The Center's work on 'Health Reform' Issues


Our Take on Today’s Trustees’ Reports

July 28, 2014 at 4:34 pm

We just issued statements on the trustees’ 2014 reports on Social Security and Medicare.  Here are the openings:

  • CBPP President Robert Greenstein on Social Security:

    “Social Security can pay full benefits for close to two decades, the new trustees’ report shows, but will then face a significant, though manageable, funding shortfall that the President and Congress should address in the near future.

    “Specifically, the trustees estimate that Social Security can pay full benefits until 2033, at which point its combined trust funds will be exhausted.  After 2033, even if policymakers failed to act, Social Security would pay about 75 percent of scheduled benefits, relying on Social Security taxes as they are collected.  The exhaustion date is unchanged from last year’s report and is within the range that the trustees have projected for some time.  In the late 1990s, they projected the exhaustion date as early as 2029; at one point in the last decade, they projected an exhaustion date as late as 2042.

    “The trustees caution that their projections are uncertain.  For example, they estimate an 80 percent probability that trust fund exhaustion would occur between 2029 and 2038 — and a 95 percent chance that it would happen between 2028 and 2041.  The Congressional Budget Office (CBO) recently estimated that exhaustion would occur in 2030, largely because CBO expects somewhat faster improvements in mortality.  Fluctuations of a year or two in either direction are no cause for either alarm or celebration.  The key point is that all reasonable estimates show a manageable long-run challenge that policymakers must address, the sooner the better, but not an immediate crisis. . . .”

  • Senior Fellow Paul Van de Water on Medicare:

    “Medicare has grown somewhat stronger financially in both the short and long term since last year but continues to face long-term financing challenges, today’s report from its trustees shows.  The projected date of insolvency for Medicare’s Hospital Insurance (HI) trust fund is 2030 — four years later than projected last year.

    “Health reform, along with other factors, has significantly improved Medicare’s financial outlook, boosting revenues and making the program more efficient.  The HI trust fund’s projected exhaustion date of 2030 is 13 years later than the trustees projected before the Affordable Care Act.  And the HI program’s projected 75-year shortfall of 0.87 percent of taxable payroll is down from last year’s estimate of 1.11 percent and much less than the 3.88 percent that the trustees estimated before health reform. . . .”

Today’s Conflicting Court Decisions Won’t Affect Federal Marketplace Subsidies

July 22, 2014 at 3:35 pm

Two federal appellate courts issued rulings today that relate to the health reform law.  In a unanimous decision, a panel of the U.S. Circuit Court of Appeals for the Fourth Circuit upheld a lower court decision finding that individuals are eligible for premium subsidies to purchase health insurance through the federal marketplace, just as they can in state-based marketplaces.

In a 2-1 decision that has received considerably more media attention, the D.C. Circuit Court of Appeals overturned a lower court ruling and ruled that premium subsidies can be used to purchase coverage only through state-run marketplaces, and not through the federal marketplace.

What do these decisions really mean?

  • Premium subsidies for the millions of federal marketplace enrollees will continue to be available, as the Administration confirmed today.
  • The Administration will appeal the D.C. Circuit court decision to the entire D.C. Circuit, where it will likely be reversed, as Washington and Lee University School of Law professor Timothy Jost explained earlier this month.
  • That’s because, as we first noted two years ago, the merits of the legal theory challenging subsidies for federal marketplace enrollees are extraordinarily weak, relying on a distorted, incorrect reading of the Affordable Care Act and ignoring legislative intent and history.

Medicaid Expansion Decisions Leading States Down Divergent Paths

July 16, 2014 at 2:24 pm

As a growing number of reports increasingly make clear, a state’s decision whether to expand Medicaid as part of health reform has real-life effects on its residents and its businesses.  In the 26 states and the District of Columbia that have expanded Medicaid (see map), the positive benefits are already playing out.  Here’s some of the latest information:

  • Hospitals are providing less uncompensated care.  In Arizona, hospitals reported that the Medicaid expansion is the chief reason for a 30 percent decline in the amount of uncompensated care they have provided so far this year, compared with a year ago.  The Colorado Hospital Association found a similar decline in charity care through April when it surveyed hospitals in 15 states that have expanded Medicaid and 15 that have not.
  • Medicaid expansion is driving large gains in health coverage.  A survey conducted by the Urban Institute finds that while the uninsurance rate is dropping across the country, states that have expanded Medicaid have seen a drop in the percentage of non-elderly adults who are uninsured by more than one-third — a 37.7 decline — while the uninsured rate fell by only 9 percent among states that haven’t expanded.  A survey from the Commonwealth Fund found a similar trend.

States can opt in to the Medicaid expansion at any time, allowing them to extend coverage to millions with the federal government picking up all of the cost of the expansion through 2016 (and nearly all of the cost in the years after), as we have written.  New Hampshire recently started accepting applications for its expansion, with coverage first available on August 15.

But states that refuse to expand leave a coverage gap, where people below the federal poverty line have income too high for Medicaid under prior eligibility rules but too low to qualify for federal subsidies to purchase coverage through the marketplaces.  This means we’re likely to see more stories as in Tennessee where, due to the coverage gap, a couple separated so the wife’s income would be low enough to maintain her Medicaid coverage.

MedPAC: Medicare Advantage Overpayments Not the Right Way to Aid Low-Income Beneficiaries

July 8, 2014 at 1:41 pm

Overpaying the insurance companies that serve some Medicare beneficiaries through the Medicare Advantage (MA) program is not a targeted, effective way to help low-income beneficiaries with their out-of-pocket costs, the Medicare Payment Advisory Commission’s (MedPAC) latest report to Congress explains.

Insurers have long defended the overpayments as helping low-income beneficiaries and have claimed that repealing or scaling back health reform’s MA savings is necessary to protect such beneficiaries from benefit cuts.  But as we’ve explained, recent research shows that before health reform, insurers didn’t pass on most of the overpayments to enrollees in the form of better benefits.  And MedPAC’s report reiterates its longstanding position that higher MA “payments are not a direct or efficient way to target assistance to low-income beneficiaries.”

That’s because, as MedPAC puts it, “higher MA payments and extra benefits financed by those payments do not go only to low-income beneficiaries.  Rather, all enrollees in a given MA plan receive the same extra benefits, low-income or not.”  Insurers’ own data show that 59 percent of MA enrollees had incomes over $20,000 in 2011.

The Government Accountability Office similarly concluded in 2008 that “if the policy objective is to subsidize health care costs of low-income Medicare beneficiaries, it may be more efficient to directly target subsidies to a defined low-income population than to subsidize premiums and cost-sharing for all [Medicare Advantage] beneficiaries, including those who are well off.”

A direct and efficient way to help Medicare beneficiaries with limited incomes, according to MedPAC, is to expand the Medicare Savings Programs, through which Medicaid helps low-income beneficiaries cover their premiums and/or cost-sharing charges.

RSC Health Plan: More Uninsured and Underinsured, Fewer Consumer Protections

July 2, 2014 at 11:58 am

With House supporters planning a new push for the Republican Study Committee (RSC) health plan (H.R. 3121), aided by RSC chairman Steve Scalise (R-LA)’s election as House majority whip, it’s worth looking at the plan’s likely impact.  Unfortunately, it would substantially expand the ranks of the uninsured and end various important consumer protections.

Impact on the Number of Uninsured

The RSC plan would repeal health reform, including its Medicaid expansion, under which the federal government will pick up nearly the full cost of covering individuals up to 138 percent of the poverty line.  The 13 million people whom the Congressional Budget Office (CBO) now estimates will gain Medicaid coverage in states that adopt the expansion would lose out.

It also would eliminate the new marketplaces through which millions of people are buying private coverage, as well as the premium tax credits and cost-sharing reductions that make marketplace coverage much more affordable for low- and moderate-income people.  The loss of these subsidies would cause millions of new marketplace enrollees to lose their health coverage.

The RSC plan would also end the tax exclusion for employer-based coverage, replacing it with a standard income and payroll tax deduction of $7,500 for individuals (and $20,000 for families) who buy coverage on their own or through their employer.  As CBO, the Joint Committee on Taxation, and others have previously estimated, this type of proposal would likely cause many people to lose their job-based coverage by encouraging employers to drop it on the assumption that their workers could use the deduction to purchase health insurance in the individual market.  (Unlike current law, the plan would not require larger employers to either offer affordable, comprehensive coverage or pay a penalty.)  But many workers in poorer health who lost employer-based insurance likely would be unable to find coverage in the individual market.

Moreover, the tax deduction would do very little to help most uninsured people gain coverage.  Most uninsured people either don’t earn enough to owe income tax or are in the 10 or 15 percent tax bracket, so they would receive an income tax benefit of no more than 15 cents for every $1 they can deduct, along with a payroll tax benefit of 7.65 cents per dollar earned.

People who lose their jobs and have no earned income would receive no benefit, while a single poor adult earning $10,000 would receive no income tax benefit and a payroll tax benefit of about $574 a year, far below the cost of insurance.  And, assuming the plan’s deduction was in place in tax year 2014, a single 64-year-old with income equal to twice the poverty line — $23,340 — would likely receive a total tax benefit of no more than about $1,530.  That’s only about one-quarter of the tax credit that health reform provides, because health reform’s tax credit is refundable, more generous at lower incomes, and adjusted for age (as older people face higher premiums).  Moreover, unlike under health reform, the RSC plan gives people with modest income no help with their deductibles and other cost-sharing charges.

The deduction would primarily benefit people in the top income tax brackets, who least need help in affording insurance and are the most likely already to have coverage.  (Also, it’s unclear whether the payroll tax deduction would effectively result in lower Social Security benefits for individuals taking it, as well as lower contributions to the Social Security and Medicare trust funds that would hasten their insolvency.)

Impact on Consumer Protections 

Health reform prohibits insurers in the individual market from refusing to cover people with pre-existing medical conditions.  In contrast, the RSC plan would allow insurers to deny coverage in such cases, except for people who have had continuous coverage (through an employer or in the individual market) for at least 18 months.  That’s only a modest improvement over the deeply flawed situation before health reform.

Thus, someone without job-based coverage who was denied coverage in the individual market because of cancer or diabetes would likely remain uninsured.

Moreover, people with pre-existing conditions who have had continuous coverage could qualify for individual-market coverage only through a high-risk pool.  Such coverage likely wouldn’t be affordable.  The high-risk pools could charge premiums twice as high as the standard premium, and standard premiums could vary based on age, with no upper limit.

More broadly, relying on high-risk pools to provide coverage would be “extremely expensive and likely unsustainable,” as the Commonwealth Fund has explained.  That’s because they pool sick individuals not with healthy individuals — as regular insurance pools do to keep premiums stable and affordable — but with even sicker individuals who cost even more to insure.

Indeed, experience with state high-risk pools shows that unless government financial support for them rises significantly over time, the pools eventually have to sharply restrict enrollment, set premiums further above what many families can afford, and/or scale back coverage by reducing benefits or increasing deductibles and other cost-sharing, in order to keep costs from spiraling out of control.  Yet the RSC plan provides no actual federal high-risk-pool funding.  (It authorizes Congress to appropriate money for this purpose, but Congress may never do so, given the caps on funding for appropriated programs and the automatic “sequestration” cuts.)

Finally, the RSC plan would eliminate all of health reform’s consumer protections and market reforms.  It would allow insurers to once again:

  • set annual and lifetime dollar limits on the coverage they provide;
  • require cost-sharing charges for preventive care;
  • have no annual limit on out-of-pocket costs;
  • limit the children whom parents can include on their plans to those 21 and younger, rather than those up to age 26;
  • charge people higher premiums in the individual and small-group markets based on their health status;
  • charge older people premiums that are more than three times what they charge younger people in the individual and small-group markets (the limit under health reform is 3 to 1); and
  • charge women higher premiums than men in the individual and small-group markets.  

In another reversal, the RSC plan would allow insurers to leave big coverage gaps in the individual and small-group markets by omitting critical benefits such as prescription drug coverage or maternity care, as they could do before health reform.  And by allowing out-of-state insurers to sell insurance within a state without complying with the state’s consumer protections, the plan also would undermine the insurance market reforms and protections that a number of states had put in place before health reform.

The bottom line?  The RSC’s proposal would be a very large step backward that would drive millions of Americans, especially people of limited means, into the ranks of the uninsured and the underinsured.