would need a regulated pricing system in those regions with a natural monopoly or with oligopoly provider networks where the competition model does not work.

The same model could offer optional dental, and vision coverage for those individuals and families who wish to purchase it. Dental and vision for children would need to be part of the basic package.

Does it offer long-term care? Does it fold in Medicare? That would depend entirely on resolving those essential political and financing issues at the state and federal levels.

What would be the residual health coverage roles for Workers Compensation and Auto Insurance Carriers? Do they offer wrap-around supplemental coverage to hold the injured workers or accident victims harmless from any extra medical costs?

 

Prepared by: Lucien Wulsin, Founder and Retired Executive Director, Insure the Uninsured Project  

Lucienwulsin45@gmail.com

Dated: 2/21/18

 

 

 

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