Why the Obama Approach to Health Policy Cancellations Is Preferable

November 19, 2013 at 3:31 pm

Responding to a wave of insurer letters notifying people that their current individual-market health plans won’t be available next year, Senators Mary Landrieu and Joe Manchin have proposed requiring insurers to permanently continue existing individual-market plans.  Our new report explains why this would likely drive up premiums in the new insurance marketplaces, weakening their chances of survival.  If the marketplaces unravel, millions of uninsured people expected to gain coverage under health reform (the Affordable Care Act or ACA) will lose access to coverage.

The Administration’s alternative proposal — to allow insurers to extend into 2015 any health plans they offer in the individual or small-group market that don’t comply with health reform’s standards and consumer protections — is also flawed but would be less damaging, as our report explains:

In general, both the Administration’s new policy and recent House and Senate proposals would prompt larger numbers of healthier-than-average people to remain in non-ACA-compliant individual-market plans outside the marketplaces; that, in turn, would cause the pool of people in the marketplace plans to be sicker, on average, than it otherwise would be.  This “adverse selection” would produce higher premiums in the marketplaces, particularly for 2015.  Depending on how many healthier people remained outside the marketplaces, the more far-reaching proposals — including the Landrieu-Manchin bill and the bill the House passed on November 15 — could trigger sticker shock when the 2015 premiums for marketplace plans are announced next October, just a few weeks before the congressional mid-term elections.

The Administration’s policy has strong advantages over the Landrieu-Manchin and House bills.

  • It doesn’t allow new people to enroll in non-ACA-compliant plans, as the House bill would.
  • It leaves the decision of whether to extend the non-compliant plans to insurers and states.  This means that fewer people will remain in such plans, and less adverse selection will result, than if the policy required insurers to offer them, as under Landrieu-Manchin.
  • It extends the non-compliant plans through 2015, rather than permanently, as under Landrieu-Manchin.
  • It is an administrative action and thus doesn’t require legislative action that could open up the ACA to even more harmful statutory changes that could push marketplace premiums up markedly, undercut the ACA’s insurance-market reforms, and threaten the long-term viability of the new marketplaces, without which millions of Americans will remain uninsured.

Click here for the full report.

SNAP and the Fight Against Extreme Poverty

November 18, 2013 at 2:21 pm

“Food stamp recipients already took a cut in benefits this month, and they may face more [cuts]” as Congress considers slashing program funding, Nicholas Kristof’s latest New York Times column points out.  Kristof focuses on the potential impact on children, many of whom the program — now called SNAP — lifts out of extreme poverty, and his column is well worth a look.

As I explained earlier this year, the number of households with children living on $2 or less per person per day — which is one definition of poverty the World Bank uses for developing nations — more than doubled between 1996 and 2011, to 1.6 million, according to research by the University of Michigan’s H. Luke Shaefer and Harvard University’s Kathryn Edin.

Counting SNAP benefits as income cuts the number of households with children in extreme poverty in 2011 by 48 percent, from 1.6 million to 857,000 (see graph).

SNAP also cut, by roughly half, the rise in extreme poverty among households with children between 1996 and 2011, the study found.

One reason SNAP is so effective against extreme poverty is that it focuses its benefits on many of the poorest households.  Roughly 91 percent of monthly SNAP benefits go to households below the poverty line, and 55 percent go to households below half of the poverty line (about $9,800 for a family of three).  One in five SNAP households lives on cash income of less than $2 per person a day.

Policymakers considering more SNAP cuts should keep in mind that the program keeps more households with children out of extreme poverty than any other government program.

In Case You Missed It…

November 15, 2013 at 3:54 pm

This week on Off the Charts, we focused on health policy, the economy, the federal budget and taxes, Social Security, state budgets and taxes, and housing.

  • On health policy, Edwin Park explained why the fact that Medicaid enrollment has significantly outpaced enrollment in the new health insurance marketplaces is neither a surprise nor a concern.  Matt Broaddus described how the start of the Children’s Health Insurance Program (CHIP) shows that early enrollment numbers aren’t a reliable indicator of health reform’s long-term performance.  Sarah Lueck noted that a bill to allow insurers to offer non-compliant health care plans would undermine health reform.  Paul Van de Water explained that raising the threshold for full-time work under health reform from 30 to 40 hours a week may encourage a shift to part-time work.  He also warned that the Trans-Pacific Partnership could raise the cost of prescription drugs.
  • On the economy, Chad Stone highlighted his latest post for U.S. News & World Report, warning that jobless benefits will end abruptly for over a million Americans and be sharply curtailed for many more the week after Christmas.
  • On the federal budget and taxes, Sharon Parrott explained why pursuing flexibility for the President to shift sequestration cuts among programs is a distraction — or worse.  Chuck Marr reminded budget negotiators looking for savings to replace sequestration to consider tax expenditures.  We outlined three features of a well-designed agreement to replace sequestration.
  • On Social Security, Paul Van de Water explained that why the program is particularly important for minorities.
  • On state budgets and taxes, Michael Leachman showed that most of the states that cut funding for K-12 education the deepest also cut income tax rates, reducing revenue that might have gone to schools.
  • On housing, Will Fischer pointed to both good and not-so-good housing ideas in the Congressional Budget Office’s new menu of deficit-reduction options.

In other news, we issued papers on how a House bill to expand “grandfathering” of health care plans would undermine health reform, a proposal by Sen. Rob Portman for automatic continuing resolutions could produce very deep funding cuts, the CHIP program rollout shows that health reform will take time to ramp up, and any sequestration replacement package should maintain the principle of parity.  We also updated our national and state housing data fact sheets and our backgrounder on the number of weeks of unemployment benefits available in each state.

A variety of news outlets featured CBPP’s work and experts recently.  Here are some highlights:

A Vote for Upton’s Bill Is a Vote for Everything You Hate About Health Care
New Republic
November 14, 2013

Medicaid is Health Overhaul’s Early Success Story
Associated Press
November 12, 2013

Some 170,000 U.S. veterans to be cut from food stamps
United Press International
November 11, 2013

Trade Agreement Threatens to Increase Drug Prices

November 15, 2013 at 1:13 pm

The Trans-Pacific Partnership (TPP) — a trade agreement that the United States and 11 other Pacific-rim countries are negotiating — could raise the cost of prescription drugs and increase health-care spending by governments and private payers.

TPP negotiations are largely secret.  Although the Office of the U.S. Trade Representative (USTR) consults with representatives of the drug and medical device industries, it does not do so with health care experts or the public.  This week, a group of more than 130 House members urged USTR to adopt a more open negotiating process.

Despite the secrecy, some negotiating texts have become public — and the newly leaked intellectual property chapter reveals sharp disagreements over access to generic medicines.

The United States has advanced provisions to protect manufacturers of brand-name drugs. They reflect the highly profitable pharmaceutical industry’s efforts to boost profits by extending market exclusivity on their brand-name drugs beyond the normal protections offered by the patent system.  In contrast, New Zealand and other countries would encourage the introduction of generics.

A U.S.-proposed draft of part of the transparency chapter would restrict governments’ ability to limit the prices they pay for drugs and medical devices.  This provision appears aimed at other countries, but it may hit existing or proposed U.S. policies as well.

AARP, AFSCME, and a dozen other health-policy organizations wrote to the Obama Administration last week expressing “deep concern” that the TPP may limit “the ability of states and the federal government to moderate escalating prescription drug, biologic drug and medical device costs in public programs.”  They listed many provisions that the TPP might jeopardize, including drug discounts that help close the “donut hole” in the Medicare Part D drug benefit, the Administration’s proposal to require minimum drug rebates for low-income beneficiaries under Part D, reduced drug prices for safety-net providers under section 340B of the Public Health Service Act, the Administration’s proposal to reduce the market exclusivity period for brand-name biologic drugs, and potentially, rebates under Medicaid.

These concerns about the TPP merit a thorough review, and U.S. trade negotiators should not uncritically accept industry arguments for higher drug prices.  The pursuit of expanded trade must not undercut efforts to slow the growth of health care costs.

Jobless Workers Facing Unhappy New Year’s

November 15, 2013 at 11:26 am

My latest post for U.S. News & World Report’s Economic Intelligence blog warns that jobless benefits will end abruptly for over a million Americans the week after Christmas, and many others who’ve recently become unemployed or will become unemployed next year will see them sharply curtailed, unless Congress extends emergency federal unemployment insurance (UI) before year’s end.  That would be bad for the economy as well as these jobless workers.  Here are some excerpts:

To combat the increased hardship and drag on the economy from rising unemployment and longer unemployment spells, policymakers in every recession starting in 1958 have enacted a temporary federal UI program to provide additional weeks of federal benefits.

The current program, Emergency Unemployment Compensation (EUC), was enacted in June 2008, relatively early in the Great Recession. . . .  EUC is scheduled to expire at the end of the year, however, abruptly dropping the maximum number of weeks available to 26 or fewer, even though long-term unemployment (27 weeks or longer) remains much worse than in any previous recession (see chart).

Unfortunately, the only policymakers with the EUC expiration on their radar screen are House Ways and Means Committee Republicans — and they want to kill the program. . . .  [Note:  The White House weighed in yesterday after this post appeared, supporting an EUC extension.]

To be sure, EUC has lasted a lot longer, helped a lot more unemployed workers, and paid out substantially more in benefits than the programs enacted in past recessions.  But that’s because the blow to the economy and especially the labor market from the Great Recession was so much worse.  In fact, without the consumer spending UI generated, the recession would have been even deeper and the recovery even slower, according to conventional economic analysis. . . .

EUC benefits help create that additional demand and contribute positively to job creation.  The economy is still too weak and unemployment is still too high to let the program expire.

Click here for the full post.