How Maine’s Medicaid Expansion Campaign Got to Yes
by Gabrielle Gurley - American Prospect - November 13, 2017
Imagine that expanding Medicaid coverage to tens of thousands of people somehow meant that hunting and fishing licenses would be more expensive. Fearing a price hike, hunters and fishermen would surely surge to the polls in off-year election to vote no on a Medicaid expansion ballot question. Which is why one of the ads unleashed by opponents of Maine’s Medicaid expansion voter initiative made that very—and very ridiculous—claim.
Maine’s Republican Governor, Paul LePage, pugnacious as usual, was the face of the anti-expansion campaign. He took to Maine’s influential talk radio programs to dial up his base, backed by a PAC called Welfare to Work launched by one of his former advisors in August to fight the Medicaid measure. The message? “Able-bodied people” looking “medical welfare” should get off their collective butts and get to work.
Those scare tactics backfired.
Mainers voted 59 percent to 41 percent to expand Medicaid, making Maine the first state to approve Medicaid expansion at the ballot box. Both the turnout and the margin of victory were higher than expected in a year with no candidate elections and just four voter initiatives on ballots statewide.
How do you successfully counter misinformation on an issue as critical as health care? Mainers for Health Care, the statewide coalition that helped lead the successful yes campaign, countered the hunting and fishing license price hikes and other tall tales by relentlessly repeating a few salient data points. Medicaid expansion would create 6,000 new jobs and give the state a $500 million infusion of federal funding each year. Most importantly, the measure would provide health care to 70,000 Mainers.
To get out the vote, canvassers hit the road and knocked on more than 200,000 doors. But according to Mainers for Health Care’s David Farmer, the decisive factor was the coalition’s decision to deploy a “leadership team” of people who would be newly eligible for Medicaid if the measure passed. The team included people like Donna Wall, a Lewiston woman who is the full-time caregiver for her three disabled adult children. She earns just $7,000 a year from a newspaper route and sells her plasma to have enough money to take her kids to McDonald’s. After her two sons aged out of the program, leaving her as an “able-bodied adult,” she lost Medicaid coverage.
Wall was one of a number of such Maine residents who told powerful stories at town halls and were featured in ad campaigns and newspaper articles. “That cuts through the bullshit of hunting and fishing licenses,” says Farmer, the coalition’s spokesman. “For all the benefits you’ll have for the economy and for hospitals, there are faces and families behind those numbers.”
The ballot initiative expands Medicaid to people who earn 138 percent of the federal poverty level in Maine, $16,643 for a single individual and $22,412 for a family of two. Before the measure passed, 20 percent of Mainers were already on Medicaid; the rate jumps to nearly 30 percent in four rural Maine counties. Hospitals, especially in rural areas, continue to bear the brunt of providing uncompensated medical care to tens of thousands of uninsured people. In 2016, many of the state’s hospitals were in financial distress.
The results generally played out along Maine’s urban-rural divide. The initiative did well in cities like Portland, Lewiston, and Bangor and less so in rural areas. But there were notable exceptions. Voters in five rural Republican districts voted to expand Medicaid even though their state representatives remained vocal opponents of expansion. In some towns, the no vote prevailed narrowly.
Health care has long been a divisive topic in Maine. LePage came into office vowing to pay off state debts to hospitals incurredunder a Medicaid expansion in the 2000s. But the governor also declined to expand Medicaid even when confronted with the Affordable Care Act’s generous federal dollars, which account for 90 percent of the additional spending. Instead, he tightened eligibility requirements for MaineCare, the state’s Medicaid program. In the past five years, 40,000 Mainers have lost health insurance.
After LePage reshaped the state’s system, a person whose yearly income is $7,000 was still not poor enough for health insurance. “The whole fight over repealing and replacing Obamacare was positive in that it reminded Mainers of why they care about health care,” says Amy Fried, a University of Maine political science professor. “People want more and better health care, not less and worse health care.”
The multiple assaults on the ACA in Washington also spotlighted one of Maine’s own, Republican Senator Susan Collins, and her refusal to countenance an ACA repeal. Collins’s stance dialed up her popularity (passengers greeted Collins with applause last summer when she arrived at Bangor’s airport after one of her no votes, a first for her) and contributed to her decision to stay in the Senate and not run for governor in 2018. The Maine vote “gives her even more strength and legitimacy to draw the line on cuts to Medicaid and to health care,” says Farmer.
But Medicaid expansion supporters remain on guard in a state where successful voter initiatives have a history of running aground. The Legislature failed to override LePage’s veto of a bill that would have created a framework for implementation for a recreational marijuana law that a slim majority of voters approved last year. The path forward for another 2016 initiative, ranked-choice voting, remains uncertain after Maine’s Supreme Judicial Court issued an advisory opinion finding that sections of the law violated the state constitution.
Surprising exactly no one, LePage has now pledged to not to implement the Medicaid expansion until the Legislature funds the state’s Medicaid match using the administration’s estimates of those costs (which are almost twice as high as the figures put forward by the nonpartisan budget office that provides analyses for state lawmakers).
Several factors may mute LePage’s bluster. Failing to implement expansion would violate the state constitution which requires voter initiatives to be implemented 45 days after the Legislature convenes in January; 90 days later the state Department of Health and Human Services must come up with an implementation plan. Eligible residents could enroll in Maine Care by mid-summer 2018. “If [the governor] does not meet the very specific timelines and deadlines in the law when it takes effect, then he is going to find himself in court,” says Farmer. “And his press releases and bluster are not going to play as well as they do on talk radio.”
State lawmakers aren’t likely to play ball with the governor either. They have passed a Medicaid expansion bill five times only to run up against five LePage vetoes. The initiative’s win, coming shortly before legislators hit the campaign trail next year, means that they must weigh LePage’s latest ultimatum against the expressed opinion of Maine voters.
Health care was also the single most-cited issue driving voters to the polls in Virginia, according to exit polls, where voters turned against a Republican legislature that had blocked Medicaid expansion. Maine’s experience also serves as a template for Medicaid expansion supporters in Idaho, Kansas, Missouri, Nebraska, North Carolina, and Utah who want to put the issue to a vote. The Pine Tree State’s success may alleviate the some of the trepidation among national health-care advocates that emerged when the ballot initiative idea came up about three years ago.
Meanwhile, the Medicaid expansion victory sows a minefield for two prominent GOP gubernatorial candidates on the eve of Maine’s governor’s race. Former state health and human services commissioner Mary Mayhew toes LePage’s hard line, while state Senate President Mike Thibodeau opposed the ballot question and has voted against expansion twice. (His mid-coast district came out strongly for expansion.) Former House Speaker Mark Eves and Attorney General Janet Mills, who both support Medicaid expansion, are the leading contenders in a crowded Democratic field. In Maine, health-care reform remains a wedge issue for Democrats that could blunt the Republicans’ health-care-as-welfare mantra next year.
Navigating The Section 1332 Waiver Process: For States, A Treacherous Road Ahead
by Billy Wynn and Taylor Cowley - Health Affairs - November 29, 2017
In light of the mounting legislative efforts to make changes to the section 1332 waiver process, especially in the Alexander-Murray market stabilization package, and enhanced state interest in availing themselves of this opportunity, we figured it timely to provide an overview of this aspect of the Affordable Care Act (ACA), the record of how state applications have been adjudicated so far, and the prospects of change to the policy in the near term. Unfortunately, given the considerable uncertainty in both the legislative and executive branches regarding the future of these waivers, states cannot safely expend meaningful resources on developing new applications for the program at this time.
Background
The provisions under section 1332, which came into effect in January of this year, were designed to allow states to waive certain ACA requirements governing the individual and small group markets, so that they may begin to pursue alternate and tailored approaches to operating their exchanges. Specifically, the statute allows modifications to: essential health benefits; qualified health plans; abortion-related restrictions; metal tiers of coverage; cost-sharing reduction (CSR) subsidies; advance premium tax credits; and the employer and individual mandates. Importantly, a state that modifies or waives its federal funding for premium tax credits, CSR payments, or small business tax credits, may receive pass-through payments equal to such funding in order to carry out their alternative model.
However, the ACA also included certain “guardrails” to which states must adhere when designing their innovation waivers. The Centers for Medicare and Medicaid Services (CMS) may only approve waivers that provide coverage that is at least as comprehensive and affordable to a comparable number of state residents as would be provided absent the waiver. Additionally, the waiver must not increase the federal deficit.
Interested states are required to first pass state-level legislation authorizing a waiver application, and as of last month, as many as 27 states had considered legislation or engaged in the process in some capacity. In this first year of implementation (including a flurry of activity this fall) four states have been successfully approved for 1332 waivers; five have either withdrawn their applications or been denied; and an additional six states have successfully enacted legislation to authorize new 1332 waiver applications.
Guidance From The Trump Administration
When the Trump Administration took office, the new regime at the Department of Health and Human Services (HHS) signaled that it would encourage, and possibly even expedite, waivers to implement high-risk pools or state-operated reinsurance programs as a way of lowering premiums, improving stability, and increasing consumer choice. This came first in a March 13 letter to states promising enhanced flexibility for states, and later in a jointly-issued state checklist from CMS and the Department of the Treasury on May 11, which offered a pathway to waiver approval, particularly those implementing a high-risk pool/state-operated reinsurance program.
Approved Waivers
Hawaii
Approved by the Obama Administration on December 30, 2016, Hawaii’s waiverfreed the state from the ACA requirement to operate a Small Business Health Options Program (SHOP), and to instead redirect the associated funding to support a state fund for small businesses health coverage tailored to Hawaii’s unique needs.
Alaska
Approved July 11, 2017, Alaska’s waiver was the first approved by the Trump Administration, and the basis for the new Administration’s guidance on reinsurance models. Under the Alaska Reinsurance Program (ARP), the state will receive federal pass-through funding to help insurers offset the costs of individuals with one or more of 33 selected high-cost conditions.
Minnesota
In September, CMS approved Minnesota’s section 1332 reinsurance waiver, but denied a portion of the proposal under which the state would maintain funding for its Basic Health Program (BHP) for low-income individuals who fluctuate between Medicaid and exchange eligibility. CMS reasoned that because BHP beneficiaries are ineligible for exchange plans and therefore ineligible for premium tax credits, BHP savings under the waiver would not be passed-through to the state. Governor Mark Dayton called the decision “contrary to all direction and assurances” the state received from CMS during the drafting process and urged former HHS Secretary Tom Price to reverse the “destructive financial penalty.” The state estimated that it would lose $161 million more in BHP funding than it would gain in reinsurance funding were the waiver enacted. Governor Dayton called Minnesota’s experience with the waiver approval process “nightmarish.”
Oregon
CMS quickly approved, on October 20, Oregon’s request to implement a reinsurance program through the end of 2022, was originally submitted on August 31. Under this waiver, the state aims to reduce premiums in part by reimbursing “qualifying individual health insurers for a percentage of an enrollee’s claims” above a high-cost threshold but with a cap on the program’s obligations.
Withdrawn Waivers
California
California submitted a 1332 waiver application to the Obama Administration in December 2016, but withdrew it the following month. It would have allowed undocumented residents of the state to purchase insurance on the exchanges.
Oklahoma
Oklahoma formally withdrew its reinsurance waiver application on September 29, citing CMS’ failure to approve it by the agreed upon date of September 25. The state’s letter indicated that the reinsurance program is “effectively inoperative for the 2018 plan year,” because approval had not come in time for health plan rate filings, and requested “clear timeframes to navigate the federal waiver approval process” in the future.
Iowa
On October 23, Iowa’s Insurance Commissioner and Governor Kim Reynolds withdrew the state’s controversial 1332 waiver application, known as the “Iowa Stopgap Measure,” saying the waivers are “unworkable” and “not designed to fix collapsing individual health markets created by the [ACA].” The state’s application acknowledged in its initial submission that it did not meet the requirements of section 1332 (for example, the state Executive acted unilaterally without authorizing legislation), but asserted that "emergency" conditions of its "collaps[ing]" market warranted flexibility from CMS, which Iowa claimed has wider regulatory power owing to the President’s “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.”
The Stopgap Measure, originally submitted on August 21, proposed to substantively repurpose federal funding allocated for advanced premium tax credits and CSR payments and transform existing ACA marketplace structure into an age-based and income-based premium assistance program. The waiver would create a single standard plan for all eligible Iowans at the Silver level, including all essential health benefits, but with a steep deductible ($14,700 for a family). Subsequent supplementsto the Stopgap Measure added additional cost-sharing reductions for beneficiaries between 133 and 200 percent of the federal poverty level.
Denied Waivers
CMS has denied two state waiver applications on the basis that they were incomplete: (1) Massachusetts’ waiver, declined on October 23, sought to waive CSR payments in exchange for establishment of a Premium Stabilization Fund that would directly reimburse insurers; and (2) Vermont's waiver, denied in June of 2016 by the Obama Administration, sought to waive the ACA requirement to operate an online SHOP exchange, and instead continue to use existing enrollment mechanisms.
Proposed Changes To Section 1332
Potential changes to the section 1332 waiver statute have been a central focus of the 2017 health reform debate, both in the Senate’s ACA repeal efforts, and as a bargaining chip in the bipartisan market stabilization deal stuck between Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) of the Senate Health, Education, Labor and Pensions Committee.
Under the Better Care Reconciliation Act (BCRA) and its later iterations, Senate Republicans sought greater flexibility and ease for states in both the process of applying for the waivers and in the types of reforms states could implement under waiver authority. The bill would have allowed governors to apply for waivers without state legislative approval, would have extended the maximum length of the waivers from five to eight years, forbade new Administrations from revoking previously approved waivers, and proposed expedited approval of “emergency” waivers.
Most consequentially, the BCRA would have removed all three ACA guardrails protecting the affordability and comprehensiveness of coverage for an equal number of enrollees, and required only that budget neutrality be achieved in a state’s proposal. Approval of a budget-neutral waiver would be mandatory, where under the ACA, the HHS Secretary retains discretion.
Following the collapse of the repeal effort, attention turned to the narrower Alexander-Murray negotiations, where the relaxing of 1332 requirements was the key ask from Republicans in exchange for appropriated funding for CSR subsidy payments. Democrats have strongly opposed the weakening of the ACA guardrails, but Senators Alexander and Murray were able to reach an agreement that includes some modification of these requirements in mid-October. Specifically, their proposal softens only the affordability standard, from “as affordable as” to “comparable affordability,” and leaves intact all other ACA protections. Additionally, the Alexander-Murray bill would shorten the prescribed waiver approval time from 180 to 90 days; extend the maximum waiver time to only six years; and like the BCRA, allow for governors to spearhead waiver applications.
Portions of the Alexander-Murray proposal have the potential to move with a year-end omnibus measure this December to fund the government and extend other critical health programs. Just a few weeks ago, as the GOP tax reform effort waded deeper and deeper into embattled health care territory, Republican leaders indicated that they would be willing to bring the bipartisan Alexander-Murray package up for a vote as a trade-off for including repeal of the ACA’s individual mandate in the tax bill. Democrats immediately questioned how much market stability Alexander-Murray’s two years of CSR funding could truly buy when the mandate for consumers to enter that market is removed. Minority Leader Chuck Schumer (D-NY) quickly announced that Democrats would no longer back the deal if the mandate repeal moves forward.
There are strong indications that the amendments the Alexander-Murray bill would make to section 1332 waivers may not go far enough to satisfy proponents of the more aggressive changes. Senators Orrin Hatch (R-UT) and Mike Crapo (R-ID) are reportedly drafting a bill which, similar to BCRA, would substantially relax or eliminate the affordability, comprehensiveness, and coverage guardrails around 1332 waivers and instead require states to articulate a plan for ensuring people with pre-existing conditions are protected. Their bill would also ease section 1332 budget neutrality requirements by assessing that on a five-year, rather than year-by-year, basis. The Hatch-Crapo bill would also allow states to achieve budget neutrality across section 1332 and section 1115 Medicaid demonstration waivers, combined under a single application – another option disallowed under previous guidance.
Outlook
In addition to the states discussed above, New Hampshire, Kentucky, Maine, Ohio, Rhode Island, and Texas have all successfully enacted state legislation authorizing 1332 waiver proposals and may be the states to watch in the coming year.
As with other aspects of the ACA, the implementation of section 1332 in the near term rests in the hands of the Trump Administration. Despite its guidance earlier in the year and its pronouncements on providing states greater flexibility and administrative ease, states have struggled to decipher conflicting signals, unreliable communication, and vague timelines from the Trump Administration regarding the various waivers proposed this year. See Oregon’s rapid approval this fall for a reinsurance program, where Oklahoma experienced delays and ultimately withdrew a similar proposal. It was reported in early October that President Trump instructed CMS Administrator Seema Verma to reject Iowa’s waiver proposal, despite its conservative approach. Ultimately, the President’s commitment to any policy that might improve stability or reduce uncertainty within the current construct of the ACA is tenuous, and his professed aim to “let Obamacare collapse” may be better served if states cannot implement their own market stabilization efforts.
In the wake of the failed efforts to repeal and replace the ACA, both the Administration and the majority in Congress are struggling to make piecemeal adjustments under the construct of a law to which they existentially object. In the meantime, while a year-end legislative scramble unfolds, fraught with expiring programs, partisan deal-making, and tax reform provisions with the potential to further destabilize insurance markets, states who have invested years of effort into section 1332 waiver proposals may be stuck reading the tea leaves as to the viability or relevance of their own plans for reform.
Beyond December and the tax reform effort looms a promised return to the task of repealing the ACA. But so long as policymakers can neither commit to fixing the flaws of the existing law, nor work together to develop a new construct, states will be unable to meaningfully plan ahead or confidently seek to avail themselves of the opportunity under section 1332 to improve their own systems.
Without Obamacare Mandate, ‘You Open the Floodgates’ for Skimpy Health Plans
by Reed Abelson - NYT - November 30, 2017
The drive by Senate Republicans to repeal the requirement that most Americans have health insurance is not only likely to discourage people from signing up for coverage during the current enrollment period, but also could result in higher premiums.
If repeal is approved, people could opt out of buying policies because they would no longer face a tax penalty and millions could go uninsured. With the Affordable Care Act already weakened by the Trump administration, big drops in enrollment would deal yet another body blow to the law and wreak more havoc in the individual insurance market.
Many consumers would likely to turn to the cheap, short-term policies that already skirt provisions of the law and may not cover pre-existing conditions or basic medical needs.
“If you get rid of the mandate, you open the floodgates,” said Robert Laszewski, an industry consultant in Alexandria, Va.
These plans — sometimes sold by brokers using tactics rife with fraud — were only supposed to last for three months. But President Trump recently signed an executive order that loosened regulations to allow such coverage to be extended up to a year. The proposed repeal of the individual mandate is part of the Senate Republicans’ tax package, and a vote on the legislation is expected this week. Without a mandate, the cost of coverage could increase by double digits on top of already high premiums as healthy people left the market and sick people needing costly care stayed in it.
While repeal supporters argue that people would benefit by having the choice to buy less expensive plans, state regulators have been cracking down on rogue agents who have misled customers about what such inexpensive plans cover or more important don’t.
Examples abound of people who are dumped from such policies or denied coverage, mired in debt and medical bills totaling thousands, if not hundreds of thousands of dollars.
One case pending in federal court involves Kevin Conroy, who had a heart attack in 2014 and underwent triple bypass surgery, just two months after his wife, Linda, obtained a short-term policy over the telephone.
Their insurer, HHC Life, refused to pay the bills.
“We freaked out,” Ms. Conroy said. “What were we going to do? It was $900,000.”
The insurer informed the Conroys the policy was “rescinded,” to use the industry jargon. After poring through his medical records, HCC claimed Mr. Conroy failed to disclose he suffered from alcoholism and degenerative disc disease, conditions he said were never diagnosed. “When one thing didn’t work, they went to another,” Mr. Conroy said.
HCC Life, a unit of Tokio Marine HCC, says it will defend its case. The company is also the subject of a multistate review by insurance regulators to see if it engaged in unfair or deceptive acts. It says it has fully cooperated. HCC Life stopped selling short-term policies last May.
A major player in this area is UnitedHealth Group, which abandoned the Affordable Care Act market after incurring sizable losses. United offers short-term plans through its Golden Rule unit. Before the federal law, Golden Rule was among those insurers criticized for rescinding policies. The company recently told investors it was excited by the president’s executive order because that would mean an increase in business for these plans.
Last year, a short-term policy averaged $109 a month for an individual, according to a recent analysis by eHealth, an online broker, compared with $378 a month during last year’s open enrollment period for an A.C.A. plan.
The policies are particularly attractive to the millions of people who don’t qualify for federal subsidies; only about half of the 17 million people buying coverage are subsidized, according to the Congressional Budget Office. Another target audience would be the 28 million who are uninsured. And some brokers are deliberately promoting the policies without pointing out they do not meet the same levels of coverage of A.C.A. plans, said Scott Flanders, the chief executive of eHealth. “They’re selling the hell out of it,” he said.
Jeff Smedsrud, a founder of Healthcare.com, an online insurance shopping site, “There are companies that aggressively, and some very aggressively, market it as a panacea.”
In recent years, state regulators have investigated the marketing practices of particular brokers, and consumers have sued to expose the actions of some bad actors.
In Pennsylvania during the past two years, the state took action against seven agents for misrepresenting the plans they sold. One woman who had a stroke was left with $250,000 in unpaid medical bills because the policy did not cover prescription drugs and other basic treatment.
While a handful of states, including New Jersey, now effectively ban short-term plans, others review rates and make sure the policies follow state law, said Dania Palanker, an assistant research professor at Georgetown University.
But other states will likely do little to prevent more sales of these policies, said Katherine Hempstead, a policy expert at the Robert Wood Johnson Foundation. “You’re going to make it easier in places where it is already easy,” she said.
Industry experts estimate as many as a million people may now have these policies, though the official tally is much lower. And others may fall under this umbrella, because it’s hard to distinguish from alternatives, like so-called limited benefit plans, which cap how much the insurer will pay, and association plans, available to small businesses, that will also be expanded under Mr. Trump’s executive order.
Several companies are poised to capitalize on a less restrictive environment. Health Insurance Innovations, which markets short-term policies, including those once offered by HCC Life, is under scrutiny by state insurance regulators. It recently told investors that there were “tens of millions” of people who could benefit from these plans. The company declined to comment.
These plans typically offer much higher commissions to brokers selling them, and they can be much more profitable for insurers. UnitedHealth’s Golden Rule spent about half of every dollar it took in premiums for medical expenses, according to regulatory filings. Under the federal law, insurers must spend at least 80 cents of each dollar on care for their customers. UnitedHealth declined to comment.
Some experts speculate that insurers are likely to exploit the existing A.C.A. market as a way of selling short-term policies to people until they have serious medical conditions. Coverage sold under the federal law would become increasingly expensive, with people priced out of the market if they didn’t get subsidies, Mr. Laszewski, the industry consultant, said.
While the market for subsidized coverage is largely protected, the market for those who pay the full cost is already shrinking, he said.
Like the insurance that was sold before the federal health care law, people with chronic conditions or a history of illness are mostly turned away. Companies will sometimes rescind policies if an individual has high medical bills.
UnitedHealth’s Golden Rule recently won a lawsuit involving one of its short-term policies, claiming it did not have to cover $400,000 in medical bills because it said a woman with breast cancer had an abnormal mammogram before she enrolled. The case is being appealed.
“Insurance companies today are interpreting their short-term health insurance policies so as to label any condition that arises during the policy term as a pre-existing condition for which the company can exclude coverage,” said a lawyer representing Ms. Jones in a statement. UnitedHealth declined to comment.
Customers often have had to argue about whether something was a pre-existing condition. When Karen Campbell and her husband looked for insurance before Obamacare, “we had this extensive, unbelievable interview, each of us about our medical history,” she said. After rupturing her Achilles’ tendon, which required $30,000 in surgery and physical therapy, the insurer asked for medical records to make sure it wasn’t something she previously had. “They just made it really difficult,” Ms. Campbell said.
Grace Wood, an instructor at a university in San Francisco, bought a short-term plan in 2013. When she had to have a heart procedure, her insurer, HCC Life, balked, leaving her with roughly $150,000 in unpaid medical bills.
“Why should I go bankrupt?” Ms. Wood recalled asking herself. It took her a year and a half, but she appealed and turned to regulators when the insurer ignored her. HCC eventually paid the claims.
How the G.O.P. Tax Bill Will Ruin Obamacare
by J.B. Silvers - NYT - December 4, 2017
As part of their giant tax bill, Republicans in Congress are about to eliminate the Affordable Care Act’s individual mandate. Their objective is not sensible health care reform but rather insensible arithmetic that could satisfy the byzantine rules governing the Senate’s reconciliation process.
The purpose of the mandate is to evenly distribute risk among healthy and unhealthy Americans on the individual insurance market so that costs are shared and no one is left out.
Will killing the mandate ruin Obamacare exchanges? No, but it will transform them into an extended form of Medicaid by another name. Americans with subsidized policies will stay in the system, with help from the federal government.
Unsubsidized individuals, however, will be driven out of the market, because a repeal of the mandate will cause premiums on exchange plans to skyrocket as healthy people exit. Many of these people will purchase new stripped-down, less expensive policies — courtesy of a Trump administration executive order — with the understanding that they can sign up for a more robust exchange policy at the next open enrollment period if they need full coverage in times of illness.
About three-quarters of those who buy insurance on the exchanges are subsidized by the federal government to reduce premiums to a specified “affordable” percentage of their income. The loss of the mandate will not effect them. But many healthy, younger enrollees — who help to make insurance affordable by balancing the risk of sicker older people — will be driven away by higher premiums, and without the mandate, they would probably opt out — they typically didn’t want to buy insurance anyway. Unfortunately, their exit will leave a higher average cost for those who are left.
Within a year or two of elimination of the mandate, the individual insurance market will resemble the failed pre-Obamacare days when pre-existing conditions and high premiums made access impossible. The difference is that the government will foot a large part of the cost through subsidies. Before the A.C.A., lower-income people who didn’t qualify for Medicaid were priced out of the individual market, but with subsidies, they can now purchase lower-cost plans. If the individual mandate is eliminated, it will be middle-income people without subsidies who lose access.
The continuing high enrollment this fall supports the idea that most people still see the subsidized insurance offerings on the exchanges as a good deal. As a result, the demand side of this unusual market will stay strong for the subsidized customers.
How will the insurance companies react? They will see high demand for subsidized insurance as a tempting market in spite of past and future chaos. The problem for them is that these customers are sicker and less predictable in their needs, which makes it difficult to set a price. This is precisely why the number of insurers this year has dropped so severely. But managing uncertainty is at the core of this business. Any risk is acceptable if the compensation is high enough.
Many observers have been critical that only one or two Obamacare insurers offer plans in many counties. But for the remaining insurers, there is a silver lining: monopoly. Without serious competition and with the support of subsidies, insurers can set premiums high enough to cover any contingency and virtually guarantee a good profit. The high quoted premiums on the exchanges signal that insurers are anticipating these changes in the pool. The remaining insurers will not run away. In fact, I expect those who stay will report record profits next year, even without the mandate. By now all those firms with a low tolerance for risk have exited.
However, the timing of a mandate repeal is central. Eliminating the individual mandate will make little difference to insurers in 2018 if the mandate expires in 2019. But Congress may decide to eliminate the individual mandate immediately. Then insurers, who priced their plans assuming continuation of the same historical enrollee pool, will lose their shirts as healthier enrollees drop out. Changing the rules halfway through the game is not something insurance company C.E.O.s. can anticipate, but it is their biggest challenge now.
A surprising result of eliminating the individual mandate would be an effective expansion of a plan that many Republicans in Congress would like to cut or abolish: Medicaid. Under the evolving Obamacare policies, lower-income enrollees are heavily subsidized by the government, and the plans on the exchanges are largely offered by insurers specialized in Medicaid service to the states.
Without the individual mandate, the exchanges will not die but will continue as zombies offering high-cost coverage, fed by the federal government and stumbling around the health system failing to serve their original purpose — access for all regardless of age, health status or pre-existing conditions.
Yet as long as the subsidies continue, health plans will offer their policies on the exchanges with very high premiums. While this may allow access for some who otherwise would be left out, the grand purpose of the A.C.A. — to allow affordable care for all — will slip away. Is this any way to do health policy?
Senate’s massive tax bill would have potent ripple effects for health-care system
by Amy Goldstein - The Washington Post - December 2, 2017
The Republican tax overhaul that squeaked through the Senate early Saturday morning would reach deep into the nation’s health-care system, with a clear dagger to a core aspect of the Affordable Care Act and broader ripple effects that could threaten other programs over time.
The measure would abolish the government’s enforcement of the ACA requirement that most Americans carry insurance coverage. It would not end the individual mandate itself but would eliminate tax penalties for flouting that requirement. The result could cause an extra 13 million people to become uninsured and drive up insurance premiums in marketplaces created under the law, according to an estimate by Congress’s nonpartisan budget analysts.
Yet downstream effects of the bill that have drawn less attention could potentially damage the health care and well-being of far more people. The Senate plan would increase the federal deficit starting in the current fiscal year and – unless lawmakers intervene – would unleash a budgetary sequence of events cutting billions of dollars from Medicare and public health services. The reductions would flow from a “pay as you go” law that basically requires offsets to increases in federal spending.
At the same time, the frenzied negotiations to line up support for the massive legislation within the Senate’s slender majority improved the prospects for temporarily reviving payments to ACA insurers that President Donald Trump ended this fall. In becoming the last Republican senator to announce support for the tax bill, Sen. Susan Collins of Maine said late Friday afternoon that Majority Leader Mitch McConnell, R-Ky., had “committed to support” two separate measures by the end of the year.
One is a bipartisan plan that would restore for two years “cost-sharing reduction” payments to cover the expense of discounts the ACA compels insurers to give lower-income customers on deductibles and other out-of-pocket costs. Trump cut off the monthly payments as of October, erroneously terming them “bailouts” to the insurance industry. The plan, forged by Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., also would expand consumers’ ability to buy inexpensive “catastrophic” health plans through ACA marketplaces and make it easier for states to secure federal permission to carry out the law’s basic ideas in different ways.
An attempt to pass the plan faltered in the Senate earlier in the fall, but Collins said Friday that McConnell was now willing to support its passage, along with a newer plan that would give states two years of money for various “reinsurance” funds intended to help insurers blunt premium increases. Neither measure has been considered by the House.
Now that both chambers of Congress have passed versions of the biggest rewrite of tax law in decades, the differences will have to be negotiated. The House bill would not end penalties for Americans who fail to carry insurance, but Republicans there have been sympathetic to the idea, which was part of legislation the House adopted this year to dismantle much of the ACA.
The likelihood of big reductions in other forms of health-care spending, triggered by the so-called PAYGO law to deter deficit increases, is less certain.
In the hours before the Senate’s final vote on the tax overhaul package, McConnell and House Speaker Paul Ryan, R-Wis., sought to tamp down fears of such cuts, issuing a joint statement in which they accused Democrats of “misleading claims” and promised to “work to ensure these spending cuts are prevented.”
The bill itself does not avert them, however. Separate action would be required later on and – unlike the parliamentary maneuvers used to adopt the tax plan with only GOP votes – would require support from some Democrats. Republican leaders predict that Democrats would cooperate rather than bear blame for harming health care funding.
The leaders’ joint statement has its skeptics. “We are aware they say they will waive the PAYGO, but we have little comfort that they can do this,” said Georges Benjamin, executive director of the American Public Health Association. “Why did they not write the bill to address this in the first place?”
The cuts, if they happen, would decrease federal spending on Medicare by 4 percent – amounting to about $25 million next year, the Congressional Budget Office forecast. Because PAYGO rules do not allow Medicare benefits themselves to be touched, the funding loss would be spread among payments to doctors, hospitals and others that provide care to the program’s 56 million older and disabled Americans.
Those rules focus only on the mandatory spending within the federal budget and would leave untouched some health-care programs that provide help to low-income Americans, such as Medicaid and the Children’s Health Insurance Program. But it could eliminate nearly $1 billion a year for a Prevention and Public Health Fund, created under the ACA, that now represents 12 percent of the Centers for Disease Control and Prevention’s budget.
If that fund disappears, “people are going to be sicker,” Benjamin warned, with fewer low-income Americans likely to get tested for breast or colon cancer and public health workers less able to control outbreaks of contagious infections.
Even if the PAYGO cuts are averted, advocates for vulnerable groups of Americans fear that the sheer magnitude of the bill’s deficit increase – $1.5 trillion in the coming decade – would give conservatives in Congress reason to shrink social safety-programs that they have long hoped to target.
“That is ultimately the most troubling part,” said David Certner, legislative counsel for AARP. “We create these large deficits and that will put pressure for cuts to Medicare, Medicaid. . . . Everything will be on the table.”
Maine AllCare works toward universal health care in Pine Tree State
by Erin Place - Advertiser Democrat - November 30, 2017
NORWAY — Maine AllCare has adopted an “everybody in, nobody out” mantra when it comes to health care coverage in the Pine Tree State and officials reported extensive growth in their organization over the past year.
Maine AllCare is a nonprofit and nonpartisan organization that was founded six years ago, though organizers report that traction really got going in 2017. Its goal is “achieving universal, high-quality and affordable health care for the people of Maine,” according to its website, http://maineallcare.org/.
It seemed appropriate that the meeting for the Norway Area Chapter was held on Giving Tuesday, Nov. 28, as chapter coordinator and board member Marilyn McWilliams reported a donor was found that day to match the first $5,000 of donations for the nonprofit. She encouraged the dozen attendees to reach out friends and family for donations.
Chapter Leader Liesha Petrovich told the group, “Our first donation was $5. People want to give. It wasn’t a lot of money but people want to give.”
The Norway Area Chapter was formed in August after Petrovich met a coordinator at the Norway Arts Festival.
“As soon as she said, ‘We’re working towards universal health care,’ I am all in,” she recalled, laughing. “At ‘universal’ you had me.”
Making the case
McWilliams, a Portland resident, became involved after learning about the organization at her church three years ago. While she is a Mainer, she worked in Massachusetts as a group insurance broker and witnessed first hand the failings of the country’s health care system.
“I thought, ‘You know, this whole system is just ridiculous. It’s my job while I am there to help them get through it, but this system needs to go away,’” she said. “Of the 34 industrialized countries, we are the only one that doesn’t have universal health care.”
“I think this is a no brainer for anybody. I don’t necessarily think it’s political,” Petrovich said about universal health care, adding there are many people who have filed for bankruptcy because of medical bills.
McWilliams noted medical bills are the reason for more than 60 percent of those who file for bankruptcy. A husband and wife duo in the Rockland Chapter are currently collecting stories about people’s health care nightmares to compile on a DVD that can be shared with audiences around the state.
“It is shocking that we live in this country and we have this problem,” Petrovich added.
Maine first
While Maine AllCare organizers would love to see universal health care happen at the federal level first, they acknowledge that is not a reality. At the same time, if it was passed by the Maine Legislature, McWilliams said the bill would be altered. So they’re working toward a referendum question in 2020, with the hope if it passes, universal health care would be up and running by 2022 or 2023.
“I think our current administration is giving us the opportunity to say, ‘Things need to change,’” she said. “People are ready for this.”
Petrovich agreed.
“I think now is the time. I think a lot of different things converged to push the idea of universal health care. … Let’s take advantage of that,” she said.
McWilliams, Petrovich and other volunteers worked at polling places on Election Day and all reported enthusiasm and excitement from the majority of people they spoke with, many of whom signed cards saying they supported universal health care. Petrovich said of course there were some who were not interested.
“We had so many more that just said, ‘Where do I sign?’” she said.
Retired physician Tom Sterne of Bridgton said while some people had doubts and questions, they were also convincible.
“I think generally they were people who left that table with their eyes a bit more open and their ears a bit more perked,” he said.
The numbers show the support for universal health care, they said. The nonprofit’s goal was to gather 3,000 signatures for support on Election Day. Across the state, more than 11,000 were collected. There were “wows” and a “woo hoo” from the local volunteers – who hail from Bridgton, Paris, West Paris and Porter – when they heard the news Tuesday night.
McWilliams said at the beginning of the year, there were only 4,000 supporters and now there are 26,000.
“It’s grown that much,” she said. “We only had three chapters at the beginning of 2017. Now [there’s] 10.”
Logistics
One of toughest questions volunteers are asked is how will universal health care be funded.
“It’s publicly funded, which is what we want. It’s taxes,” McWilliams said. “We’re going to have those numbers because we’re having those mathematical studies done.”
Maine AllCare would not have any deductibles, co-pays or networks.
“You just go to the doctor,” she said. “Obviously the people who are going to be afraid – and they’re going to come after us – is the insurance companies because they’re not going to be needed and the drug companies because we have to negotiate costs right now.”
However, McWilliams posits, universal health care would be good for businesses.
“Businesses would spend less on health care than they are now if they are paying for health care,” she said, putting an emphasis on the word “if.”
For those businesses that don’t pay for health care, this system would put them on an even playing field, she said.
“If a business knew it didn’t have to offer employees medical insurance here, that’s a pretty big incentive to bring or start your business here,” McWilliams added.
Upcoming events
The chapter plans to show the PBS documentary “Sick Around the World” in mid-January or February, which would be followed by a panel discussion, as a way to get more people involved with the movement.
“It didn’t tackle a narrow issue. It kept the scope quite broad,” said Sterne. “It is done by a lay reporter, T.R. Reid, who came at it as a normal consumer, patient person would, only a little more sophisticated.”
The meetings are held on the fourth Tuesday of the month from 6:30 to 8 p.m. at Maine Kyokushin Karate Center, 29 Main St., Suite 5, Norway. The next meeting is scheduled for Tuesday, Jan. 23.
For more information, visit http://maineallcare.org/, www.facebook.com/NorwayArea/ or email Petrovich at lieshapetrovich@gmail.com.
Why so many Mainers are paying the ACA penalty for lacking health insurance
by Meg Haskell - Bangor Daily News - December 1, 2017
Maine has one of the highest rates of health insurance in the nation, with only about 7 percent of the population lacking coverage. But at the same time, many Mainers have paid the federal tax penalty, established under the “individual mandate” provision of the Affordable Care Act, for having no insurance.
According to IRS data, more than 34,000 Maine tax filers paid nearly $15.5 million in the ACA tax penalty in 2015, the most recent year for which the data are available. That’s about 5.25 percent of all tax filers in the state that year, a high share compared to other states.
Nationwide, 4.5 percent of all tax filers paid the penalty in 2015, according to a recent report in the New York Times.
Most states with large percentages of residents paying the ACA penalty, such as Texas, Alaska and Florida, also have high percentages of uninsured residents, which stands to reason.
But Maine, where comparatively few lack insurance, is an outlier.
Is it a misunderstanding about the requirements of the law? A failure of marketing? A political statement? Or plain old Yankee cussedness?
Trish Riley, executive director of the National Academy for State Health Policy, said it could be any or all of the above. But, she cautioned, 2015 was the first full year of ACA-generated data. American consumers, insurers and tax experts were just coming to terms with the program and its complexities, including the penalty for not having health coverage.
“This is just a baseline,” she said of the Times data. “Things have gotten a lot better. 2015 was a long time ago in ACA-land.”
From 2003 to 2011, Riley headed the Office of Health Policy and Finance in Maine, under then-Gov. John Baldacci.
Low rates of uninsured
“It’s a complicated question,” Mitchell Stein, an independent health policy consultant who advocates for expanding access to care, said. “There are unique issues in Maine that push us in several different directions at once.”
Maine’s success in covering its residents dates back to the days of the Dirigo Health Reform Act of 2003, he said, when Baldacci signed into law a number of provisions to expand health care access and improve the quality of care in Maine, including a subsidized insurance plan known as DirigoChoice.
“Dirigo kind of disappeared with [the coming of] the ACA,” Stein said. “But there was this whole group of people in Maine who were primed for this kind of set-up.”
He also credits the Maine Health Access Foundation’s statewide ACA marketing campaign, called Enroll207.
Also, Stein said, the founding of Community Health Options, a Lewiston-based insurance cooperative that offers a range of health plans on the marketplace, provided Mainers with an important alternative to commercial insurance plans. For 2018, nonprofit Harvard Pilgrim Health Care is the only other insurer selling plans through the marketplace in Maine.
“Maine is a small state, and a communal state,” Stein said, “so all these people who were involved [in the success of the ACA] knew each other and came together to make it work.”
Still, he said, especially in the least-populated areas of the state, the ACA and its complexities remain a bit of a mystery, possibly reflected in higher rates of penalty-filing from those far-flung areas.
The average payment in Maine was about $455 in 2015, in keeping with the national average that year of $462. The penalty is calculated using income and the average cost of health premiums. In 2015, the minimum payment for a single adult was $325 and the maximum was $2,676. The figures have increased over time, and in 2017 the average penalty was estimated at $708.
Stein pointed out that for 2018, a subsidized, basic-benefit “Bronze” plan can cost almost nothing — or in a surprising number of cases, literally nothing. “I wonder if people know that,” he said.
And, he said, in low-income households where the lowest subsidized monthly premium costs more than 8 percent of income, the tax penalty for not having insurance is waived.
“I can’t prove it,” Stein said, “but many of the people paying the penalty in Maine may be doing so mistakenly.”
Paying the penalty
“The word ‘affordable’ has a specific meaning in the ACA, but it’s a relative term for everyone else,” Joel Allumbaugh, a Maine-based employee benefits broker and a senior fellow with the conservative Foundation for Government Accountability, said.
Allumbaugh said that despite good-faith efforts to promote ACA plans, many Mainers still feel they cannot afford even the cheapest available option and choose to pay the penalty instead. Or, independent-minded Mainers may be ideologically opposed to the taxpayer-subsidized program and protest it by not enrolling.
Allumbaugh said that though an employer may offer coverage to a middle-wage worker, the expense of adding a spouse and dependents often proves unaffordable.
“I’d love to see how many people who pay that penalty are family members of a person who has coverage,” he said.
Many Mainers find the process of signing up for coverage and reporting it on their tax forms confusing, Allumbaugh said.
“It can be cumbersome and complicated, with a lot of ambiguity,” he said
At the H&R Block tax preparation assistance office in Bucksport, owner Catherine Hope said many of her clients are confused about the ACA reporting requirements and the tax penalty, even those with employer-sponsored insurance.
People who buy a subsidized plan on the individual marketplace themselves, without the benefit of a trained assistant, are especially likely to file incorrectly.
“It gets really messed up,” she said. “A lot of different things can happen.”
The Times reported that about. 6.1 million tax filers paid the ACA penalty — officially known at the Internal Revenue Service as the “health care individual responsibility payment” — in tax year 2015, a significant decrease from the 2014 number of 8.1 million.
In 2015 and early 2016, the IRS sent letters to almost 319,000 taxpayers who may have unnecessarily paid the penalty, in order to help them amend their 2014 taxes, according to the report.
To complicate things further, the IRS announced in February that it will no longer reject electronically filed “silent returns” — those that do not provide required information about health coverage. That’s in response to an executive order issued in January by President Donald Trump that all federal agencies with responsibilities under the ACA “waive, defer, grant exemptions from, or delay the implementation of any requirement of the Act that would impose burden.”
Maine Voices: Proposed unification of hospitals about balance sheet, not health care
by JB Turner - Portland Press Herald - December 2, 2017
BELFAST — Between a rock and hard place: That’s where Waldo County General Hospital sits amid an impending decision about its unification with the MaineHealth system.
As a board member first of Waldo County General Hospital in Belfast, and then of Coastal Healthcare Alliance following a partnership with Rockport-based Penobscot Bay Medical Center, I’ve watched Waldo County General Hospital being squeezed and pressed in its uncomfortable position for the past year. Next week it will finally be irrevocably reshaped, and I don’t yet know how.
My fellow Coastal Healthcare Alliance board members and I each will cast a vote Tuesday to either become part of the growing MaineHealth machine or remain a semi-independent entity. For months our board meetings have been consumed by deep discussions regarding the merits of unification. We’ve hosted supplemental workshops and outreach programs for both the Waldo and Pen Bay areas. Each of us has struggled alone and as a group with the predicted financial, health and community repercussions of unification.
I regularly voice my opinion to my fellow board members that this decision about unification is actually a choice about control of the balance sheet, not health care. If our two hospitals are part of MaineHealth, our two revenue streams – and deficits – are also part of MaineHealth. Funds from all of MaineHealth’s hospitals will move around the entire state to create a balanced budget. For Pen Bay, which suffers annual losses, MaineHealth’s control will be a benefit, zeroing out its debt. For Waldo County General Hospital, which enjoys a healthy surplus, MaineHealth’s control will result in a huge loss of the funds that could benefit its immediate community.
This imbalance in the bottom lines of the two Coastal Healthcare Alliance hospitalshelps to divide the votes across our board. Members with closer ties to Pen Bay are much more likely to support the unification, which would ease its financial burden. Many of us who hail from Waldo County feel like Waldo County General Hospital’s surplus – the result of the leadership’s careful navigation of the health care system’s regulations – will be appropriated unfairly by organizations that haven’t been as forward-thinking as ours.
During our deliberations several months ago, we considered dissolving Coastal Healthcare Alliance so the two hospitals could vote independently about unification with MaineHealth. That motion never made it to a board vote, so we remain together, yet slightly divided.
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When we look beyond the dollars and cents, we see other potential bureaucratic costs that we can’t forecast. Will our local hospitals lose control of their destinies when MaineHealth exerts its control? Will we need approval for every new piece of life-saving equipment, new doctor or new facility? And what happens to the quality of our hospitals if we don’t get it?
These fears are shared by many of our doctors and health staff. Our board can’t appease their anxieties; we have no clear vision of a “unified” future. We either take the chance with MaineHealth and believe in the good intentions of its executives, or we push back and see if we can make it on our own without the corporate safety net.
I often struggle to believe in those good intentions when our ongoing negotiations with MaineHealth fall flat. As part of the unification, MaineHealth has guaranteed that Waldo County General Hospital and Pen Bay each will have a MaineHealth board representative for five years. After that period, no hospital – other than Maine Medical Center – is guaranteed a seat at MaineHealth’s decision-making table. Our Coastal Healthcare Alliance board has asked MaineHealth multiple times to reconsider our board seats, but it won’t budge.
What if we at Coastal Healthcare Alliance decide not to budge? We wouldn’t be thrown out of MaineHealth, but we would begin an uncharted course. Our hospitals would become outliers in the system. Just as our doctors are concerned they might not get much-needed equipment if we unify with MaineHealth, our board is concerned we might not get critical support for our hospitals if we don’t unify.
Should next week’s vote support unification, our organizations will move into a very expensive planning phase for the merger, which will take a significant amount of time and resources. Should the vote be against unification, we’ll begin our daunting journey into the future of health care alone.
As both a Waldo County resident and as a Maine business leader, I’m squeezed between that rock and hard place with little room to breathe before next Tuesday’s vote.
Unlike Canadians, Americans pay a huge financial and emotional price for health care
by Diane Archer - JustCare - November 29, 2017
Catherine Gordon reports for the UC Observer on cancer care in Canada and the US, profiling her own experience in Canada and that of her sister Karen, in the US. The sisters were diagnosed with breast cancer within one year of each other. They both received first-rate treatment; but, unlike Catherine, Karen paid a huge financial and emotional price for her health care.
Both sisters had six chemotherapy treatments and 25 rounds of radiation treatment. Catherine’s medical bills were minimal, $750 in out-of-pocket costs and $1,200 for her wig. The Ontario Health Insurance Plan paid for the rest of her care. Ontario’s Assistive Devices Program paid for most of the cost of her $400 breast prosthetic.
Karen, in sharp contrast, paid more than $23,000 out of pocket–about $7,500 in health insurance premiums and $16,000 to meet her deductibles over her two years of care. In addition, she suffered through the emotional and financial hassles of deductibles and copays, as well as accessing needed care. Karen was asked to write a check for her care minutes before she was about to get surgery. “Just as I was getting ready to head to the operating room, a tall man in a nice suit came in and told us he had to have a cheque before they would go ahead. ‘It’s our new policy because people aren’t paying their bills.’ We paid him, of course, but it seemed absolutely outrageous — especially when you’re frightened and sick.”
Catherine reports that Karen’s file folder of medical bills was three inches thick. She had nearly 50 bills from a range of health care providers, including pathologists, imaging centers, radiologists, plastic surgeons, anesthesia services, blood labs. She had no clue who many of these providers were or what services they had provided. Karen had to navigate this sea of bills, while “in crisis mode and trying to deal with getting well.”
Watch this video put together by Bernie Sanders to learn more about Catherine and Karen’s experiences getting cancer care in Canada and the US, respectively.
Editor's Note:
There is a video embedded in the preceding article. To see it go to
-SPC
As Health Care Changes, Insurers, Hospitals and Drugstores Team Up
by Reed Abelson - NYT - November 26, 2017
They seem like odd couples: Aetna, one of the nation’s largest health insurers, is in talks to combine with CVS Health, which manages pharmacy benefits. The Cleveland Clinic, a highly regarded health system, joined forces with an insurance start-up, Oscar Health, to offer individuals a health plan in Ohio.
Aetna also has new partnerships with large health systems that include hospitals and doctors’ groups in Northern California and Virginia.
These established players are venturing beyond their traditional lines of business, now that federal officials have quashed the mega-mergers proposed by the biggest insurers and blocked a deal between two large drugstore chains.
Former adversaries are banding together, girding against upheaval in a rapidly changing health care environment. They are also bracing for the threats posed by interlopers like Amazon eyeing a foray into the pharmacy business or tech companies offering virtual medical care via a computer or cellphone.
“There’s been a strong trend for health organizations to want to broaden their footprint, especially on the part of insurers to get more direct contact with the individual,” said Dr. John W. Rowe, a former hospital and insurance executive who is a professor of health policy at Columbia University.
Given the uncertainty over the Affordable Care Act and the potentially limited appeal of the core insurance business, insurers are looking to follow the strategy pursued by UnitedHealth Group. The big insurer, which acquired a chain of outpatient surgery centers earlier this year, has a wide array of profitable health care businesses like its own pharmacy benefit manager and various consulting arms through its Optum unit.
While the companies promote these partnerships to employers and consumers as one-stop shopping, they could also put customers at a disadvantage by limiting their choices and increasing medical costs.
Under these arrangements, people may not be able to see doctors outside the organization’s own medical group. In addition, patients may worry that their doctor will decide not to order an expensive test to exact savings for the business partners — the insurer and the health organization. An in-house pharmacy benefit manager could direct customers to certain drugs because its manufacturer offers hefty rebates even if the medicine is more expensive or does not work as well as a competitor’s.
And the combined clout of the companies could push consumers’ expenses higher.
Employers that purchase coverage on behalf of their workers may also have difficulty determining how much they are paying for a given medicine or a particular service, said Edward A. Kaplan, a senior vice president at Segal Consulting. There’s already a lack of transparency when it comes to drug prices, and employers may have even less information if the insurer and the pharmacy benefit manager are the same entity. “It’s going to be harder for us to get behind the curtain,” Mr. Kaplan said.
Companies are actively looking for partners that will provide an entree into new businesses or a new supply of customers. CVS Health, which started as a drugstore chain, operates a large pharmacy benefit manager as well as walk-in clinics in its drugstores. By combining with Aetna, which covers about 22 million people, CVS would be able to direct members to its own mail-order and pharmacy business and to its walk-in clinics, located in its drugstores, for much of their care.
“It’s a sign of the continued integration in health care,” said Tom Robinson, a partner for Oliver Wyman, a consultant that estimated there have been about 200 partnerships created between insurers and large health groups in the last five years. By sharing in the profits or losses of these ventures, the parties say they work more closely to make sure a patient gets the right medicine or has access to a doctor at a nearby clinic instead of resorting to an emergency room.
The savings can be tangible. Anthem, which recently announced that it plans to start its own pharmacy benefit manager, estimated it could save $4 billion a year, the bulk of which it said would result in lower drug costs for customers.
These partnerships can also represent a dramatic departure from the status quo. In many situations, an insurer and a hospital group would barely talk to each other outside a meeting every year or so to haggle over how much to pay for a knee replacement or an overnight hospital stay. The discussions rarely include how to better manage the care of a patient whose asthma goes untreated or has back pain that would be better treated with physical therapy.
The contract negotiations between insurers and hospital systems tend to be “a zero-sum game,” said Brigitte Nettesheim, a senior executive with Aetna. Once the contract is signed, and a conflict arises over the cost or choice of a treatment, the patient is the one often caught in the middle.
Aetna started offering joint plans with Inova, a large organization in Northern Virginia, in 2013. The partnership now covers more than 193,000 people. Patients see a doctor who belongs to a special network of primary-care physicians and specialists, most of whom are not employed by Inova but work together closely with the system to coordinate care for patients.
Inova was able to finance the creation of this network through the joint venture, and it is now experimenting with new ways of paying the network’s doctors so they bear more responsibility for the overall effectiveness of the care they deliver. If they save money by caring for the patient more efficiently, they share in the savings.
Patients in these joint ventures are also assigned a nurse who helps them navigate the system. When a cardiologist prescribed a new cholesterol medicine that required a $200 co-payment, the nurse was able to call the doctor to find a less expensive alternative, saving the patient nearly $2,300 a year, Ms. Nettesheim said. “It’s about these open lines of communication,” she said.
When Banner Health, a large group based in Phoenix, partnered with Aetna to offer a joint health plan, it decided to add 35 retail clinics where people could get care after-hours or closer to their homes rather than show up in the system’s emergency rooms. The clinics “are lower-cost options for our members and more convenient,” said Chuck Lehn, the president of the Banner Health Network.
It’s too soon to tell whether these new combinations will succeed in delivering on the promises made when they join forces. “They just tied the knot,” Mr. Robinson of Oliver Wyman said. “Now they have to build the relationship.”
Hearing Amazon’s Footsteps, the Health Care Industry Shudders
by Nick Winfield and Katie Thomas - NYT - November 27, 2017
SEATTLE — With little more than a whiff of Amazon’s interest in a new business, the company can crater the stocks of potential competitors, prompting them to consider bold acquisitions and other drastic measures in response. Just ask companies in the home improvement, meal-kit and grocery businesses.
The latest category alarmed by the specter of competition from Amazon is the pharmacy market. With huge amounts of consumer spending and frustrating inefficiencies, it is the type of business that invariably attracts Amazon’s attention. CVS Health is now in talks to acquire Aetna, one of the nation’s largest health insurance providers, a move considered to be partly a reaction to the footsteps of Amazon.
The likelihood of Amazon’s eventually getting into the pharmacy business is high, several analysts and a former employee said. But it is not clear when it will make that move or how aggressive it intends to be.
The near-term threat may be somewhat overstated. Amazon has received wholesale pharmacy licenses in at least a dozen states, as The St. Louis Post-Dispatch reportedon Thursday. But the licenses permit the company to sell other kinds of products too. In Connecticut, for example, the license is for “wholesale of drugs, cosmetics and medical devices,” while in Louisiana it was granted to a “drug or device distributor.”
Brian Tanquilut, an analyst for Jefferies, noted that the company acquired many of the wholesale pharmacy licenses between fall of last year and early this year, around when the company started selling medical supplies to businesses. “It’s not evidence of a retail entry into the pharmacy business,” he said.
An Amazon spokeswoman, Lori Torgerson, refused to comment on “rumors or speculation” about Amazon entering the pharmacy business, but she shared a statement that suggested other motivations for the paperwork. “Wholesale licenses are required for Amazon Business to sell professional-use only medical devices in certain states,” she said.
There is little doubt, though, that Amazon is interested in at least some aspects of the pharmacy business. Brittain Ladd, a supply chain consultant who worked at Amazon until earlier this year on groceries and other initiatives, said he participated in discussions about how Amazon could enter the category, including through acquisitions.
“The pharmacy business was always a topic of interest when I was with Amazon, and there was a sincere desire on the part of Amazon to create a better customer experience across pharmacy and health care as a whole,” he said.
While Mr. Ladd said he isn’t privy to the company’s current strategy, he believes existing pharmacy companies are right to be worried. “My advice is that executives at pharmaceutical companies should crush all assumptions when it comes to Amazon and their ability to enter, innovate and reimagine the pharmacy business and health care,” he said.
If Amazon decides to enter the market, it could take a variety of avenues, analysts said.
The easiest way in would be to set up a mail-order pharmacy that focused on price-sensitive customers without health insurance or who have high-deductible plans that require them to pay for some drug costs upfront. To do this, Amazon would need retail pharmacy licenses in every state — a hurdle, certainly, but not an insurmountable one, the analysts said.
“They can at least dip their toe in the water with the cash-pay customers, and learn the business,” said Ana Gupte, an analyst for Leerink Partners.
She said cash-paying customers account for 5 percent to 10 percent of the $560 billion prescription drug business.
The idea could prove attractive to customers who already go to Amazon for a wide range of shopping items, from shoes to electronics to diapers. Retailers like Target and Walmart have added pharmacies to bring in extra business for a similar reason. Amazon’s recent acquisition of Whole Foods could also provide a physical location for pharmacies.
“A large part of the infrastructure is already there,” said David Maris, an analyst for Wells Fargo.
In a call with analysts this week, Timothy C. Wentworth, the chief executive of the pharmacy-benefit manager Express Scripts, indicated a willingness to work with Amazon to reach these cash-paying customers. “We certainly see that as something where if they wanted to move into a space, we could be a very natural collaborator,” he said.
If Amazon wanted to go bigger, Ms. Gupte and others said, it could sell to insured customers and even serve as a pharmacy-benefit manager, overseeing drug coverage for people on behalf of insurers and large employers.
This would be far more complex. It would likely require Amazon to either acquire a pharmacy-benefit manager or enter into a partnership with an existing one. Expanding the pharmacy business without the aid of a major pharmacy-benefit manager would be tough, because the benefit managers serve as gatekeepers to insured patients, deciding which pharmacies they can and cannot use. The benefit managers also operate their own mail-order pharmacies, which might make them less willing to accommodate Amazon.
Some said they expect that if Amazon chooses to enter the health care business, it would do so in a big way. The company could attempt to provide comprehensive services to patients, doctors and others, far beyond selling drugs.
Nadina J. Rosier, the health and group benefits pharmacy practice leader at Willis Towers Watson, said other areas the company could explore include offering virtual doctor consults, or using the Amazon Echo, its voice-controlled smart device, for health care applications.
No matter the short-term steps Amazon is taking, Ms. Rosier said, her research has demonstrated that it is “clearly looking to revolutionize how health care is delivered in some way.”
But while Amazon has a track record for upending major industries, from books to groceries, she said health care is complicated and there would be intense pressure to get it right. “It is just a sensitive topic,” she said. “We don’t have as much scrutiny of how much you paid for your jeans, or your shoes.”
CVS to Buy Aetna for $69 Billion in a Deal That May Reshape the Health Industry
by Michael J. de la Merced and Reed Abelson - NYT - December 3, 2017
CVS Health said on Sunday that it had agreed to buy Aetna for about $69 billion in a deal that would combine the drugstore giant with one of the biggest health insurers in the United States and has the potential to reshape the nation’s health care industry.
The transaction, one of the largest of the year, reflects the increasingly blurred lines between the traditionally separate spheres of a rapidly changing industry. It represents an effort to make both companies more appealing to consumers as health care that was once delivered in a doctor’s office more often reaches consumers over the phone, at a retail clinic or via an app.
The merger comes at a time of turbulent transformation in health care. Insurers, hospitals and pharmacy companies are bracing for a possible disruption in government programs like Medicare as a result of the Republicans’ plan to cut taxes. Congress remains at an impasse over the future of the Affordable Care Act, while employers and consumers are struggling under the weight of rising medical costs, including the soaring price of prescription drugs. And rapid changes in technology have raised the specter of new competitors — most notably Amazon.
A combined CVS-Aetna could position itself as a formidable figure in this changing landscape. Together, the companies touch most of the basic health services that people regularly use, providing an opportunity to benefit consumers. CVS operates a chain of pharmacies and retail clinics that could be used by Aetna to provide care directly to patients, while the merged company could be better able to offer employers one-stop shopping for health insurance for their workers.
But critics worry that customers could also find their choices sharply limited. The deal risks leaving patients with less choice of where to get care or fill a prescription if those with Aetna insurance are forced to go to CVS for much of their care.
On Sunday, the two companies emphasized their ability to transform CVS’s 10,000 pharmacy and clinic locations into community-based sites of care that would be far less expensive for patients.
“We think of it as creating a new front door to health care in America,” CVS Health’s chief executive, Larry J. Merlo, said in an interview.
The merger would establish a new way of delivering care, with nurses, pharmacists and others available to counsel people about their diabetes or do the lab work necessary to diagnose a condition, Mr. Merlo said. “We know we can make health care more affordable and less expensive.”
Mark T. Bertolini, Aetna’s chief executive, said that by using CVS’s locations, the company can provide people with a better way of accessing medical care.
“It’s in their community. It’s in their home,” he said. He added, “CVS has the draw. People trust their pharmacist.”
It is the development of community-based clinics — capable of delivering care with the technology and health information available from both parties — that could prove to be the biggest change brought about the deal.
The hope would be that consumers would not only be able to see savings by going to a retail store to treat a sore throat but also have better oversight of a chronic illness, such as diabetes or heart disease. They could get advice on how to lose weight, or undergo tests to monitor their health.
“If they can drive the adoption of the care delivery model, that’s a big deal,” said Ana Gupte, a senior health care analyst for Leerink Partners.
The merger agreement came as another factor weighs on the minds of all in the health care industry: Amazon, which has been rumored to be preparing for an entry into the pharmacy business. Jeff Bezos, the Amazon chief executive, and his e-commerce juggernaut have already overturned many industries: book buying, retail shopping, groceries and Hollywood, using fierce customer loyalty and enormous reach as cudgels against incumbent players.
But CVS and Aetna have had a business partnership dating back seven years, and have steadily converged into similar visions of how the health care industry was evolving. Conversations about a deeper bond eventually crystallized into deal talks within the last two months, according to a person with direct knowledge of the discussions.
Although neither chief executive mentioned Amazon by name, both said that what they were creating was a compelling opportunity in and of itself.
“Chasing our competitors has never been a solution,” Mr. Bertolini said. He added, “Our competitors will do what they do.”
Many companies are seeking shelter in the arms of their former adversaries, with well-known medical groups like the Cleveland Clinic joining with Oscar Health, an insurer. With federal officials blocking traditional mergers — like the megadeal that featured Anthem and Cigna, the nation’s largest insurers, and one involving Aetna and its rival Humana — companies are looking at combinations that take them beyond their traditional lines of business.
Many analysts view the combination of CVS and Aetna as a defensive move by the companies. CVS Health, which also recently signed an agreement with Anthem to help the insurer start its own internal pharmacy benefit manager, is looking to protect its business with Aetna as it fends off rivals like UnitedHealth Group’s OptumRx and others. Aetna, foiled in its attempt to buy Humana, is searching for new ways to expand its business.
The merger could also fundamentally reshape the business of overseeing drug coverage for insurers, an industry that is dominated by three large players and that has increasingly come under scrutiny over the past year as public anger over high drug prices has expanded beyond the usual culprits — most notably the pharmaceutical industry — to lesser-known players like pharmacy benefit managers.
Under the terms of the deal, CVS will pay about $207 a share, based on Friday’s closing prices. Roughly $145 a share of that would be in cash, with the remainder in newly issued CVS stock. The deal is expected to close in the second half of next year, subject to approval by shareholders of both companies as well as regulators.
Antitrust approval has become an interesting question in the Trump administration, which bankers and lawyers had thought would be more tolerant of consolidation than its predecessor.
A combination of a drugstore company and an insurer is considered less problematic than a merger of two players in the same business, which could reduce competition and hurt consumers. Such concerns ultimately sank Aetna’s efforts to buy Humana, and Anthem’s push to buy Cigna, when the Obama administration signaled its opposition to such consolidation.
CVS’s proposed takeover of Aetna is a so-called vertical merger, combining companies in two different industries. But while such deals have traditionally met little opposition in Washington, the Justice Department has sued to block AT&T’s $85.4 billion takeover of Time Warner on the grounds that it would create too powerful of a content company.
Both CVS and Aetna played down the prospects of regulators moving to block their deal. The breakup fee for the transaction is not especially large, reflecting that belief.
Mr. Bertolini asserted that the companies would not raise prices for consumers. “It doesn’t make sense for us to charge people more when we want more people in the store,” he said.
But analysts and other merger experts warn that the deal could be blocked by federal antitrust officials who worry that it could lessen competition. One area of focus may be Medicare; both companies are significant players in offering prescription drug plans to Medicare beneficiaries.
While the companies said they want to lower costs, CVS also makes money on rebates from drug makers and on filling prescriptions through its pharmacies.
David A. Balto, an antitrust lawyer who has been sharply critical of combinations among insurers and pharmacy benefit managers, said that he was wary of having retailers in charge of people’s health. He argued that doctors may be in a better position to treat illness than retail executives.
“Who do you want to run the health care system?” he said.
Why a CVS-Aetna Merger Could Benefit Consumers
by Austin Frakt - NYT - December 3, 2017
Consolidation in health care has generally not been good for Americans. Here’s why this seems to be an exception.
There are reasons for consumers to be optimistic about CVS’s reported purchase of Aetna for $69 billion on Sunday.
It’s one of the largest health care mergers in history, and in general, consolidation in health care has not been good for Americans.
But by disrupting the pharmacy benefits management market, and by more closely aligning management of drug benefits and other types of benefits in one organization, CVS could be acting in ways that ultimately benefit consumers.
You probably know CVS as a retail pharmacy chain — it runs nearly 10,000drugstores. But over the years, it has diversified. It now runs walk-in clinics, including in Target stores. And it runs one of the largest specialty pharmacies, dispensing high-priced drugs that require special handling.
In a big move a decade ago that set the stage for more recent developments, CVS purchased a majority of shares of Caremark for nearly $27 billion to enter the pharmacy benefits management business.
Pharmacy benefits managers are companies that help insurers devise and run their drug benefits, including serving as middlemen in negotiating prices between insurers and drug manufacturers.
Many health industry experts believe that pharmacy benefits managers effectively increase prescription drug prices to raise their own profits. This is because they make money through opaque rebates that are tied to drug prices (so their profits rise as those prices do). Competition among pharmacy benefits management companies could push these profits down, but it is a highly concentrated market dominated by a few firms, CVS among the largest.
But CVS’s recent moves may shake up an already changing pharmacy benefits landscape. In October, the insurer Anthem announced its intentions to part ways with the pharmacy benefits management firm Express Scripts. Instead, it will partner with CVS to develop its own pharmacy management business.
Anthem would not be the first insurer to forgo external pharmacy benefits management and take on the role internally. The insurer UnitedHealth Group also runs a leading pharmacy benefit management business, OptumRx. And CVS’s purchase of Aetna would also remove it as a middleman acting between that insurer and drug companies.
“While it’s still early, the moves by Anthem and Aetna have the feeling of the beginning of the end of the stand-alone pharmacy benefits manager business,” said Craig Garthwaite, a health economist with Northwestern University’s Kellogg School of Management. These insurers, and UnitedHealth Group, have concluded that outsourcing pharmacy benefits management may not serve their interests.
This removal of profit-taking middlemen could be good for consumers in the short run if it leads to lower drug prices. “In the long run, it might be harder for new insurers to enter the market because they won’t be able to negotiate lower drug prices than the larger firms,” Mr. Garthwaite said. “This could result in further concentration in the health insurance market.” That could harm future consumers, though not in ways we can predict today.
The CVS-Aetna deal would be just another of the many recent mergers across business lines in health care. Insurers are buying or partnering with health care providers. Health systems are offering insurance. Hospitals are employing physicians. Even Amazon is jumping into the pharmacy business in some states. This may be part of the motivation for CVS to buy Aetna — defensive jockeying to maintain access to a large customer base that might otherwise begin to fill drug prescriptions online.
Typically, mergers in the sector have led to higher prices and no better outcomes. But a CVS-Aetna merger might be different because their business lines complement each other. The most significant overlap is in the management of Medicare drug benefits: Both companies offer stand-alone Medicare prescription drug plans.
But there is a lot of competition in the Medicare drug plan market, so this overlap may not be a leading area of concern.
The CVS-Aetna merger is primarily about a supplier and its customer joining forces, what economists call a vertical merger. This type of merger can enhance a firm’s ability to coordinate across interlocking lines of business.
In this case, CVS-Aetna might more effectively manage certain patients with chronic conditions (those insured by Aetna), reducing costs. Let’s imagine that Aetna could leverage CVS’s pharmacies and clinics to help patients — who require medications to avoid hospitalizations — stay on their drug regimen. That could save the merged organization money. It could also translate into both better care and lower premiums, though there’s no guarantee at this stage of either.
One source of optimism: Research shows that coordinating pharmacy and health benefits has value because it removes perverse incentives that arise when drug and nondrug benefits are split across organizations. When pharmacy benefits are managed by a company that’s not on the hook for the cost of other care, like hospitalization, it doesn’t have as strong an incentive for increasing access to drugs that reduce other types of health care use. That could end up costing more over all.
So there’s reason to believe that a combined CVS-Aetna might find ways to reduce costs — and represent an instance when consumers actually come out ahead after health care consolidation.
SPECIAL GIVEAWAYS IN TAX CUT BILL BENEFIT FAMILY MEMBERS, COLLEAGUES OF KEY GOP SENATORS
by Lee Fang - The Intercept - December 1, 2017
The tax plan before Congress, though sold as broad legislation to reduce rates and end favoritism in the tax code, contains targeted provisions designed to benefit special interest groups, many of which maintain close ties to senior Republican lawmakers.
Take the special tax cut for the alcohol industry hidden in the bill.
The tax cut legislation includes a provision that cuts taxes on beer, wine, and liquor produced or imported into the country, saving companies involved around $4.2 billion over 10 years. The provision mirrors language from the Craft Beverage Modernization and Tax Reform Act, or S. 236, introduced by Sen. Roy Blunt, a Republican from Missouri and a member of the Senate GOP leadership team. (While the legislation does benefit craft, or small breweries, it extends the cuts to larger companies and the industry as a whole.)
Key GOP lawmakers maintain close ties to individuals connected to the booze industry.
Sen. Blunt’s son Andy Blunt is a registered lobbyist for MillerCoors, a brewing company that has worked to build support on Capitol Hill for the exact sametargeted brewer tax cuts now included in the tax bill. Sen. John McCain, R-Ariz., whose support for the tax bill was initially in doubt, before he backed it this week, is married to Cindy McCain, the owner of Hensley Beverage, a major beer distributor. Hensley Beverage’s trade group, National Beer Wholesalers Association, lobbied in support of the very same special tax cuts that are in the bill.
Sen. Rob Portman, the Republican lawmaker and member of the Senate Finance Committee who championed the inclusion of the beer tax break, is no stranger to the industry as well. Look no further than Fierce Government Relations, a corporate lobbying firm that has donated generously to Portman’s election committee and lobbied lawmakers on behalf of MillerCoors on the tax reform legislation. Portman’s own Chief of Staff Mark Isakowitz is a former partner at the firm who took a $6.8 million payout to begin working for Portman.
Isakowitz’s old lobbying firm also represents Delta Airlines, which won an unusual concession in the tax cut legislation designed to penalize foreign competition. The provision forces foreign-based airlines, such as Qatar Airways and Etihad, to pay corporate taxes on money earned while flying to the U.S. Delta has worked with other U.S.-based airline companies American Airlines and United Airlines to stifle competition from foreign airlines, primarily those based in the Persian Gulf, though it appears Delta may have flown solo on this effort.
The airline provision was inserted by Sen. Johnny Isakson of Georgia, a Republican who maintains close ties to Delta. The airline, based in Georgia, has provided $137,364 campaign dollars to Iskason, making it one of his largest lifetime contributors. (Isakson’s former congressional staffer, Tyler Stephens, is also working at Fierce Government Relations as a lobbyist for Delta.)
Then there’s the language that opens up drilling in the Alaska National Wildlife Refuge, a provision that is wholly unrelated to tax reform but was crafted by Sen. Lisa Murkowski, the Alaska Republican who has made ANWR drilling a career-long cause, and whose vote was helped along by adding in the provision.
While drilling in the protected wildlife region has been a special priority for Murkowski, oil executives that share the goal have long cultivated ties with her family.
Lisa Murkowski’s sister works for the Waterfall Foundation, an Alaska-based charity that raises funds for breast cancer with donations from ExxonMobil, ConocoPhillips, BP, and Royal Dutch Shell, firms that have expressed interest in the past in expanded Alaska drilling. Andrew Lundquist, a senior vice president for government affairs at ConocoPhillips, has long served as a board member to the Waterfall Foundation, and is one of the biggest players behind the scenes working for decades to open up ANWR for oil exploration. An investigation from ProPublica found that Lundquist has been a tireless advocate of drilling in protected lands, even managingthe Dick Cheney-led energy effort that called for opening up ANWR.
It’s possible other pivotal GOP senators are influenced by their lobbyist family members, but most have deregistered in recent years, making their activities difficult to track. Senate Finance Committee chairman Sen. Orrin Hatch has a son, Scott Hatch, who no longer registers as a lobbyist. Senate Finance Committee member Sen. Pat Roberts, R-Kansas, also has a lobbyist son, David Roberts, but he no longer registers although he visibly works at a powerhouse lobbying firm.
The tax legislation, a sprawling bill that not only changes tax rates but fundamentally reorders American society in many ways, has been rushed through with hardly any public hearings or congressional debate. Given the opaque nature of the bill, it is difficult to understand why certain provisions were included, or why certain industries are favored while others are penalized.
Some targeted provisions appear simply as the result of sustained lobbying by industry. Portman’s influence on the bill, for instance, includes a provision clarifying the tax rules to ensure that private jet owners do not have to pay certain management fees to store their aircraft. The provision comes as a number of private jet operators based in Ohio have maintained a sustained lobbying effort toinfluence Portman and other Ohio legislators, including Sen. Sherrod Brown, a Democrat who ended up voting against the overall tax bill, and it so happens that Sen. Portman was able to hold wide sway over tax legislation.
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