There are plenty of ways to im­prove Oba­macare

The Denver Post - - PERSPECTIVE - By Michael Hiltzik

Now what?

With Monday’s col­lapse of the Se­nate Repub­li­cans’ lat­est ef­fort to re­peal the Af­ford­able Care Act, the GOP and the Trump White House are con­fronted with the ques­tion of what to do next, if any­thing, on health care. But that’s a ques­tion for Democrats, too.

Al­though there’s a gen­eral per­cep­tion that Democrats con­sider Oba­macare to be the last word on health care pol­icy, that’s never been true. The ACA was the prod­uct of com­pro­mise from its in­cep­tion, and also some­thing of an ex­per­i­ment. No one was sure how all its mov­ing parts would work. The law’s drafters and sup­port­ers ex­pected that re­al­world ex­pe­ri­ence would al­low them to come back and strengthen the pro­vi­sions that were work­ing and fix those that weren’t. Those ex­pec­ta­tions were dashed by the GOP’S seven-year in­sis­tence that re­vi­sion of the ACA be­gin and end with re­peal.

But there’s no dearth of pro­pos­als for mak­ing the ACA work bet­ter. With ex­quis­ite tim­ing, An­drew Sprung of Xpost­fac­toid on Monday un­earthed a pack­age pro­posed in Jan­uary by John Ho­la­han and Linda J. Blum­berg of the Ur­ban In­sti­tute. It’s an ex­cel­lent start­ing point that at­tempts to balance im­prove­ments to the law with con­ces­sions that Repub­li­cans might find palat­able enough to bring on board.

If Repub­li­cans and Democrats could come to­gether in a good-faith ef­fort to im­prove the Af­ford­able Care Act, what should be on the ta­ble? Here’s a digest of the sug­ges­tions for fixes and con­ces­sions of­fered by Ho­la­han and Blum­berg.

First, the fixes:

Ex­pand the sub­si­dies.

As the Ur­ban In­sti­tute au­thors ob­serve, the ACA’S pre­mium sub­si­dies are too low, and the in­come cutoff too sharp, to make cov­er­age truly af­ford­able for many work­ing- and mid­dle-class fam­i­lies. Un­der cur­rent law, sub­si­dies are pro­vided to house­holds earn­ing up to

400 per­cent of the fed­eral poverty line, or $98,400 for a fam­ily of four. They’re en­ti­tled to enough so that the cost of a bench­mark sil­ver-level health plan, which would cover an av­er­age 70 per­cent of med­i­cal ex­penses, won’t cost them more than 9.69 per­cent of their in­come.

Above 400 per­cent, how­ever, the sub­si­dies dis­ap­pear. Ho­la­han and Blum­berg cal­cu­lated in a sep­a­rate study that house­holds just above the cutoff — those earn­ing 400 per­cent to 500 per­cent of the poverty level — took the great­est hit in in­sur­ance costs, pay­ing a me­dian 18.1 per­cent of their in­come in pre­mi­ums and out-of­pocket ex­penses. That ac­counts for com­plaints that the ACA in­creased the cost bur­dens on the mid­dle class in order to pay for bet­ter ben­e­fits for lower-in­come house­holds, and ex­plains why the law has strug­gled to win ap­proval from more than a bare 50 per­cent of Amer­i­cans.

Ho­la­han and Blum­berg pro­pose low­er­ing the cost cap to 8.5 per­cent of in­come and ap­ply­ing it to all house­holds, what­ever their earn­ings. This wouldn’t be much of a wind­fall for higher-in­come fam­i­lies, they ar­gue, be­cause pre­mi­ums and out-of-pocket spend­ing don’t nor­mally in­crease with in­come, so as in­come rises, the share spent on health cov­er­age falls nat­u­rally. They also would peg sub­si­dies to a gold-level plan, which cov­ers an av­er­age 80 per­cent of ex­penses, rather than sil­ver. Gold plans typ­i­cally have lower de­ductibles and co-pays.

Step up ed­u­ca­tion and out­reach. The ef­fec­tive­ness

of such ef­forts is well-es­tab­lished. States with vig­or­ous pub­lic out­reach pro­grams, such as Cal­i­for­nia, con­sis­tently have ex­pe­ri­enced higher ACA ex­change en­roll­ment than those that ne­glected them or even in­ter­fered. And the Trump ad­min­is­tra­tion’s cut­back of ACA out­reach and mar­ket­ing im­me­di­ately af­ter the in­au­gu­ra­tion is widely blamed for a slow­down in ACA ex­change en­roll­ments in Jan­uary and Fe­bru­ary this year, rel­a­tive to the same peri-

od in pre­vi­ous years. Cap pay­ments to doc­tors and hos­pi­tals. Re­duced

com­pe­ti­tion among health plans in some re­gions, a prob­lem un­der the ACA touted in­ces­santly by the GOP, leads to higher re­im­burse­ment rates for med­i­cal providers and con­se­quently higher pre­mi­ums. Ho­la­han and Blum­berg have a sim­ple so­lu­tion drawn from Medi­care: cap those re­im­burse­ments. It’s un­likely that lim­it­ing them to Medi­care rates or slightly higher would drive providers out of the mar­ket — Medi­care has lit­tle trou­ble sign­ing up doc­tors and hos­pi­tals to serve their en­rollees. And now, the give­backs: What con­ces­sions could Democrats of­fer to bring Repub­li­cans to the ta­ble?

Re­place the in­di­vid­ual man­date. This is by far the most un­pop­u­lar el­e­ment of the Af­ford­able Care Act, and the fo­cus of the GOP’S pitch that Amer­i­cans shouldn’t be forced to buy any­thing they don’t want. Some means of goad­ing health­ier peo­ple into buy­ing in­sur­ance is ob­vi­ously a nec­es­sary ad­junct to the ACA’S re­quire­ment that ev­ery buyer be of­fered es­sen­tially the same price, re­gard­less of med­i­cal his­tory — which is a part of the law that Amer­i­cans widely fa­vor.

The ques­tion is what sort of goad? Se­nate and House Repub­li­cans pro­posed re­plac­ing the tax penal­ties im­posed on those with­out in­sur­ance with a wait­ing pe­riod for any­one who al­lowed a lapse in his or her cov­er­age for at least two months. Dur­ing the wait, the en­rollee’s pre-ex­ist­ing con­di­tions wouldn’t be cov­ered; but that raises the is­sue of how to pro­tect such buy­ers from what could be cat­a­strophic costs in the mean­time.

Ho­la­han and Blum­berg sug­gest in­stead a ver­sion of the late-en­roll­ment penal­ties im­posed un­der Medi­care Parts B and D. Th­ese vol­un­tary parts of Medi­care, cov­er­ing doc­tor and out­pa­tient vis­its and pre­scrip­tion drugs, are par­tially paid by en­rollees. Those who wait past their ini­tial el­i­gi­bil­ity pe­ri­ods to sign up are hit with life­time pre­mium sur­charges.

Ho­la­han and Blum­berg pro­pose that ACA penal­ties be limited — say, to one or two years — in­stead of per­ma­nent. The goal is to “make the penal­ties strong enough to be ef­fec­tive in max­i­miz­ing en­roll­ment, yet not so puni­tive” that peo­ple wouldn’t be able to af­ford cov­er­age if they’re subject to the penal­ties.

One ob­jec­tion to the late-en­roll­ment penal­ties is that many peo­ple wouldn’t even be aware of them un­til they tried to en­roll, which makes them com­par­a­tively in­ef­fec­tive in prompt­ing hold­outs to buy cov­er­age. The so­lu­tion is to make them aware, through ed­u­ca­tion and out­reach.

Kill the em­ployer man­date. Even pro-aca

economists ac­knowl­edge that it achieves lit­tle, es­pe­cially when bal­anced against its un­pop­u­lar­ity. Em­ploy­ers al­ready have strong in­cen­tives to of­fer their work­ers health cov­er­age, in­clud­ing tax ben­e­fits and the need to at­tract and keep pro­duc­tive em­ploy­ees.

Ex­pand Health Sav­ings Ac­counts. HSAS, which

are tax-ad­van­taged ac­counts that can be used to pay out-of-pocket med­i­cal ex­penses, are a boon to high-in­come house­holds be­cause they per­mit yet more shel­ter­ing of in­come from taxes. That’s why the GOP has placed them front and cen­ter among its Oba­macare “re­place­ment” ideas. But de­spite the GOP’S claims that HSAS are good for ev­ery­one, for work­ing-class fam­i­lies with limited in­come tax li­a­bil­ity and lit­tle dis­pos­able in­come to use to fund the ac­counts, they’re rel­a­tively use­less. The Tax Pol­icy Cen­ter cal­cu­lated that more than 16 per­cent of all house­holds with $200,000 in in­come or more have HSAS — but fewer than 2 per­cent of house­holds earn­ing less than $30,000 do.

The Se­nate and House pro­posed rais­ing the max­i­mum an­nual con­tri­bu­tion lim­its for HSAS to $6,550 for in­di­vid­u­als and $13,100 for fam­i­lies, up from $3,450 for in­di­vid­u­als and $6,750 for fam­i­lies. Here’s an idea for the Democrats: Let them.

Kill the “Cadil­lac tax.”

Among the ACA pro­vi­sions that Democrats and Repub­li­cans all hate is this tax, which is im­posed on high-cost em­ploy­er­spon­sored and multi-em­ployer (that is, union­spon­sored) health plans. The law levies a 40 per­cent tax on health plans val­ued at more than $10,200 for in­di­vid­ual cov­er­age and $27,500 for fam­ily cov­er­age and union plans. The tax has been de­layed to 2020.

The tax was de­signed in part to equal­ize the treat­ment of em­ployer plans, which are tax-de­ductible for both em­ploy­ers and work­ers, and in­di­vid­ual plans, which are not. But there are prob­a­bly jus­ti­fied fears that em­ploy­ers will re­spond by re­duc­ing the cov­er­age they pro­vide. Repub­li­cans hate the tax be­cause it hits busi­ness; Democrats be­cause it hits union­ized work­ers.

So bury it. Since the tax is pro­jected to bring in about $70 bil­lion over 10 years, that fund­ing will have to be re­placed some­how, but that shouldn’t be too dif­fi­cult for Repub­li­cans and Democrats work­ing to­gether, should it?

Some el­e­ments of the ACA need to be pre­served at all costs. They in­clude the law’s ros­ter of Es­sen­tial Health Ben­e­fits that all plans must cover, in­clud­ing hos­pi­tal­iza­tion, men­tal health and sub­stance abuse treat­ment, ma­ter­nity care, and pre­scrip­tions. Repub­li­cans have ar­gued in fa­vor of cut­ting back the list or elim­i­nat­ing the man­date en­tirely, but that just opens the door to the re­turn of junk in­sur­ance and the loss of pro­tec­tion for pre­ex­ist­ing con­di­tions, with­out any ap­pre­cia­ble sav­ings.

The ab­sence of any con­sen­sus within the Repub­li­can cau­cus on EHBS un­doubt­edly con­trib­uted to the GOP’S re­peal fail­ure, since most law­mak­ers seem to un­der­stand, in their hearts, that th­ese ben­e­fits re­ally are the essence of de­cent health in­sur­ance. They should be off the ta­ble.

But that leaves a smor­gas­bord of work­able op­tions. Once the GOP di­vorces it­self from an ide­o­log­i­cal com­mit­ment to re­peal­ing the ACA, the Democrats may well be in­clined to a bit of horse trad­ing to achieve the im­prove­ments that al­most ev­ery­one agrees are war­ranted.

Let the bar­gain­ing be­gin, for all Amer­i­cans’ sakes.

Michael Hiltzik is a colum­nist for the Los An­ge­les Times. Email him at michael.hiltzik @la­times.com.

Bren­dan Smi­alowski, Afp/getty Images

Se­nate Ma­jor­ity Leader Se­na­tor Mitch Mccon­nell speaks Tues­day at the U.S. Capi­tol on Tues­day, a day af­ter the fail­ure of Se­nate Repub­li­cans to pass a bill to re­peal and re­place the Af­ford­able Care Act.

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