Tag Archives: House Rules Committee

What You Need to Know about Invisible High Risk Pools

Last Thursday afternoon, the House Rules Committee approved an amendment providing an additional $15 billion for “invisible high risk pools.” That surprising development, after several days of frenetic closed-door negotiations and a study on the pools released Friday, may have some in Washington trying to make sense of it all.

If you want the short and dirty, here it is: Thursday’s amendment doesn’t resemble the model cited by pool proponents, undermines principles of federalism, relies on government price controls to achieve much of its premium savings, and requires far more taxpayer funding than the amendment actually provided. But other than that, it’s great!

Want more info? Read on.

The Amendment Text Does Not Match Its Maine Model

The legislative text the Rules Committee adopted last week bears little resemblance to the invisible risk pool model the amendment’s proponents have described.

In response to my article last week asking whether the invisible risk pool funding differs from Obamacare’s reinsurance program, supporters cited a blog post highlighting the way such a pool works in Maine. Under Maine’s program, insurers cede their highest risks to the pool prospectively—i.e., when individuals apply for insurance. Insurers also cede to the pool most of those high-risk patients’ premium payments, to help pay for the patients’ health claims.

Conversely, insurers participating in Obamacare’s reinsurance program receive retrospective payments (i.e., after the patients incur high health costs), and keep all of the premium payments those patients make. In theory, then, those two differences do distinguish the Obamacare reinsurance program from the Maine pool.

But there’s one other key distinction: The amendment the Rules Committee adopted last week doesn’t include the parameters of the Maine model. The original version proposed by Rep. Gary Palmer—the amendment language upon which the Milliman study was based—more closely tracked the Maine model. But the Rules Committee instead passed an amendment with generic language leaving much more discretion to the Trump administration. On Friday, Politico explained why:

The [Milliman] study…assumes that insurers would agree up front to surrender most of the premiums paid by high-risk enrollees, in exchange for protection against potentially costly claims down the line… Palmer included those specifics the first time he proposed adding a risk-sharing program to the [American Health Care Act], roughly two weeks ago. But they were stripped out of the final version presented Tuesday, and likely for good reason…Insurers likely wouldn’t be too enthusiastic about having that much skin in the game. Instead, the amendment essentially tells state and federal officials to sort out the details later—and most importantly, after the program is passed into law.

The federal pools may end up looking nothing like the Maine program advocates are citing as the model—because the administration will determine all those critically important details after the fact. Or, to coin a phrase, we have to pass the bill so that you can find out what’s in it.

The Amendment Undermines State Sovereignty

As currently constructed, the pool concept undermines state sovereignty over insurance markets. Paradoxical as it may sound, the amendment adopted last Thursday is both too broad and too narrow. With respect to the invisible high risk pool concept, the legislation doesn’t include enough details to allow policy-makers and insurers to determine how they will function. As noted above, all of those details were essentially punted to the administration to determine.

But the amendment is also too narrow, in that it conditions the $15 billion on participation in the invisible risk pool model. If a state wants to create an actual high risk pool, or use some other concept to stabilize their insurance markets, they’re out of luck—they can’t touch the $15 billion pot of money.

Admittedly, the amendment the Rules Committee adopted last Thursday isn’t nearly as bad as the original Palmer amendment on invisible pools. That original amendment required all insurers to participate in the invisible pools “as a condition of doing business in a state”—potentially violating both the Fifth Amendment for an unconstitutional taking against insurers, and the Tenth Amendment by undermining states’ sovereignty over their insurance markets and business licensing.

In a post last week, I cited House Speaker Paul Ryan’s February criticism of Obamacare: “They’re subsidies that say, ‘We will pay some people some money if you do what the government makes you do.’” That’s exactly what this amendment does: It conditions some level of funding on states taking some specific action—not the only action, perhaps not even the best action, to stabilize their insurance markets, just the one Washington politically favors, therefore the one Washington will attempt to make all states take.

Ryan was right to criticize the Obamacare insurance subsidy system as “not freedom.” The same criticism applies to the invisible pool funding—it isn’t freedom. It also isn’t federalism—it’s big-government, nanny-state “conservatism.”

The Pools’ Claimed Benefits Derive From Price Controls

Much of the supposed benefits of the pools come as a result of government-imposed price controls. The Milliman study released Friday—and again, conditioned upon parameters not present in the amendment the Rules Committee adopted Thursday—models two possible scenarios.

The first scenario would create a new insurance pool in “repeal-and-replace” legislation, with the invisible pools applying only to the new market (some individuals currently on Obamacare may switch to the new market, but would not have to). The second scenario envisions a single risk pool for insurers, combining existing enrollees and new enrollees under the “replace” plan.

In both cases, Milliman modeled assumptions from the original Palmer amendment (i.e., not the one the Rules Committee adopted last Thursday) that linked payments from the invisible risk pools to 100 percent of Medicare reimbursement rates. The study specifically noted the “favorable spread” created as a result of this requirement: the pool reduces premiums because it pays doctors and hospitals less than insurers would.

Under the first scenario, in which Obamacare enrollees remain in a separate market than the new participants in “replace” legislation, a risk pool reimbursing at Medicare rates would yield total average rate reductions of between 16 and 31 percent. But “if [risk pool] benefits are paid based on regular commercially negotiated fees, the rate reduction becomes 12% to 23%”—about one-third less than with the federally dictated reimbursement levels.

Under the second scenario, in which Obamacare and “replace” enrollees are combined into one marketplace, premiums barely drop when linked to commercial payment rates. Premiums would fall by a modest 4 to 14 percent using Medicare reimbursement levels, and a miniscule 1 to 4 percent using commercial reimbursement levels.

Admittedly, the structure of the risk pool creates an inherent risk of gaming—insurers could try to raise their reimbursement rates to gain more federal funds from the pool. But if federal price controls are the way to lower premiums (and for the record, they aren’t), why not just create a government-run “public option” linked to Medicare reimbursement levels and be done with it?

The Study Says This Doesn’t Provide Enough Money

According to the study, the amendment adopted doesn’t include enough federal funding for invisible risk pools. The Milliman study found that invisible risk pools will require more funding than last Thursday’s amendment provided—and potentially even more funding than the entire Stability Fund. Under both scenarios, the invisible risk pools would require anywhere from $3.3 billion to $17 billion per year in funding, or from $35 billion to nearly $200 billion over a decade.

By contrast, Thursday’s amendment included only $15 billion in funding to last from 2018 through 2026. And the Stability Fund itself includes a total of $130 billion in funding—$100 billion in general funds, $15 billion for maternity and mental health coverage, and the $15 billion specifically for invisible risk pools. If all 50 states participate, the entire Stability Fund may not hold enough money needed to fund invisible risk pools.

Remember too that the Milliman study assumes that 1) insurers will cede most premium payments from risk pool participants to help finance the pool’s operations and 2) the pool will pay claims using Medicare reimbursement rates. If either or both of those two assumptions do not materialize—and insurers and providers will vigorously oppose both—spending for the pools will increase still further, making the Milliman study a generous under-estimate of the program’s ultimate cost.

Let States Take the Reins

All of the above notwithstanding, the invisible high risk pool model could work for some states—emphasis on “could” and “some.” If states want to explore this option, they certainly have the right to do so.

But, as Obamacare itself has demonstrated, Washington does not represent the source and summit of all the accumulated wisdom in health care policy. States are desperate for the opportunity to innovate, and create new policies in the marketplace of ideas—not have more programs foisted upon them by Washington, as the Rules Committee amendment attempts to do. Moving in the direction of the former, and not the latter, would represent a true change of pace. Here’s hoping that Congress finally has the courage to do so.

This post was originally published at The Federalist.

Revised Bill Summary: Manager’s Amendment to H.R. 4213

Last night the House Rules Committee reported out a rule for consideration of the extenders package today, along with an additional amendment to that package.  (Text of the manager’s amendment is here, and text of the new base bill introduced last Thursday is here.)  As has been widely reported, the manager’s package would reduce the length of the “doc fix” by two years (such that it would expire on December 31, 2011 instead of December 31, 2013), and reduce by one month the extensions of unemployment and COBRA subsidies.  The manager’s amendment also eliminates a nearly $4 billion transfer to the Medicare Improvement Fund, allowing savings from the 3-day payment window provisions to reduce the bill’s overall deficit impact, instead of being redirected into a “slush fund.”

The overall bill would raise deficits by $109.4 billion over five years, and $87.7 over ten.  The health subtitle would add $45 billion to the deficit over five and ten years.  Within that total, the SGR provisions would raise the deficit by $21.9 billion over five and ten years (down from $65 billion in the earlier version).  The COBRA subsidies would cost $6.9 billion over five and ten years (down from $7.8 billion due to the shorter extension period), and the Medicaid FMAP provisions would raise the deficit by $24.1 billion over five and ten years (unchanged).

According to CBO, the cost of the 19-month “doc fix” (through December 31, 2011) is $22.9 billion.  The difference stems from the fact that the amendment would actually provide an increase to the SGR formula for 2010 and 2011, but the maximum allowable adjustment under statutory PAYGO reflects a freeze in current payment rates.  Thus the maximum allowable amount under statutory PAYGO (the amount of a freeze for 19 months) is about $21.9 billion, but CBO estimates the total cost of the SGR provision at $22.9 billion, with the difference of approximately $1 billion being the cost of providing payment updates.

Also of note, CBO estimates that Medicare physician payment rates will be cut by 33 percent in January 2012 absent further congressional action.

 

Medicare Physician Payment:  Provides a 2.2% increase in reimbursement levels for June-December of 2010, and a 1% increase for 2011.  The legislation also guarantees a further funding “cliff” in January 2012, whereby Medicare payments would be cut by 33% absent further Congressional action.  Most of the new Medicare spending (approximately $21.9 billion) would be exempt for PAYGO purposes, but it would increase the deficit regardless.  Raises the deficit by $22.9 billion over five and ten years.

Medicaid Funding:  Includes a six-month extension (through June 30, 2011) of increased federal Medicaid funding provided in the “stimulus,” which is designated as emergency spending for PAYGO purposes.  The bill clarifies that states with Section 1115 waivers covering childless adults in effect as of December 31, 2009 qualify for meeting the “stimulus” bill’s maintenance of effort requirements.  The bill also includes a new provision requiring that to obtain the additional six months of federal funding, state chief executive officers must certify “that the state will request and use such additional funds” – language which some may view as a politically motivated stunt.  Raises the deficit by $24.1 billion over five and ten years.

COBRA Subsidies:  Extends for six months eligibility for COBRA subsidies for individuals laid off through November 30, 2010.  The bill does not extend the length of the subsidy program beyond the current-law 15 months.  The bill designates this spending as emergency appropriations for PAYGO purposes, although it will still add to the deficit.  Raises the deficit by $6.9 billion over five and ten years.

IRS Data Match:  Includes provisions allowing the IRS and CMS to co-ordinate data matching efforts with regard to delinquent tax debts owed by Medicare providers, and to take such information into account when releasing reimbursement payments and accepting new providers.  These provisions were originally included in Section 1303 of the substitute amendment for the reconciliation bill (H.R. 4872), but were stripped out at the House Rules Committee due to Byrd rule concerns.  Saves $175 million over five years and $425 million over ten, according to JCT.

Hospital Payments:  Prohibits Medicare from reopening or adjusting claims made by hospitals during the three days preceding a patient’s inpatient admission.  Saves $4.2 billion over five and ten years.

340B Program:  Adds inpatient drugs to the 340B outpatient discount program, and maintains childrens hospitals’ ability to participate in the 340B discount program with respect to orphan drugs.

Health Law Clarifications:  Repeals the health law’s delay of the revised skilled nursing facility prospective payment system, as well as the law’s extension of reasonable cost payments for certain laboratory services.  Repeals section 6502 of the law, which requires states to exclude certain providers from Medicaid and SCHIP.  Includes other clarifying amendments with respect to drafting errors in the health care law.

Other Provisions:  Extends for an additional year (through September 30, 2011) the Section 508 hospital reclassification program, at a cost of $300 million over five and ten years.  Provides $175 million in mandatory appropriations to CMS to implement the act’s provisions.  Includes clarifying provisions regarding eligibility for Medicaid health IT funding provided in the “stimulus.”  Provides $400 million to California to adjust Medicare fee schedule localities, and includes clarifying language preventing Medicare providers from un-bundling reimbursement requests.