Hoping to finally pass the stalled American Health Care Act (AHCA), House Republicans unveiled the “MacArthur amendment,” authored by Tuesday Group co-chairman Tom MacArthur (R-N.J.). It attempts to bridge the gap between moderates and the conservative Freedom Caucus, which announced support for the amendment last Wednesday, by putting more responsibility for insurance markets back into the hands of the states.
The MacArthur amendment focuses on an idea that’s core to Republicans’ DNA: federalism. That’s a positive step forward. But what still seems to be lacking is a strategic roadmap for what Congress and the Administration should be trying to achieve. By laying out this roadmap, the Administration can bridge the gap between Republican moderates and conservatives, and possibly open up a much-needed dialogue with centrist Democrats.
Close to 10 million Americans are bearing the full, unsubsidized cost of the ACA plans, while some 27 million remain uninsured under the law today. Innovation in these parts of the market should be encouraged, provided that states are accountable for outcomes and can reform their markets with a stable source of federal funding.
Is it possible to offer more affordable insurance designs , while also encouraging younger, healthier enrollees to sign up? In a word, yes.
We’ve discussed the keys to a better approach elsewhere: matching subsidies to income, to enable low-income enrollees to manage premiums, deductibles, and co-pays (through, for instance, Health Savings Accounts); standardize the Medicaid safety net, so that benefits don’t vary radically by states, while encouraging states to provide care as effectively as possible (per capita caps are one workable approach, previously supported by President Clinton and several sitting Democratic senators).
Finally, Congress should give states additional waiver authority not granted through the ACA’s current waiver (1332) structure. For states that wanted to, they should be able to restore risk-rating to the individual market, lowering premiums for younger and healthier enrollees, or allow the sale of temporary health plans, or plans with fewer core benefits. Experimentation should occur with a permanent federal backstop—adequately funded—for reinsurance or high risk pools, and adequate protections for the low-income, high cost enrollees.
Essential health benefits are another current flash point, but they need not be. States could encourage more value-based insurance designs, for instance, that would focus coverage on high value services, but offer more cost sharing (up to 100 percent out of pocket) for low value services, or services where affordable options are available from competitive providers, like retail clinics.
Ironically, the ACA’s expansive, heavily regulated benefit designs are pushing even many high value services, like some prescription drugs, out of patients’ reach with high ($6,000+) deductibles.
Nuanced insurance coverage designs can and should cover “big ticket” items for unavoidable expenses like care for chronic illnesses, specialist visits, hospital care, and prescription drugs, while encouraging a market to develop for more convenient, low cost, routine services, that can be paid for out of pocket via Health Savings Accounts. Targeted cost-sharing around “shoppable” services could help rein in health care inflation, reduce administrative burdens for providers, and encourage providers to compete in delivering routine care conveniently at an affordable cost.
Medicaid would remain a backstop for low-income uninsured (although here, too, states can experiment with different coverage options).
States have already started to make effective use of the waiver provision in Section 1332 of the ACA.
Alaska, whose insurance market was “facing a death spiral,” and a projected 42 percent premium increase, decided to divert $55 million of the tax revenue generated from insurance plans into a reinsurance program that would pay exchange insurers extra money if they had especially large medical claims. This move convinced Premera Blue Cross, the lone remaining exchange provider, to raise their premiums by just 7 percent. And, since the federal government subsidizes 86 percent of Obamacare enrollee’s in Alaska, it also saved the federal government $56 million dollars.
Savings in hand, Alaska applied for a waiver to have the federal government repay them the amount it cost to set up their reinsurance fund. This waiver received conditional approval and has been publicly lauded by Secretary Tom Price.
There is much, in fact, that HHS can do today to improve market stability, and create a streamlined waiver process for the states. Additional authority can pass through Congress, and might just attract bipartisan support, with clear guardrails and funding (fully funding risk pools or reinsurance might cost up to $20 billion per year, according to some estimates).
No matter what happens to the AHCA, waivers remains a powerful arrow in the administration’s quiver, and there are real trade-offs that could attract bipartisan support while improving the cost and quality of coverage in the individual market.
This might seem like small ball to advocates on both sides of the aisle who are looking for a home run. We think that pragmatism and incremental market-based experimentation are the right tools for improving coverage at a manageable cost for both the uninsured and taxpayers.
This piece originally appeared at The Hill
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Paul Howard is a senior fellow and director of health policy at the Manhattan Institute. Follow him on Twitter here.
Yevgeniy Feyman is an adjunct fellow at the Manhattan Institute. Follow him on Twitter here.
This piece originally appeared in The Hill