File Under: “…and don’t let the door hit you on the way out”
Recently, two Florida insurers announced their intention to quit the non-group health insurance market in that state. The state of Florida is trying to use the exit to bolster its case for a waiver from the Affordable Care Act’s Medical Loss Ratio requirement. If the waiver is granted, it will cost Florida rate-payers millions of dollars. Given that the carriers in question cover well under one percent of the non-group market, their exit hardly makes for a compelling case in Florida. But setting the specifics of Florida aside for a moment, should we be worried about carriers leaving the market? In general, the answer is no.
When it comes to health insurance, the notion of “the more the merrier” is deeply flawed. Why? Because every insurer has to pay fixed costs for sales and marketing, claims processing, and underwriting. At the same time, unless you are talking about old-school HMOs where the insurer is essentially synonymous with the provider network, small insurers don’t have the ability to negotiate effectively with providers on price or to innovate with respect to quality. Basically, the insurers most likely to call it quits have a business model based on making sure that they don’t cover sick people. That business model is now obsolete thanks to the ACA. The only thing such insurers add to our health care system is cost, not value. (Click here for an economic model illustrating why too many insurers can be a problem.)
File under: “I’ve got some good news and some bad news”
The recent CMS decision to partially allow proposed cuts in California Medicaid rates is a mixed bag. First the good news: The state agreed to withdraw proposals to reduce reimbursements to pediatricians and for home health services. The state has also agreed to a first-of-its-kind Medicaid access monitoring plan to evaluate the impact of the cuts.
Now the bad news: CMS approved rate cuts to a broad cross-section of other providers. Although a few types of providers (family practitioners, internists and pediatricians) will see rate increases starting in 2013 courtesy of the ACA, most others will continue to be reimbursed at the lowest rates in the country. (Decisions on proposed benefit limits and increased cost-sharing are still pending.)
The decision elicited concern from consumer advocates and outrage from some providers. One worry is that cuts will undermine access and provider support in the run-up to the ACA’s Medicaid expansion. Another concern is that, notwithstanding the access monitoring plan agreed to by the state, the recent decision underscores the limits of CMS’s ability to block state cuts that could be harmful to patients. At the same time, the administration has taken a position on the wrong side of the question of whether individuals should have the right to pursue legal action to enforce access to care for Medicaid beneficiaries.
Unfortunately, what is most unusual about the California developments is the state access monitoring plan, not the cuts. Across the country states are cutting Medicaid benefits and rates. This is a dead end strategy. The bottom line is that states cannot solve their budget problems via Medicaid rate cuts. There is an urgent need for states to reform the delivery of care to maximize quality while reducing cost. At the same time, even the best crafted strategies will not be sufficient. Whether we are looking at the federal budget or the states, new revenue has to be part of the solution to balancing budgets without eviscerating services.
And speaking of revenue and budget balancing…
File this one under “What are they thinking (or smoking)?”
The $3 trillion debt reduction proposal by the majority of the “Super Committee’s” Democratic members has, apparently, crashed and burned (though elements of it could still rise from the dead). The proposal had a lifespan even shorter than a Kardashian marriage, and was immediately panned by Republican members and criticized by many Democrats off the committee, as well.
Although details are hard to come by, the $475 billion in proposed Medicare and Medicaid cuts would certainly have included both significant cuts to beneficiaries and cost shifts onto state Medicaid programs, violating the key demands of consumer advocates.
Committee Democrats may have been hoping to get political credit for “being the adults in the room” willing to make tough choices. But it is more likely that the only thing they accomplished was to further arouse the fears of older voters—an important voting bloc that largely turned against the Democrats in 2010—that the Democratic Party was unwilling to defend their health care benefits.
In earlier blog posts, we’ve shown how to achieve substantial federal health savings without harming Medicare and Medicaid beneficiaries, which means supporting proposals that harm seniors is not only politically unwise, but also unnecessary. So in the future, please folks, no more negotiating with yourselves. There is simply no upside to making symbolic gestures toward debt reduction as long as there is “no partner for peace” in the room. As one Democratic Hill staffer put it recently, “Because the GOP is not engaged at all on revenues … this could go on forever and they would still stand there offering a giant middle finger.”
– Michael Miller, Policy Director
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