The Center's work on 'Health Policy' Issues

The Center works to ensure that federal and state health insurance programs provide coverage that meets the health care needs of low-income children and families, as well as seniors and people with disabilities. The Center also works to remove barriers preventing eligible families from gaining access to health coverage.

Republican Senators’ “Plan” for Health Subsidies Lacks Substance

March 2, 2015 at 4:44 pm

Republican Senators Lamar Alexander, Orrin Hatch, and John Barrasso claim in a Washington Post op-ed today that they have a plan if the Supreme Court decides that health reform subsidies are no longer available to people buying coverage through federal marketplaces.  Their “plan,” however, is extremely vague — perhaps intentionally so, because the details would likely show that it would make coverage less affordable for marketplace enrollees, particularly those who are older or in poorer health, and threaten the stability of the overall individual health insurance market.

The senators write that the plan would “provide financial assistance to help Americans keep the coverage they picked for a transitional period,” but they don’t furnish the most basic information about this assistance.  Would people receive the same amount of help they do now, both for premiums and for deductibles and cost-sharing?  How long would this transitional assistance be available?  What, if any, financial assistance would be available when it expires — and if it were available, who would be eligible and for how much?  The senators don’t say.

The senators also write that their plan would give states “the freedom and flexibility to create better, more competitive health insurance markets offering more options and different choices,” whether or not they have a federal marketplace.  They don’t explain what this means either, but most likely it means permitting states to significantly weaken or drop health reform’s consumer protections and market reforms, as well as eliminate the individual mandate that people have coverage or pay a penalty.

Health reform established these protections for a good reason.  Before health reform, insurers in the individual market could charge people with pre-existing health conditions exorbitant premiums or deny them coverage outright.  They also could charge older people much higher premiums than younger people, pricing many out of coverage.  And many individual-market plans had large gaps in coverage, such as no prescription drug coverage, or charged deductibles and other cost-sharing that people could not afford.

Health reform ended or limited those practices — requiring insurers to take all comers, barring them from charging sicker people more, limiting how much they can charge older people, requiring certain benefits to be covered, and establishing an annual limit on out-of-pocket costs.  But to ensure that older and sicker people don’t disproportionately enroll, which would cause premiums to skyrocket, health reform also includes an individual mandate.  That creates a balanced mix of people enrolled in health coverage — young and old, healthy and sick — which helps keep premiums more stable and affordable.

Permitting states to roll back these protections and eliminate the individual mandate would almost certainly make health coverage much less affordable for marketplace enrollees, particularly for people aged 50-64 and those with pre-existing health conditions.  Even if some subsidies were available after the transition period, they would likely prove highly inadequate over time as plan premiums rose.  That, in turn, would drive many people out of marketplace coverage and back to the ranks of the uninsured and underinsured.

Do Right by States and Extend Children’s Health Funding Soon

March 2, 2015 at 12:32 pm

The Children’s Health Insurance Program (CHIP), which along with Medicaid has played a central role in cutting the number of uninsured children to a historic low, has no new federal funding starting in October.  Congress should act soon to extend CHIP — for example, by attaching a funding extension to must-pass legislation in March to avert scheduled cuts in Medicare payments to physicians.

Waiting until later in the year to fund CHIP or pursuing harmful program changes to it would make it unnecessarily difficult for states to administer their CHIP programs and risks disrupting coverage for children.

Here’s why:  State legislative sessions are already entering the homestretch; Virginia adjourned Saturday, seven more states will end by April 1, and 13 others by May 1.  This means states are making decisions now about their budgets for fiscal year 2016, which in most states begins on July 1.  As Governors Steve Beshear (D-KY) and Bill Haslam (R-TN) wrote Congress recently on behalf of the National Governors Association, “certainty of [CHIP] funding in the near-term is needed so that states may appropriately budget and plan for their upcoming fiscal years.”

The longer Congress waits to fund CHIP, the greater the unnecessary burden it will place on states.  In a recent survey, many state CHIP directors said that continued delay would force them to develop contingency plans for possible measures like moving enrollees out of state CHIP programs if federal funding runs out, updating eligibility systems to allow for the termination of coverage, and renegotiating or ending contracts with managed care plans providing CHIP coverage.

Also, if Congress pursues controversial changes that could adversely affect the program and the children who rely on it, that likely would significantly delay — and could derail — CHIP funding legislation.  Draft legislation from Senate Finance Committee Chairman Orrin Hatch (R-UT) and House Energy and Commerce Committee Chairman Fred Upton (R-MI) is a prime example.  As we’ve explained, it would likely cause some CHIP children to become uninsured, shift large costs to states, and make the program harder for eligible children to enroll in.

Congress should instead quickly extend CHIP funding for another four years and largely continue existing policies, as bills introduced by Senator Sherrod Brown (D-OH) and Representative Gene Green (D-TX) and as the President’s 2016 budget would do.

Wisconsin’s Growing Cost of Not Adopting Medicaid Expansion

February 20, 2015 at 1:05 pm

Governor Scott Walker’s decision not to adopt health reform’s Medicaid expansion will cost the state $345 million in forgone budget savings over the next two fiscal years, the nonpartisan Legislative Fiscal Bureau estimates.  That’s $30 million more than the bureau estimated in August.  (The August report also estimated that adopting the expansion would have saved the state $206 million in the past two years.)

Under health reform, the federal government picks up 100 percent of the cost of expanding Medicaid through 2016 and at least 90 percent thereafter.  To receive this special matching rate, though, states have to expand Medicaid eligibility for adults up to 138 percent of the poverty line.

Governor Walker chose instead to extend Medicaid to adults only up to the poverty line through a separate waiver, so Wisconsin receives its regular matching rate, under which the federal government pays 58 percent of the cost of covering this population.  The $345 million in projected savings reflects the higher matching rate Wisconsin would receive by adopting the full expansion.

Other states also face forgone savings if they don’t adopt the Medicaid expansion this legislative session.  In Idaho, a workgroup put together by Governor Butch Otter estimates the expansion would save the state $173 million over the next ten years.  And in Alaska, Governor Bill Walker’s administration estimates the expansion would save the state $6 million next year.

Reducing Medicare Advantage Overpayments

February 19, 2015 at 12:22 pm

Ahead of Friday’s announcement of Medicare’s preliminary payment rates and policies for Medicare Advantage insurers in 2016, insurers have launched an advertising campaign claiming that potential payment changes would undermine the program.  For numerous reasons, it’s hard to take these doom-and-gloom predictions seriously.

For starters, Medicare Advantage continues to thrive — enrollment has reached an all-time high and is expected to keep growing in 2016, according to the Congressional Budget Office (CBO) and Office of Management and Budget (OMB) — despite health reform’s ongoing, much-needed effort to curb overpayments to insurers.

In addition, Medicare Advantage payments still average about 105 percent of the cost of covering comparable beneficiaries in traditional Medicare, according to preliminary estimates by analysts from the Medicare Payment Advisory Commission (MedPAC), Congress’ official advisory body on Medicare payment policies.

MedPAC estimates that roughly 60 percent of that differential reflects the phenomenon known as “upcoding” — the first time MedPAC analysts have quantified how much upcoding inflates Medicare Advantage payments.  Medicare Advantage includes a risk adjustment system that raises or lowers payments to plans based on their enrollees’ relative health, measured by a “risk score” based on patient diagnoses; upcoding occurs when the risk scores that plans submit rise over time — making enrollees appear increasingly unhealthy — without actual changes in enrollees’ health.  This results in higher-than-warranted payments to Medicare Advantage plans.

Upcoding is a long-standing problem in Medicare Advantage, as CBO and the Government Accountability Office (GAO) have documented.  According to MedPAC, risk scores were 8 percent higher in Medicare Advantage, on average, than in traditional Medicare for comparable beneficiaries.  And MedPAC analysts noted that the amount of upcoding seems to be getting larger.

Policymakers could better address upcoding by raising Medicare’s annually required “coding intensity” adjustment.  Health reform requires the Centers for Medicare and Medicaid Services (CMS) to adjust Medicare Advantage’s risk adjustment system by at least a minimum amount each year to compensate for upcoding.  The President’s 2016 budget would raise that minimum annual adjustment very modestly starting in 2017, saving $36.2 billion over ten years, OMB estimates.

Moreover, while CMS has only applied the minimum required adjustment in recent years, it has the discretion to institute a larger adjustment than required, for example as part of the 2016 preliminary rate announcement.  MedPAC estimates that this year’s adjustment would have to have been more than 50 percent larger to fully offset the effects of upcoding.  (GAO similarly found that the annual adjustment likely needs to be substantially larger than the minimum level.)

Policymakers could also reduce upcoding by excluding in-home health assessments from Medicare Advantage risk score calculations unless the assessment diagnoses are later confirmed in treatment settings.  Medicare Advantage plans increasingly provide in-home health assessments of their enrollees; for example, a nurse may come to a patient’s home to do a physical exam.  CMS has found that insurers primarily use these assessments to “collect” diagnoses in order to increase enrollees’ risk scores for purposes of risk adjustment, rather than to improve follow-up care or identify illnesses requiring treatment.

CMS proposed last year to exclude any diagnoses identified during an in-home assessment that subsequent clinical encounters fail to confirm.  CMS, however, dropped the proposal in the face of industry opposition, opting to collect additional data about the impact of these assessments and revisit the issue later.  CMS could include this prior proposal in its 2016 preliminary rate announcement in order to limit the use of these assessments to promote upcoding.

What Tax Preparers Need to Know About Health Reform

February 12, 2015 at 2:07 pm

Our new Tax Preparer’s Guide to the Affordable Care Act explains the ACA’s coverage requirements, how they affect tax returns, and the new forms that taxpayers will need to complete.  It includes examples and practical tips on how to approach the ACA-related sections of the tax return.

Beginning this tax season, all taxpayers need to report on their health insurance coverage to the IRS.  Some will have to complete additional tax forms or worksheets to claim an exemption from the requirement that they have coverage (or to calculate the penalty for not having coverage).

Also, recipients of advance payments of the premium tax credit to purchase marketplace coverage will need to reconcile the payments they received with their final premium tax credit, which is calculated on the tax return.

Knowing more about the ACA requirements will help tax preparers better serve their clients, especially those who are unfamiliar with filing taxes, experienced periods without coverage in 2014, or have complicated coverage situations.