qotd: Free Medicaid? Gotcha!

Bloomberg View
August 4, 2014
You Qualify for Medicaid: Don't Sign Up
By Christopher Flavelle

The debate over Obamacare's Medicaid expansion divides states into two
broad categories -- those that expand their program and those that
don't. New research suggests we should talk more about a third group:
States that agree to expand Medicaid, then impose premiums whose only
purpose seems to be keeping people out of the program.

A paper released today in the journal Health Affairs, written by
researchers from the federal government's Agency for Healthcare Research
and Quality, seeks to quantify the effect of premium increases on
children's enrollment in Medicaid or its sister plan, the Children's
Health Insurance Program. They found that even small premiums lead to
big drops in sign-ups.

Using data from 1999-2010, the researchers -- Salam Abdus, Julie Hudson,
Steven C. Hill and Thomas M. Selden -- found that for children in
families making from 101 percent to 150 percent of the federal poverty
line, a $10 increase in monthly premiums was associated with a 6.7
percent reduction in enrollment. For the subset of families not eligible
for health coverage through their jobs, that grew to 7.3 percent.

The authors of the Health Affairs study don't examine the effect of
premium increases on adults. But Laura Dague, a professor at Texas A&M
University, has. In an article published in the Journal of Health
Economics in May, Dague looked at three years of data from the Wisconsin
BadgerCare Plus program, which offers subsidized health coverage to
families with low incomes. She found that moving from $0 to $10 a month
reduced enrollment among children and adults by 12 percent to 15 percent.

What struck Dague about those results was that it's not just the
magnitude of the premium that matters, but the existence of a premium.

"The biggest effects in my data were at the margin where folks start
having to pay premiums at all," she told me by phone last week. She
wasn't sure why that was -- perhaps the difficulty of paying another
monthly bill or the psychology of having to pay in the first place.

What makes these papers relevant is that at least four states --
Indiana, Iowa, Michigan and Pennsylvania -- have expanded or are trying
to expand Medicaid access in a way that imposes premiums on those making
from 101 percent to 138 percent of poverty. Those premiums aren't high:
$25 a month in Indiana, $10 in Iowa, $25 in Pennsylvania ($35 for a
household) and 2 percent of income in Michigan. But these new studies
show that even those small amounts can significantly reduce the number
of people who sign up.

That seems to be the point. After all, Medicaid spending per beneficiary
will reach almost $6,400 in 2014, against which $120 in premiums each
year generates additional revenue that's barely significant. And as
Dague notes, imposing a premium at all means spending money to obtain
and process those payments.

"If the administrative costs of collecting premiums are high relative to
revenue collected," she wrote, "small premiums seem difficult to justify
as anything other than a measure to discourage enrollment."

If the states that have already imposed premiums were the outliers, then
this would be a frustrating story but a limited one. However, 24 states
still refuse to expand their Medicaid programs, and there's a strong
chance that some of those will change their minds on the condition that
they can impose premiums, too. There's an equally good chance that the
Centers for Medicare and Medicaid Services, which faces pressure to
bring those states into the fold, will go along with it.

Unquestionably, access to Medicaid for a small premium is better than no
access at all. But this new research says we shouldn't mince words about
the point of those premiums. They're designed to get fewer people to
sign up.

http://www.bloombergview.com/articles/2014-08-04/you-qualify-for-medicaid-don-t-sign-up

****

Health Affairs
August 2014
Children's Health Insurance Program Premiums Adversely Affect
Enrollment, Especially Among Lower-Income Children
By Salam Abdus, Julie Hudson, Steven C. Hill and Thomas M. Seedless

In this article we have examined the effects of public premiums on
insurance coverage of children who were eligible for Medicaid or CHIP
and whose family incomes were above 100 percent of the federal poverty
level in 1999–2010. Higher public premiums are associated with lower
public coverage and with increases in private coverage and uninsurance.
The magnitudes of these premium effects vary considerably by poverty
level and by parental coverage offers.

Among lower-income children, premium increases are associated with
larger reductions in enrollment in public coverage, and a larger share
of the decline in enrollment takes the form of increased uninsurance.
The association between premiums and uninsurance is particularly strong
among lower-income children who lack access to employer-sponsored
insurance through parental offers.

http://content.healthaffairs.org/content/33/8/1353.abstract

****

Journal of Health Economics
September 2014
The effect of Medicaid premiums on enrollment: A regression
discontinuity approach
By Laura Dague

This paper estimates the effect that premiums in Medicaid have on the
length of enrollment of program beneficiaries. Whether and how low
income-families will participate in the exchanges and in states'
Medicaid programs depends crucially on the structure and amounts of the
premiums they will face.

http://www.sciencedirect.com/science/article/pii/S0167629614000642

****


Comment by Don McCanne

The obsession of the policy and political communities with requiring
even low income families to experience consumer sensitivity to costs has
crossed the bounds into blatant psychopathology, as these studies confirm.

The Medicaid and CHIP programs were specifically designed to provide
health care coverage for low income families - a goal with which most
caring individuals agree. The very modest Medicaid and CHIP premiums
extracted from these families are so small that they have no impact on
the overall financing of the programs. Yet they are enough that these
families with no discretionary income find these programs to be
unaffordable, and so they remain uninsured.

The screwball idea that these premiums somehow make these low income
families better consumers is totally void of reason. These premiums
merely defeat the purpose of the programs - getting these people the
coverage that they need. The psychopathology rests with those who insist
that cash payments, no matter how small, are absolutely essential for
these families to appreciate the benefits of actively participating in
markets rather than passively accepting a government handout. This is
ideology gone mad!

Under a well designed single payer system, premiums and cost sharing are
eliminated. People simply get the heath care they need when they need
it. Paying for the system is totally removed from the delivery of care
since it is financed through progressive taxes that everyone can afford.

qotd: Correction: Reinsurance and risk corridors

In today's Quote of the Day on California's 4.2% premium increase, the
following statement was incorrect: "And what about the next year when
they no longer have protection against losses?" The next year after
2015, that is 2016, reinsurance and risk corridors are still in effect.
The protection ceases in 2017.

qotd: What does California’s 4.2% premium increase mean?

Los Angeles Times
July 31, 2014
Obamacare premiums to rise a modest 4.2% in 2015
By Stuart Pfeifer, Chad Terhune, Soumya Karlamangla

Defying an industry trend of double-digit rate hikes, California
officials said the more than 1.2 million consumers in the state-run
Obamacare insurance exchange can expect modest price increases of 4.2%
on average next year.

"We have changed the trend in healthcare costs," said Peter Lee, Covered
California's executive director. "This is good news for Californians."

State officials and insurers credited the strong turnout during the
first six-month enrollment window that ended in April for helping to
keep 2015 rates in check. But others cautioned it's still too early to
gauge the health law's impact, suggesting several factors may be
temporarily holding rates down in the individual market.

"We don't really know what the real cost of Obamacare is yet because
insurance companies are heavily subsidized for the first three years" of
the law's implementation, said Robert Laszewski, a healthcare consultant
in Virginia who has closely tracked the overhaul. "The insurance
companies essentially can't lose money."

California Insurance Commissioner Dave Jones said the modest uptick in
premiums was a positive sign, but he said insurers were likely motivated
by a November ballot initiative, Proposition 45, that would give his
office new authority to regulate health insurance rates.

"This is merely a pause in the double-digit rate increases we've seen
historically," Jones said.

Consumer Watchdog, the Santa Monica advocacy group pushing Proposition
45, said insurers held back this year to avoid that kind of voter backlash.

WellPoint Inc., Anthem Blue Cross' parent company, Kaiser and other
insurers have contributed more than $25 million to defeat the ballot
measure.

http://www.latimes.com/business/la-fi-obamacare-2015-rates-20140801-story.html

****


Comment by Don McCanne

Before we discuss some of the possible reasons that the 2015 increase in
premiums for California's ACA exchange were held down to 4.2 percent, we
should mention the bad news that is not being covered by the media. We
are celebrating an artificially low increase that is still twice the
rate of inflation - 2.1 percent (Consumer Price Index, June 2014 -
Bureau of Labor Statistics), as workers continue to fall behind over the
last three decades of increasing income inequality.

Although ACA enthusiasts are touting success in controlling health
insurance premiums, there are many reasons why their celebration is
premature, but two stand out.

Proposition 45, which will be on the November ballot, would provide
authority to California's insurance commissioner to regulate health
insurance premiums. The last thing the insurers want to do is to anger
voters with high rate increases just before this election. The insurers
have already contributed over $25 million to defeat this measure.

The other important reason is that the insurers are still protected by
reinsurance and insurance rate corridors. In fact, the Obama
administration adjusted this coverage to be sure that the insurers were
fully protected again next year should they not receive enough premium
revenue to meet their expenses. They can't lose! Of course they are
going to come in with low bids when they are under the threat of voter
revolt.

And what about the next year when they no longer have protection against
losses? We already know the routine. "The patients enrolled in our plans
were older and sicker while the younger, healthier individuals were
covered by plans at work, or bought the cheap catastrophic plans, and
the new drugs that cost tens of thousands of dollars or more placed a
strain on our budgets, and our contingency reserves were depleted with
the market crash of 2015, and we've lost our rate flexibility with the
termination of government reinsurance, and…" Well, you know.

Although there are many other uncertainties as the implementation of ACA
plays out, one certainty that we can rely on is that insurers will be
requesting much larger premium increases for 2016, possibly double
digits. That would not be happening under a single payer national health
program.