Readers: Here’s the next of a series of Monday posts that are collecting what I hope are the most interesting stories of the week on the PPACA (ObamaCare). This is a huge subject to cover, so if you have additional links, please add them in comments! Also, katiebird and I are only beginning to realize how huge this story is, so, readers, if more of you want to pitch in, please let us know in comments. –lambert]
The Pointless Search for Meaning in Exchange Prices The Health Care Blog, 2013-07-02
I view the initial plan bids on the health insurance exchanges as somewhat akin to an initial public offering. In an IPO, the price is based on a complex set of known and unknown factors. There are negative consequences if the price is set too high or too low. The analogy is imperfect, but the critical shared feature is that the price is set in an environment of significant uncertainty before there is a market to determine the price.
The health insurance exchange prices we are observing today are not market prices; they are opening bids in a not-yet-existent marketplace.
Exchange prices matter—to those purchasing coverage and to taxpayers subsidizing that coverage. But the first round of exchange bids mostly tell us about the assumptions different health plans are making and how they want to position themselves in this new market. They tell us nothing about the ultimate prices in the exchange or the ability of competition within the exchanges to drive improvements in the health care system.
Postponing Health Rules Emboldens Republicans New York Times, 2013-07-03
The federal government is creating a data network to help verify the income and citizenship of individuals buying policies in the marketplaces, which are to start enrolling people on Oct. 1, to determine if the buyers qualify for subsidies. Through the network, each state exchange is supposed to be able to swap data with the Internal Revenue Service, the Department of Homeland Security, the Social Security Administration and the Health and Human Services Department, among other agencies. People with knowledge of the administration’s work to put the law into full effect said the [employer reporting] postponement was in part a result of delays by the I.R.S. and the Treasury Department in finishing proposed rules and regulations for businesses. Catherine E. Livingston, who was the health care counsel at the I.R.S. until February, said the delay was “a recognition of practical realities.” Employers and insurers are supposed to inform the agency of the people they cover. But without the final rules, employers and insurers could not program their computers to comply, said Ms. Livingston, a lawyer at Jones Day, a Washington firm.
British Company Is Awarded Contract to Administer Health Rollout New York Times, 2013-07-04 (!!)
Racing to meet an October deadline, Obama administration officials said Thursday that they had awarded a contract worth as much as $1.2 billion to a British company to help them sift applications for health insurance and tax credits under the new health care law. The company, Serco, has extensive experience as a government contractor with the Defense Department and intelligence agencies, and it also manages air traffic control towers in 11 states and reviews visa applications for the State Department. But it has little experience with the Department of Health and Human Services or the insurance marketplaces, known as exchanges, where individuals and small businesses are supposed to be able to shop for insurance. Serco will help the Obama administration and states determine who is eligible for insurance subsidies, in the form of tax credits, and who might qualify for Medicaid. Tasks include “intake, routing, review and troubleshooting of applications,” according to the contract. Under the contract, Mr. Hill said, Serco and its subcontractors will immediately begin hiring 1,500 people. White House officials say that in many cases federal and state computers will be able to verify a consumer’s income and citizenship status and determine eligibility in a matter of minutes. But contract documents indicate that federal officials still expect that one-third of the 19 million applications in the first year will be filed on paper. Under the contract, the company is also supposed to help consumers and the Obama administration resolve “complex eligibility issues.”
Our research suggests that low-income adults experience so much income fluctuation that 28 million annually could “churn” across the Medicaid–exchange divide, set by the ACA at 138% of the FPL. Without health plans spanning both markets, shifts in financing could disrupt coverage and care. Buying exchange plans with Medicaid funds might shield families from the effect of small income shifts, since they could keep their plans and providers regardless of whether Medicaid or federal premium subsidies were paying the bill at any given moment.
Using national survey data and methods similar to those we’ve used previously, we estimate that purchasing coverage in an exchange could reduce churning by nearly two thirds in states such as Arkansas that currently have highly restrictive Medicaid coverage for adults (see graphRates of Continuous Insurance Eligibility among Adults over Time, According to Various Approaches to Expanding Medicaid under the Affordable Care Act.; for methods, see the Supplementary Appendix, available with the full text of this article at NEJM.org). However, in states such as Ohio, whose income limits under traditional Medicaid are higher, this policy could create churning between the traditional Medicaid-eligible group and the expansion group (which will now be buying exchange plans). Although that effect would reduce potential gains in coverage stability, there would still be less churning than there would under a Medicaid expansion that doesn’t use premium assistance. In both cases, this analysis assumes that people shifting from Medicaid-funded private coverage (when their income is below 138% of the FPL) to tax-credit–supported private coverage (when their income increases) would have a fairly seamless transition and could remain with the same plan and provider networks. But as discussed below, such seamlessness is hardly guaranteed.
Health insurance marketplaces will not be required to verify consumer claims, Sarah Kliff and Sandhya Somashekhar WaPo 2013-07-05
The Obama administration announced Friday that it would significantly scale back the health law’s requirements that new insurance marketplaces verify consumers’ income and health insurance status. Instead, the federal government will rely more heavily on consumers’ self-reported information until 2015, when it plans to have stronger verification systems in place. The delay comes after a Tuesday announcement that the federal government would postpone for one year a requirement that employers with 50 or more full-time workers provide health coverage.
Delay in Obamacare requirement puts onus on the honor system Reuters 2013-07-05
[W]ithout the reporting requirements of the employer mandate in 2014, “the exchanges and the IRS will not be able to verify whether someone’s coverage is unaffordable” and thus whether the person is eligible for subsidies, said law professor Timothy Jost of Washington and Lee School of Law in Lexington, Virginia. That leaves it up to individual consumers to be honest about what they do, or do not, qualify for.
Could More Reform Law Provisions be Delayed? Health Data Management 2013-07-05
The final rule also sets new processes for verification of eligibility and enrollment in employer-sponsored plans available via exchanges to ensure minimum essential coverage is offered, “This final rule does not address proposed provisions regarding exchange eligibility appeals, to provide additional time for the careful development of standards that can be effectively implemented, particularly for those regarding coordination with Medicaid and CHIP,” according to the rule.
The goal here is plain as day. The Obama administration is laser-focused on making sure that enough Americans enroll onto Obamacare-subsidized health insurance platforms, because if they do, it will be politically impossible for Republicans to repeal Obamacare in the future. Politics ain’t beanbag, they say. But deliberately encouraging tens of billions of dollars of waste, fraud, and abuse in order to achieve a political objective is profoundly immoral. … [A] key ramification of this announcement is what it means for uninsured people who were slated for Obamacare’s Medicaid expansion, who live in states that don’t expand Medicaid. Effectively, states no longer need to expand Medicaid, because this newly Medicaid-eligible population can now sign up for the exchanges, at no cost to the state, and know that their incomes won’t be verified by the IRS (because their incomes are too low to file tax returns).
Obamacare, heal thyself Editorial, New York Daily News 2012-07-06
President Obama’s decision to postpone a key component of his national health-care reform plan is economically welcome but politically revealing. It instantly raises three possibilities, all troubling: That the President and his team have botched the execution of a central piece of this hallmark domestic policy push. Or that they’re sidestepping political blowback in advance of midterm elections. Or that they have identified a serious problem in the design of the law. The Treasury Department’s official spin is that it needs time to simplify excessively complex paperwork requirements, as employers have asked. Taken at face value, this is a stunning admission — that the Obama administration has blown a major deadline despite having more than three years’ notice.
One more comment on that income over-reporting thing Incidental Economist 2013-07-07
The latest curious possibility is that red-state residents with incomes below 100% of the federal poverty line might seek to over-report their incomes to qualify for credits on the new health insurance exchanges. Austin noted this possibility a few months ago on Twitter. With Friday’s release of ACA’s encyclopic final rule, Avik Roy and other conservatives sadly pointed out the apparent loophole permitted by CMS regulations.
The provisions of the July 5 rule that drew the most media attention (indeed one of the few provisions that drew any attention on a day no one was reading the news) address verification of eligibility for premium tax credits. The Administration had shocked ACA observers by announcing on July 2 that it was delaying until 2015 the enforcement of the ACA’s employer and insurer reporting requirements and employer mandate. … There are, moreover, serious consequences for applicants who misrepresent their employer-coverage. The exchange must still notify employers every time one of their employees receives premium tax credits. The IRS will do so as well. Applicants who receive tax credits for which they are ineligible will have to pay them back when they file their taxes, and the exchange will inform applicants of this fact if it provides the applicant with tax credits pending verification of information provided by the applicant. Negligent misrepresentation of eligibility information can result in a $25,000 fine, while knowing and willful violations are punishable by a $250,000 penalty. … The final rule also addresses verification of other premium tax credit eligibility information. An applicant’s claimed income must be checked against tax and Social Security records. If an applicant claims that his or her income is greater than that shown by this data, and thus tax credits will be smaller than they otherwise would have been, the applicant’s attestation will be accepted. … If an applicant claims that his or her income has decreased by 10 percent or more below amounts found in available data sources, the exchange must verify the decrease, requesting documentary evidence. For 2014 only, in cases where electronic data is not available to verify claims of decreased income, the exchanges can limit the documentary verification requirement to a statistically valid sample of applicants and accept attestation from the rest, recognizing that more and better data will be available in future years.
The rule clarifies that Medicaid programs may purchase coverage in the individual market through the use of premium assistance. This has been possible in the statute for some time, but it was first widely noticed when Arkansas proposed using Medicaid funds in such a manner. The premium assistance program recognized by the rule, however, is not exactly the program Arkansas has requested. The program is optional for recipients, who may opt for traditional Medicaid instead. Medicaid must provide wraparound services to ensure that a recipient receives all Medicaid benefits, and a recipient may not be charged any cost-sharing in excess of that permitted under Medicaid (see below). Finally, the cost of purchasing coverage, including administrative expenses and cost sharing, must be comparable to the cost of direct Medicaid coverage.
Health Insurance Exchange Subsidies Will Be Granted on the Honor System!––Is There Something Wrong With “ObamaCare’s” Federal Data Hub? Health Care Policy and Marketplace Review 2013-07-07
Two of the essential things the Federal Data Hub was supposed to be able to do was to determine and report to the exchange if a person was eligible for a qualifying employer plan and to be able to feed an individual’s income history to the exchanges to help determine the amount of subsidy they would be eligible for. As of the week of the Fourth of July, it would appear the Federal Data Hub will be doing neither of these things––or at least not doing them to the extent they can be relied upon. That begs yet another question: Is the Federal Data Hub not working as intended?
Obamacare’s Invitation to Fraud The Corner 2013-07-07
[O]nly the administration itself really knows how implementation is going. No one else has anything approaching a complete picture, and particularly not regarding the development of the exchanges. The status of the federally-run exchanges, even more than those to be run by the states, remains simply a mystery. The administration has shared scant little information with the public, and even an investigation by the Government Accountability Office (an arm of the Congress) concluded last month that the likelihood that the exchanges will be ready to launch in October as required by law “cannot yet be determined.” The various delays and rule changes announced by the administration are responses to problems they are finding in the process of implementation, and the shape of those responses is among the only clues we have to the shape of the problems they see.
ObamaCare’s ‘Liar’ Subsidies Wall Street Journal, 2013-07-07
The White House seems to regard laws as mere suggestions, including the laws it helped to write. On the heels of last week’s one-year suspension of the Affordable Care Act’s employer mandate to offer insurance to workers, the Administration is now waiving a new batch of its own ObamaCare prescriptions.
Right-Wing Media Mislead On Obamacare Eligibility Verification 2013-07-08 Media Matters
Fox News and The Wall Street Journal stoked fears that a delay in the verification systems of health care reform would lead to fraud, while ignoring the fact that the government will conduct audits before implementing a stronger verification system and will heavily fine individuals who misrepresent their eligibility.
The Cracks Are Showing [PDF] CCH Freedom, 2013-07-08
Obamacare says the employer mandate “shall apply to the months beginning after December 31, 2013.” Whether you like the delay or not, is the President allowed to singlehandedly change the law?
[Peter Lee, Executive Director of Covered California] A couple of the big differences structurally is here in California, our legislation that formed us gave us the ability to be what’s called an active purchaser which means we will be specifically selecting health plans and excluding some health plans from being in our marketp lace. So we went through a process that ended up selecting across the state 13 health plans, and we have a pretty rigorous set of contract standards of those we selected in on what they need to deliver high-quality care for people with chronic illness, preventive care, etc. And that role of active purchaser is somewhat unique around the country.
The other thing I’d note, and again it’s not so much a wrong way or a right way but there’s ways we can learn from one another in California. Being an active purchaser, we’re also standardizing benefits. So across the nation consumers will have new standards for what are called silver/bronze benefits, essential health benefits that everyone will get. California took that a step further and said within bronze, let’s not have consumers be confused by having different co-pays, different co-insurance, but instead pick plans based on the difference between the networks.
Insurers game risk against each other PNHP, 2013-07-08
It has already been established that private Medicare Advantage plans engage in surreptitious activities that result in enrollment of lower-cost, healthier patients, while both avoiding higher-cost patients, and engaging in behaviors that cause higher-cost patients to disenroll (cherry picking and lemon dropping). This shifts higher-cost patients to the traditional public Medicare program, while the private insurers increase profits by continuing to game risk selection.
This study [from the NEBR] is different because all of the Medicaid patients who were formerly insured through a public program were transferred to private Medicaid managed care programs. Thus there was no public program where the private plans could dump their high-cost patients. So what did they do? They dumped them on their private Medicaid managed care competitors!
What is particularly shocking is the way they did it. They spent more money on the healthier patients to keep them contented so they would stay in their plans, while reducing spending and giving worse service to their higher-cost patients, ensuring dissatisfaction because of the worse outcomes that the patients suffered. Particularly distressing to advocates of social justice is that the high-cost patients discriminated against in this Texas study were predominantly black.
This study provides an important lesson for the insurance exchanges being established under the Affordable Care Act. Since a “public option” was rejected, the exchanges will include only private plans competing with each other. What kind of behavior can we expect? The most effective way for the private insurers to dump high-cost patients onto their competitors will be to give them worse care with terrible outcomes, causing their patients to flee. Of course, there is nowhere else to turn except to other private insurers, though some patients might even consider that paying a penalty for remaining uninsured might be a better option. Then again, remaining uninsured is not a realistic option for those who need higher-cost care.
Obamacare just got easier to implement, not harder Ezra Klein, WaPo 2013-07-08
Both changes make the same trade-off: They raise the law’s first-year costs in order to reduce its first-year problems. The poorly designed employer mandate was perhaps the most serious threat the law faced in its first year. … [T]he law had a real problem among a politically powerful constituency. Now, it doesn’t. At least not until 2015, assuming the mandate actually begins then. That isn’t to say the delay is costless: The federal government will lose billions in penalty revenues… The consumer-information delay is a similar story. …On Friday, the Obama administration said that in the law’s first year, they would accept the testimony of consumers when they applied for health insurance. … In 2015, the requirements will tighten further, and the federal government can claw back subsidies that were improperly awarded. Here, again, the calculation is simple: The Obama administration made implementation easier — both for themselves and for the consumers — at the cost of making the bill a bit more expensive. [T]he choice the White House actually made: Bad press now, and higher costs in 2014, in return for an easier roll out.
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