Right-wing media have helped promote piecemeal Republican proposals to replace the Affordable Care Act (ACA), propagating a series of myths about the efficacy of health savings accounts, the benefits of allowing insurers to sell across state lines, how high-risk pools operate, and what converting Medicaid into so-called “block grants” would mean for beneficiaries. Health care experts have resoundingly rejected these proposals as alternatives to the ACA, as they all would result in higher costs and less coverage for Americans.
Conservative Replacements To Obamacare Don’t Hold Up To Scrutiny
Myth: Health Savings Accounts (HSAs) Are An Effective Tool For Increasing Choice And “Empowering Patients”
Pacific Research Institute’s Sally Pipes: Health Savings Accounts “Empower ... Patients To Take Control Of Their Care.” Conservative author Sally Pipes, the president of the libertarian Pacific Research Institute, wrote an op-ed in Investor’s Business Daily advocating for the expansion of health savings accounts, claiming they “empower ... patients to take control of their care.” She claimed that “HSA contributions help lower long-term healthcare spending” and encourage lawmakers to do “everything they can to get them in the hands of more people.” From the February 29 article:
They're right to bet on HSAs, whose popularity has exploded in recent years. By empowering patients to take control of their care, HSAs have injected some consumerist discipline into the marketplace.
Because consumers have direct control over their HSA dollars, they have a strong incentive to spend their money wisely. Perhaps they'll pick the low-cost generic over the name-brand drug -- or compare what different hospitals charge for an elective procedure.
Twelve years ago, HSAs didn't exist. Today, 20 million people count on them. They've empowered consumers to take charge of their care and saved the healthcare system money. Lawmakers should be doing everything they can to get them in the hands of more people. [Investor’s Business Daily, 2/29/16]
CBPP’s Edwin Park: “GOP Health Savings Account Proposals Would Mostly Help Wealthy, Not Uninsured.” Edwin Park, vice president for health policy at the Center for Budget and Policy Priorities (CBPP), argued that expanding HSAs “would mainly benefit high-income taxpayers and likely do little for those losing their health coverage if the ACA were repealed.” Park explained that “because a tax deduction rises in value with an individual’s tax bracket, HSAs provide the largest tax benefits to high-income individuals.” He noted that “research shows that at least 90 percent of the uninsured before the ACA were in the 0, 10, or 15 percent tax bracket, so they would receive an income tax benefit of no more than 15 cents for every $1 they can deduct — not enough to make coverage affordable.” From the November 2016 article:
For his alternative to the Affordable Care Act (ACA), which he would repeal, President-elect Trump proposes to rely on Health Savings Accounts (HSAs). That’s consistent with the health plans of House Speaker Paul Ryan and other congressional Republicans, which would expand HSAs in ways that would mainly benefit high-income taxpayers and likely do little for those losing their health coverage if the ACA were repealed.
Because a tax deduction rises in value with an individual’s tax bracket, HSAs provide the largest tax benefits to high-income individuals. In addition, research shows that high-income people are likelier to make the maximum annual contributions to HSAs. Since there are no income limits on HSA participation, affluent people whose incomes are too high to qualify for individual retirement accounts (IRAs) or who have “maxed out” their 401(k) contributions can use HSAs to shelter more funds. Households with incomes of at least $100,000 account for most tax returns claiming an HSA deduction and the large majority of the total amount of HSA contributions (see chart).
Many other congressional Republican HSA expansion proposals (including the RSC plan) would also allow HSA funds to pay health insurance premiums. Because HSA contributions are tax-deductible, this would effectively create a tax deduction for the premium costs of a high-deductible plan in the individual health insurance market. But it would do little or nothing to help the uninsured. Research shows that at least 90 percent of the uninsured before the ACA were in the 0, 10, or 15 percent tax bracket, so they would receive an income tax benefit of no more than 15 cents for every $1 they can deduct — not enough to make coverage affordable. Those with no federal income tax liability would receive zero benefit. [Center on Budget and Policy Priorities, 11/17/16]
Economist Kathryn Phillips: Health Savings Accounts “Primarily Benefit The Wealthy, The Healthy, And The Educated.” Health care economist Kathryn Phillips of the University of California, San Francisco, wrote an article in Health Affairs outlining that while “HSAs are conceptually appealing,” in reality, “they primarily benefit the wealthy, the healthy, and the educated.” She noted that “most low-income individuals do not have a high enough tax liability to benefit from the tax deductions associated with HSAs.” She explained that “HSAs benefit not only the wealthier more but also healthier individuals who are more likely to be able to benefit from accrued savings over time.” She also emphasized that “an important but often neglected aspect of HSAs is that they require an educated and savvy consumer who can devote a great deal of time and effort to understanding their plan and shopping for care.” From the December 8 article:
One of the reforms proposed as part of the Trump health platform is to “allow individuals to use Health Savings Accounts (HSAs).” This increased emphasis on HSAs is a clarion call for more understanding about how to make HSAs work so that they are equitable, effective, and efficient.
Although HSAs are conceptually appealing and can play an important role in health reforms, current evidence suggests that they primarily benefit the wealthy, the healthy, and the educated. Thus, new approaches will be needed if HSAs are to be used more widely and improve health outcomes for the broader population.
In general, studies have found that HSAs combined with high-deductible plans can decrease overall use of services and costs, but there is little evidence yet that this results in improved health status. Most low-income individuals do not have a high enough tax liability to benefit from the tax deductions associated with HSAs — and that assumes that they even have enough disposable income to put aside into a savings account. Studies have found that the impact of HSAs differs by income level, e.g., lower-income workers (and their dependents) were more likely than higher-income individuals to reduce their use of physician office visits and certain high-value services not subject to the deductible, such as influenza vaccinations and breast cancer screenings. HSAs benefit not only the wealthier more but also healthier individuals who are more likely to be able to benefit from accrued savings over time. [Health Affairs, 12/8/16]
Kaiser Family Foundation: HSAs Can Increase Out-Of-Pocket Costs For “People With Chronic Conditions, Disabilities, And Others With High-Cost Medical Needs” And Don’t Increase Coverage Among The Uninsured. A Kaiser Family Foundation issue paper on the use of HSAs in low-income families found that “people with chronic conditions, disabilities, and others with high-cost medical needs may face even greater out-of-pocket costs under HSA-qualified health plans.” The brief also noted that HSAs “are unlikely to substantially increase health insurance coverage among the uninsured” because the majority of uninsured Americans are low-income and thus receive few benefits from HSAs. From the October 2006 report:
People with chronic conditions and disabilities often experience higher medical costs than those without these conditions. For example, the total health care costs for individuals with asthma, heart disease, and diabetes are more than double that of nonelderly adults in general. As a result, these individuals are much more likely to reach their deductible level each year, which by design, is set at a much higher level in HDHPs. Health Savings Accounts and HDHPs are likely to be more attractive to healthy individuals and families who have had few major medical expenses. If the healthiest increasingly enroll in HSA qualified HDHPs while persons with chronic conditions and those with higher medical expenses remain in existing health plans, the premiums for traditional coverage will rise accordingly for the least healthy.
Over two-thirds of the nonelderly uninsured are low-income. Because they earn so little, over half of the uninsured have no tax liability. As such, health insurance proposals that rely on tax deductions as an incentive will have limited impact on the number of uninsured. In addition, high deductible health plans that require higher out-of-pocket spending will not offer the low-income uninsured enough financial protection to offset the premium cost. [Kaiser Family Foundation, October 2006]
Families USA: Health Savings Accounts “Are No Substitute For Health Insurance With Real Coverage Guarantees.” A Families USA fact sheet emphasized that HSAs “are no substitute for health insurance with real coverage guarantees we have today.” It also noted that they “don’t work for most families” that “do not have the additional financial resources to set aside thousands of dollars to pay for health care bills” and often just provide “another tax shelter for the wealthy.” From the February 2017 fact sheet:
Health Savings Accounts (HSAs) — Health Savings Accounts are not health insurance; they merely provide a place where people can stash their own money to later spend on health care. They are no substitute for health insurance with real coverage guarantees we have today. And these accounts don’t work for most families, especially those living paycheck to paycheck, who can’t afford to set aside thousands of dollars to pay the full cost of their health care bills. They are just another tax shelter for the wealthy.
- The majority of families who actually put money in health savings account are households making more than $100,000each year.
- When you look at all of the money put into health savings accounts in a year, 70 percent of that money comes from higher-income homes (households making more than $100,000).
- More than 15 million family households in the United States are headed by women. About 29 percent of those families, or 4.4 million family households, have incomes that fall below the poverty level. Women and families living in poverty simply do not have the additional financial resources to set aside thousands of dollars to pay for health care bills.
- Plans that come with HSAs must have a deductible of at least $1,300 ($2,600 for a family). Kaiser Family Foundation found that 68 percent of lower-income households (between 100-250% of poverty) don’t have the financial assets to pay an even smaller $1,200 deductible. [Families USA, February 2017]
Myth: Allowing Insurers To Sell Across State Lines Increases Competition In Insurance Marketplaces And Reduces Costs
Fox’s Pete Hegseth: “Solutions Can Be More Simple. Things Like Donald Trump Talks About Letting You Go Through Different States And Compete.” Fox contributor Pete Hegseth promoted Trump’s proposal to let insurers sell insurance coverage across state lines, claiming that “oftentimes solutions can be more simple.” He said, “Donald Trump talks about letting you go in through to different states and compete. The free market is an answer to a lot of things that technocrats will never acknowledge.” From the January 3 edition of Fox News’ Fox & Friends:
PETE HEGSETH: Oftentimes, solutions can be more simple. Things like -- Donald Trump talks about letting you go in through to different states and compete. The free market is an answer to a lot of things that technocrats will never acknowledge. But I want to put that tweet up one more time if we can. She says, “Republicans will leave millions of Americans without health insurance.” You mean like the health insurance they lost when you gave them Obamacare? Or what about the worsening the coverage of those who don't have coverage, or can't get coverage, or their premiums are so expensive they’re choosing to pay the penalty instead. It’s hypocrisy at its highest. She’s trying to pin Republicans down. [Fox News, Fox & Friends, 1/3/17]
Fox’s Eric Bolling: “Drop The State Lines And You Will Allow More Competition Into Every Single Health Care System.” Fox host Eric Bolling claimed that “the number one way” to increase competition in the health insurance markets “is to drop the state requirements.” He asserted that if you “drop the state lines” -- thus allowing insurers to sell across state lines -- “you will allow more competition into every single health care system.” From the January 12 edition of Fox News’ The Five:
ERIC BOLLING (CO-HOST): And so, they need to tackle a couple things. Number one, they need to get competition back into it to keep price-- to really bend the cost curve down. That's the only thing that’ll do. But there are two issues that the Obamacare failed on. It was -- number one, that in order to make it work, insurers had to jack up deductibles so high that you were -- they were, they were sometimes in a family, you are paying $10- or $15,000 out of your own pocket before you even went to the insurer to pay for a single thing. So that was the only way to keep their numbers low for the extra policies. That's a problem, they need to figure that out by getting more competition, you bring prices down.
The other one was, the other way they had to make it work was someone had to finance this whole thing. And the people who had to finance it in order for it to work, because a lot of elderly people were on it, they're using a lot of health assets and resources, young people had to buy it. And the young people turned out. They realized at some point it was cheaper to take the fine in your taxes than to buy the insurance and go ahead and pay for your own insurance, and they didn't come out. So there were some economic things they need to play with. But those are certainly surmountable. And the number one way of doing that: drop the state requirements, drop the state lines, and you allow more competition into every single health care system. [Fox News, The Five, 1/12/17]
Fact: Allowing Insurers To Sell Across State Lines Causes A Race To The Bottom, Limiting Competition And Choice
Kaiser’s Larry Levitt: Trump’s Proposal To Allow Insurance Companies To Offer Health Insurance Across State Lines Would Leave “People With Preexisting Conditions Without Access To Insurance.” Kaiser Family Foundation senior vice president Larry Levitt criticized Trump’s proposal to allow “health insurance companies to sell plans across state lines,” noting that “would actually worsen access to coverage for people with preexisting conditions” because “insurers would have a strong incentive to set up shop in states with minimal regulation, undermining the ability of other states to enact stricter rules.” From an October 19 column in The Journal of the American Medical Association’s (JAMA) online policy debate forum:
The ACA included a comprehensive set of insurance market reforms, primarily affecting the individual and small business insurance markets. Beginning in 2014, the law required insurers to guarantee coverage regardless of preexisting conditions, prohibited rate surcharges for people who are sick, limited variation in premiums due to age, and established a minimum benefit package.
Repealing the ACA—as Trump has proposed—would return insurance markets to their pre-ACA state, leaving people with preexisting conditions without access to insurance in the vast majority of states.
Allowing insurers to then sell plans across state lines would actually worsen access to coverage for people with preexisting conditions, since insurers would have a strong incentive to set up shop in states with minimal regulation, undermining the ability of other states to enact stricter rules.
The idea of guaranteeing access to insurance for people with preexisting conditions has bipartisan appeal. But, making such protections work requires some mechanism to share in the cost of health care for people who are sick. Under the ACA, that mechanism is the so-called “individual mandate,” which helps to get healthy people to sign up for insurance to balance out the cost of those who are sick. A high-risk pool could also work, if it’s adequately funded (which has not been the case for such efforts in the past). Simply getting rid of the “lines around states” wouldn’t make coverage available to people with preexisting conditions, or meaningfully enhance competition among insurers. [JAMA Forum, 10/19/16]
NAIC And CIPR: Selling Insurance Across State Lines “Would Actually Reduce The Options Available To Consumers” And Would “Start A Race To The Bottom.” The National Association of Insurance Commissioners (NAIC) and the Center for Insurance Policy and Research (CIPR) published a fact sheet that outlines the myths and realities of interstate health insurance sales, arguing that despite claims to the contrary, “interstate sales would actually reduce the options available to consumers” because “insurance policies would cover less and less, as insurers try to design policies that discourage the sickest customers from applying.” Additionally, the fact sheet emphasized that “interstate sales will start a race to the bottom by allowing companies to choose their regulators,” resulting in “steep premium hikes” for anyone not in “pristine health.” From the 2011 fact sheet:
MYTH: Allowing individuals to purchase insurance across state lines will give them access to coverage at lower premiums.
REALITY: Interstate sales will start a race to the bottom by allowing companies to choose their regulator.
- Allowing banks to choose their own regulator was a major cause of the current financial crisis.
- Insurers will seek the regulations that allow them to most aggressively select the healthiest risk.
- While those individuals in pristine health may be able to find cheaper policies, everyone else would face steep premium hikes if they can find coverage at all.
MYTH: Interstate sales will simply provide people with more options. People who don't want interstate policies can keep the coverage they currently have.
REALITY: Interstate sales would actually reduce the options available to consumers.
- Out-of-state insurers would be able to lure healthy enrollees away from existing risk pools, which would become progressively sicker and more expensive until they ultimately fail.
- Insurers that currently comply with state consumer protections would be forced by out-of-state competitors to evade them as well.
- Insurance policies would cover less and less, as insurers try to design polices that discourage the sickest customers from applying. [National Association of Insurance Commissioners and the Center for Insurance Policy Research, “Interstate Health Insurance Sales: Myth vs. Reality,” accessed 2/10/17]
Chicago Tribune Columnist Eric Zorn: Erasing State Lines Would Create “A Race To The Bottom” In Insurance Markets And Worsen “Coverage Gaps And Disparities.” Chicago Tribune columnist Eric Zorn rejected Trump’s claim that “it’s those dreaded, pesky state lines that make health insurance so darn expensive,” noting that his proposal to eliminate state boundary restrictions in the insurance market would create “a race to the bottom” in order to “set the regulatory bar as low as possible in order to lure corporate headquarters and the jobs and taxes they generate.” Zorn criticized Trump’s idea that “it’s merely burdensome regulations that discourage carriers from offering low-cost health care policies” to individuals with “chronic, expensive conditions,” noting that his proposal would cause “dramatically higher premiums” that would worsen “the coverage gaps and disparities that the 2010 Patient Protection and Affordable Care Act (Obamacare) attempted to address.” From the October 14 column:
Contra Trump, current state laws do not “stop insurance companies from coming in and competing.” Blue Cross and Blue Shield, Aetna, Humana and so on are all welcome to get licensed in any state they wish and set up shop to compete with other insurers to sell coverage at the best price.
When they enter a market, however, they must abide by the regulations in those states designed to protect the interests of patients and providers.
Advocates for allowing the sale of health insurance “across state lines” are really talking about allowing an insurer based in, say, Kansas, to sell plans to, say, Illinois residents that follow the regulatory guidelines in Kansas rather than the regulatory guidelines in Illinois.
The “competition in the insurance industry” Trump dreams of would actually be a competition among the states; competition to set the regulatory bar as low as possible in order to lure corporate headquarters and the jobs and taxes they generate.
The beloved market forces dictate that such competition would be a race to the bottom — similar to the de-regulatory battle that saw nearly all major credit card companies end up located in Delaware, Nevada and South Dakota, where the credit-banking laws are the most lax..
Trump's idea — “When we get rid of those lines, you will have competition, and we will be able to keep (providing affordable coverage to people with) pre-existing (medical conditions)” — assumes, crazily, that it's merely burdensome regulations that now discourage carriers from offering low-cost health care policies to cancer patients, diabetics and others living with chronic, expensive conditions. [Chicago Tribune, 10/14/16]
Families USA: Selling Insurance Across State Lines Is “A Giveaway To Insurers.” A Families USA fact sheet on Republican ACA replacement proposals explained that allowing insurers to sell across state lines would mean “companies [will] move to the states with the weakest regulations, which could destroy coverage protections.” The report characterized the idea as “a giveaway to insurers” because it “basically allow[s] them to pick and choose which rules to follow, creating a race to the bottom.” Families USA also noted that the Congressional Budget Office “found that this would actually increase premiums for people with pre-existing conditions and lead to more of these individuals going uninsured.” From the February 2017 fact sheet:
Allow the sale of health insurance across state lines — Selling insurance across state lines will let insurance companies move to states with the weakest regulations, which could destroy coverage protections and threaten other patient safeguards. It is a giveaway to insurers – basically allowing them to pick and choose which rules to follow, creating a race to the bottom. While it will lower monthly premiums for people in perfect health, it will drastically increase premiums for everyone else, particularly older people, and those with health conditions.
- The Congressional Budget Office (CBO) found that this would actually increase premiums for people with pre-existing conditions and lead to more of these individuals going uninsured.
- The National Association of Insurance Commissioners, the bipartisan body that represents every single state’s top insurance regulator, opposes allowing insurers to sell across state lines and has issued public statements on why this policy won’t work for states’ markets and residents.
- In the past, only a few states allowed insurers to sell across state lines. Even so, not a single out-of-state insurer decided to sell insurance in these states. [Families USA, February 2017]
Center On Health Insurance Reforms: State Line Proposals “Do Not Address The True Drivers Of Health Insurance Costs.” Georgetown University’s Center on Health Insurance Reforms analyzed legislation in six states proposing the sale of insurance across state lines and found that the proposals “do not address the true drivers of health insurance costs nor do they adequately take into account the complexity of how insurance products are sold and regulated.” Additionally, state lines proposals “underestimate the administrative hurdles necessary for full implementation.” The study emphasized that “across state lines legislation was largely unsuccessful because of the localized nature of how health care is delivered.” From the October 2012 report:
We find that while across state lines proposals cite many important goals—such as enhancing consumer choice, increasing competition and making insurance more affordable—the across state lines proposals as currently enacted in six states do not address the true drivers of health insurance costs nor do they adequately take into account the complexity of how insurance products are sold and regulated. The proposals also underestimate the administrative hurdles necessary for full implementation. As a result, none of the across state lines laws resulted in a single insurer entering a new market or the sale of a single new insurance product.
Across state lines legislation was largely unsuccessful because of the localized nature of how health care is delivered. Respondents universally reported the enormous difficulty that out-of-state insurers face in building a network of local providers, and insurers identified doing so as a significant barrier to market entry that far surpasses concerns about a state’s regulatory environment or benefit mandates. State officials and insurers also noted that across state lines legislation ignores the primary cause of high prices—the cost of delivering care—and fails to account for often dramatic differences in the cost of care between states and regions. [Center on Health Insurance Reforms, October 2012]
The Hill: Despite The “Enduring Popularity” Of The State Lines “Talking Point,” “No States Have Signaled Interest In The Policy.” In October, The Hill noted that while “the GOP’s decade-old talking point has gained momentum” in reality, “for the last 10 months, states have been legally allowed to let insurers sell plans outside their borders.” While it is legal, “no states have signaled interest in the policy.” Additionally, “healthcare experts have long been skeptical about the plan, because they say there’s been no evidence that it would actually spur competition among insurers.” The article cites Rhode Island Health Insurance Commissioner Dr. Kathleen Hittner, who emphasized the difficulty of “entering a new marketplace… when a company doesn’t have a footprint in that state.” From the October 13 article:
The GOP’s decade-old talking point has gained momentum since the healthcare law passed six years ago. But Republicans rarely — if ever — acknowledge that the crux of what they want is already allowed under ObamaCare.
For the last 10 months, states have been legally allowed to let insurers sell plans outside their borders.
Despite the idea’s enduring popularity, no states have signaled interest in the policy, insurance experts and regulators say. And the federal government never even finished writing the rules for how it would work.
The biggest problem with the idea is a practical one, [Rhode Island health insurance commissioner Kathleen Hittner] said.
Any insurer entering a new marketplace has to sign contracts with providers and hospitals in that state to offer those services. It’s difficult work already but far tougher when a company doesn’t have a footprint in that state.
“Creating the network is not such a simple thing,” she said. “You have to really worry about network adequacy.” [The Hill, 10/13/16]
Myth: High-Risk Pools Are An Effective Alternative For The ACA’s Ban On Pre-Existing Conditions
Fox News’ Dr. Marc Siegel: “The Ultimate Goal Is Probably To Create High-Risk Pools Where Those With Pre-Existing Conditions Can Be Subsidized By The Government.” Fox News contributor Dr. Marc Siegel promoted high-risk pools as a way to insure those who currently have pre-existing conditions, claiming that “the ultimate goal” of the Trump administration’s ACA replacement plan “is probably to create high-risk pools where those with pre-existing conditions can be subsidized by the government.” He argued that “pre-existing conditions have to be covered” and high-risk pools are “where government subsidies should go.” From the February 6 edition of Fox News’ America’s Newsroom:
DR. MARC SIEGEL: Well, that's why I think President Trump is saying it going to take a while, a year or two, for this whole thing to be fixed because the ultimate goal is probably to create high-risk pools where those with pre-existing conditions can be subsidized by the government. Right now almost everybody’s subsidized by the government. If you go to the state exchange you pay $350 for a premium, on average, $250 of that comes out of the taxpayer pocket. That’s what’s got to change. The state exchanges aren’t working, but critics are saying, “wait a minute, we don't want 30 million to lose their insurance right away.” So let's honor the state exchanges as we try to reform Medicaid, to get malpractice reform, to get a cheaper option, and to create high-risk pools.
MELISSA FRANCIS (HOST): Let me drill down on that point a little bit because that’s a solution that I haven't heard from a lot of people that makes sense, because this is where it’s tricky. So you are saying put people into high-risk pools that go over different state lines, this is something Rand Paul had talked about as well. That still -- in my mind of getting all of these people together -- doesn't solve the problem of how you pay for it. That's just a bigger group. You’re are saying, of those pools, that is where the government's money, that is already being spent frankly, should be directed.
SIEGEL: Absolutely. Because I agree, and many other critics of Obamacare agree, that pre-existing conditions have to be covered. That's in the best interest of the government, it’s in the best interest of the patient, it’s the best interest of the doctor. I want to know that my diabetics, that those with heart disease, that those with emphysema are going to be covered. That's where government subsidies should go. Why should someone else get a government subsidy who’s completely well? Why should the worried well get paid for by the government. That’s socialized medicine. [Fox News, America’s Newsroom, 2/6/17]
Investor’s Business Daily Columnist Betsy McCaughey: High-Risk Pools Are “An Honest Way To Subsidize Care For The Sick.” Serial health care misinformer Betsy McCaughey, who helped propagate the conspiracy that the ACA would create “death panels” to ration care for the elderly and infirm before joining Trump’s team of economic advisers, wrote a column for Investor’s Business Daily advocating for the creation of high-risk pools, arguing that “subsidizing high-risk pools in all 50 states would cost about $16 billion yearly,” which she claimed was “chicken scratch.” McCaughey characterized high-risk pools as “an honest way to subsidize care for the sick,” claiming that they “will stop premiums from skyrocketing in the individual market.” From the December 27 column:
Subsidizing high-risk pools in all 50 states would cost about $16 billion yearly. That figure assumes a per person cost of $32,000 — the same as in the federal transitional risk pool.
Congress, take note. Some Republican proposals in Congress only provide for $1 or $2 billion a year for state risk pools. That's chicken scratch. $16 billion may sound like a fortune, but it's less than half the $43 billion spent on Obamacare plan subsidies last year. And it's money far better spent, because it directly helps the sickest among us.
Separate risk pools for the medically needy will stop premiums from skyrocketing in the individual market. Voila! Healthy people will be able to buy coverage at prices that reflect their own expected health needs.
Though Congress is divided, Democrats and Republicans should find common ground in reviving and fully funding high-risk pools. They're an honest way to subsidize care for the sick. Obamacare used devious methods, spending billions on P.R. to convince the young and healthy to overpay for insurance. Most Americans weren't fooled. [Investor’s Business Daily, 12/27/16]
Fact: High-Risk Pools Historically Fail, Resulting In Less Coverage And Skyrocketing Costs For States And Consumers
Commonwealth Fund: High-Risk Pools Are “Prohibitively Expensive To Administer,” “Prohibitively Expensive For Consumers,” And “Offer Much Less Than Optimal Coverage.” In a February 2015 report published by the Commonwealth Fund, social scientist Jean Hall, a health policy professor at the University of Kansas, critiqued the suggestion that high-risk pools could serve as “a viable alternative to the ACA’s ban on preexisting condition exclusions” and concluded they “are not a realistic alternative.” She emphasized that they are “prohibitively expensive to administer,” “prohibitively expensive for consumers,” and “offer much less than optimal coverage, often with annual and lifetime limits, coverage gaps, and very high premiums and deductibles.” From the report:
By concentrating risk, high-risk pools also concentrate costs, resulting in greater expenses to administrators and consumers and driving plans to impose severe coverage limits that often serve to negate the benefit of having insurance. Indeed, pronounced adverse selection is common in high-risk pools, because only the very sickest and most expensive individuals are willing to pay the high premiums for coverage, increasing administrative costs even more. This phenomenon was evident in several state-based high-risk pools, such as in California and Kansas, where enrollment declined from 2009 to 2011, but premiums totals and medical reimbursement costs increased, even with coverage limits in place.4 In stark contrast, coverage expansions under the Affordable Care Act spreading risk across a broad population to decrease per capita costs and allow for more affordable and comprehensive coverage for all. By their very nature, high-risk pools cannot and will not do so. [Commonwealth Fund, 2/13/15]
Families USA: “High-Risk Pools Have Been Tried And They Failed.” A Families USA fact sheet criticized high-risk pools by pointing to their history of failure in 35 states that “tried using high-risk pools … and they only wound up covering a mere fraction of the number of people who have obtained coverage under the ACA.” The report also noted that “high-risk pools charged people about twice as much as the typical premiums” and included “lifetime maximums on how much they would pay for people’s care” -- which are both banned by the ACA. From the February 2017 fact sheet:
High-risk pools — High-risk pools have been tried and they failed. In fact, 35 states tried using high-risk pools before insurers were banned from denying people with pre-existing conditions, and they only wound up covering a mere fraction of the number of people who have obtained coverage under the ACA. Moreover, high-risk pools charged people about twice as much as typical premiums, and most had lifetime maximums on how much they would pay for people’s care.
- High-risk pools covered only 226,615 people in 2011—a mere fraction of the number of people with pre-existing conditions.
- Premiums for coverage in state high-risk pools were typically 150%-200% of standard rates for healthy individuals.
- Almost all state high-risk pools excluded coverage for pre-existing conditions for 6 to 12 months, making health coverage effectively useless during that period.
- Nearly all state high-risk pools (33 out of 35) had lifetime dollar limits on coverage, most between $1 million-$2 million. 13 had annual dollar limits on coverage, which could cap people’s coverage to as low as $75,000 in care a year.
- High-risk pools were expensive for states: In 2011, states had to finance $1.2 billion in net losses to cover costs that exceeded money brought in through premiums. [Families USA, February 2017]
Kaiser Health News: High-Risk Pools “Sound Like A Good Idea” But Are “Very Hard To Make Work.” Kaiser Health News produced a video explaining that “high risk pools are another idea that sounds good” but are “very hard to make work in the real world of health care.” Citing the high-risk pools used in 35 states before the ACA’s implementation, the video noted that “none of them worked very well” because “premiums and other costs remained too high” and “the federal program ran out of money almost a year before it was scheduled to end.” The video emphasized that states “had to impose waiting lists for coverage” and many “risk pools set up waiting periods before they started paying bills for the very illness that made people high risk.” From the October 31 video:
[Kaiser Health News, 10/31/16]
Mother Jones: High-Risk Pools “Are A Disaster” With “A Lousy History.” Mother Jones columnist Kevin Drum critiqued Speaker of the House Paul Ryan’s (R-WI) high-risk pools proposal, noting that “high-risk pools have a lousy history” and that “implementing them at the state level guarantees a race to the bottom, since no state wants to attract lots of sick people into its program.” Drum called high-risk pools “a disaster” and critiqued conservative framing of them “as some kind of bold, new, free-market alternative to Obamacare.” From the April 28 article:
It's true that the cost of covering sick people raises the price of insurance for healthy people. That's how insurance works. But there's no magic here. It costs the same to treat sick people whether you do it through Obamacare or through a high-risk pool—and it doesn't matter whether you fund it via taxes for Obamacare or taxes for something else. However, there are some differences:
- Handling everyone through a single system is more efficient and more convenient.
- High-risk pools have a lousy history. They just don't work.
- Implementing them at the state level guarantees a race to the bottom, since no state wants to attract lots of sick people into its program.
- Ryan's promise to fund high-risk pools is empty. He will never support the taxes it would take to do it properly, and he knows it.
This is just more hand waving. Everyone with even a passing knowledge of the health care business knows that high-risk pools are a disaster, but Republicans like Ryan keep pitching them anyway as some kind of bold, new, free-market alternative to Obamacare. They aren't. They've been around forever and everyone knows they don't work. [Mother Jones, 4/28/16]
Myth: Block Granting Medicaid Would Increase State Flexibility And Innovation While Increasing Quality Of Care
National Review: “A Block Grant Would Empower Medicaid Enrollees To Make Their Own Decisions About What Kind Of Coverage They Need.” A National Review article claimed that “the block-grant scheme [for Medicaid] is gaining new traction as states face skyrocketing Medicaid costs.” The article asserted that “the basic idea of a Medicaid block grant is to give states maximum flexibility” and “would empower Medicaid enrollees to make their own decisions about what kind of coverage they feel they need.” From the October 2015 article:
Among GOP candidates who have bothered to roll out Obamacare repeal-and-replace plans, a common theme has emerged: States should have more control over Medicaid, the joint federal-state health-care program for the poor, and that control should come in the form of a block grant.
The basic idea of a Medicaid block grant is to give states maximum flexibility in exchange for their accepting a fixed amount of funding from the federal government. It’s been around for decades, but the block-grant scheme is gaining new traction as states face skyrocketing Medicaid costs. Back when he was still in the race, Wisconsin governor Scott Walker proposed what was probably the most detailed block-grant plan for Medicaid to date. Florida senator Marco Rubio and Louisiana governor Bobby Jindal also have endorsed some form of a Medicaid block grant. If a Republican moves into the White House in 2017, a block grant will likely be on the new administration’s health-care agenda.
A block grant would empower Medicaid enrollees to make their own decisions about what kind of coverage they feel they need.
Under this scheme, enrollees would be responsible for any health-care costs beyond the premium subsidy, just like those purchasing subsidized coverage through the ACA exchanges. While out-of-pocket costs might be higher for some, private individual coverage would give Medicaid patients greater access to providers and therefore would likely produce better health outcomes. [National Review, 10/7/15]
Wash. Examiner’s Hadley Heath Manning: “Block Granting Medicaid Would Finally Allow States To Truly Innovate To Provide Better Quality Coverage.” Washington Examiner contributor Hadley Heath Manning advocated for converting federal Medicaid reimbursements into “block grants” to the states, claiming that it “would finally allow states to truly innovate to provide better quality coverage to those who are truly in need.” Manning alleged that currently “Medicaid patients don't have the health access or health outcomes that other patients do” and asserted that block grants “allow states more flexibility to make policies of their own.” From the January 31 article:
On NBC's “Sunday Today,” President Trump adviser Kellyanne Conway said Medicaid block grants would be a part of a Republican replacement for Obamacare. Block grants have long been among conservative proposals to reform the government health insurance program for the poor.
If you can recall from your high school civics class, block grants are large sums of taxpayer dollars granted from the federal government to the states with very few strings attached (unlike categorical grants, which come with specific rules). Block grants, as opposed to a federal match, are fixed amounts indexed to grow each year along with inflation or other factors. These grants take away the incentive to spend more, but instead allow states more flexibility to make policies of their own about how they use that money and how the program will operate.
But Medicaid reform isn't primarily about saving money. More important than any financial consideration is this: block granting Medicaid would finally allow states to truly innovate to provide better quality coverage to those who are truly in need. [The Washington Examiner, 1/31/17]
Families USA: “Block Granting Medicaid Is Just Another Way To Cut Medicaid.” A Families USA fact sheet denounced proposals to block grant Medicaid, calling them “just another way to cut Medicaid.” It emphasized that block grants shift costs to the states and when costs go up, “states will get stuck with the extra bill, posing budget problems, stifling innovation, and likely leading to program cuts.” The fact sheet noted that “states already have significant flexibility to innovate within the Medicaid program” and “block grants would severely undermine Medicaid, boot people off the program, cut services, and hurt peoples’ (sic) health.” In particular, block granting Medicaid “has serious consequences for women, as Medicaid provides essential care for women throughout their lives.” From the January 2017 fact sheet:
Block-grant Medicaid to the states — Block granting Medicaid is just another way to cut Medicaid. It is not a new or innovative idea.
- Today, the amount of federal Medicaid dollars that a state receives is based on what it actually costs that state to provide health coverage to people with Medicaid. If costs go up—like when there is an epidemic, natural disaster, or economic downturn—states are guaranteed additional federal funds. With a block grant, states will get stuck with the extra bill, posing budget problems, stifling innovation, and likely leading to program cuts.
- States already have significant flexibility to innovate within the Medicaid program in order to improve health care quality, and reduce costs. But there are certain basic services states must provide so no one falls through the cracks. Block grants would severely undermine Medicaid, boot people off the program, cut services, and hurt peoples’ health.
- Cutting Medicaid has serious consequences for women, as Medicaid provides essential care for women throughout their lives—from family planning and maternal health services to nursing home care. Medicaid finances nearly half of all births in the U.S., accounts for 75% of all publicly-funded family planning services, and accounts for half (51%) of all long-term care spending, which is critical for many frail elderly women. [Families USA, February 2017]
CBPP: Block Granting Medicaid Would “Threaten Benefits For Tens Of Millions Of Low-Income Families, Senior Citizens, And People With Disabilities.” Edwin Park of the Center on Budget and Policy Priorities (CBPP) denounced Medicaid block grant proposals, noting that they “would institute deep cuts to federal funding for state Medicaid programs and threaten benefits for tens of millions of low-income families, senior citizens, and people with disabilities.” Block grants “would institute deep cuts to federal funding for state Medicaid programs,” which, he said, would cause states “to make draconian cuts to eligibility, benefits, and provider payments.” He predicted states would “likely be able to begin charging significant premiums … at levels that research suggests would likely cause poor people to forgo coverage entirely or go without needed care.” Park noted studies of existing block grant proposals that indicate they would “lead states to drop between 14.3 million and 20.5 million people from Medicaid by the tenth year.” From the November 30 article:
A Medicaid block grant would institute deep cuts to federal funding for state Medicaid programs and threaten benefits for tens of millions of low-income families, senior citizens, and people with disabilities. To compensate for these severe funding cuts, states would likely have no choice but to institute draconian cuts to eligibility, benefits, and provider payments. To illustrate the likely magnitude of these cuts, an analysis from the Urban Institute of an earlier block grant proposal from Speaker Ryan found that between 14 and 21 million people would eventually lose their Medicaid coverage (on top of those losing coverage if policymakers repeal the ACA and its Medicaid expansion) and that already low provider payment rates would be reduced by more than 30 percent.
Such a block grant would push states to cut their Medicaid programs deeply. To compensate for the federal Medicaid funding cuts a block grant would institute, states would either have to contribute much more of their own funding or, as is far more likely, use the greater flexibility the block grant would give them to make draconian cuts to eligibility, benefits, and provider payments. For example, Speaker Ryan’s “Better Way” health plan would give states the choice of a block grant or a Medicaid per capita cap; both would appear to enable states to make sizeable cuts directly affecting beneficiaries that states can’t make now. This could include using waiting lists or capping enrollment; under current law, all eligible individuals who apply for Medicaid must be allowed to enroll. States also could be allowed to no longer provide children with a comprehensive pediatric benefit known as EPSDT (Early Periodic Screening, Diagnostic, and Treatment), under which children enrolled in Medicaid receive both regular check-ups and coverage for all medically necessary treatments that the check-ups find a child needs.
In addition, states could be permitted for the first time to impose a work requirement and terminate coverage for people deemed non-compliant. This could result in people with various serious barriers to employment — such as people with mental health or substance use disorders, people who have difficulty coping with basic tasks or have very limited education or skills, and people without access to child care or transportation — going without health coverage. States would also likely be able to begin charging significant premiums, deductibles, and co-payments at levels that research suggests would likely cause poor people to forgo coverage entirely or go without needed care. [Center on Budget and Policy Priorities, 11/30/16]
Political Scientist Ryan LaRochelle: “Turning Medicaid Into A Block Grant Would Result In Less Funding.” Ryan LaRochelle, a political scientist at Brandeis University, wrote in The Washington Post that “turning Medicaid into a block grant would result in less funding” for recipients. He pointed to “historical data [that] suggest that a shift to block grants would result in a gradual decline in Medicaid funding” because among 13 major block grant programs, “funding for all but one has shrunk.” Block grants also reduce funding because “the policies don’t get regular tuneups.” LaRochelle also pointed to other research on block grants, which found “no empirical evidence that the shift to block grants reduced total administrative costs” despite claims to the contrary. From the January 18 article:
1. Data shows that the move to block grants leads to less funding over time.
Historical data suggest that a shift to block grants would result in a gradual decline in Medicaid funding. A 2016 report by the Center on Budget and Policy Priorities (CBPP) showed that when the federal government uses block grants, the funding for the programs shrinks over time:
[O]ur analysis of the 13 major housing, health, and social services block grant programs that policymakers have created in recent decades shows that funding for all but one has shrunk in inflation-adjusted terms since their inception, in some cases dramatically. … Overall funding for the 13 block grants has fallen by 37 percent since 2000, adjusted for inflation and population growth.
2. Reformers argue that block grants need less funding because they reduce costs. But they don’t.
When reformers propose switching a program to a block grant, they increasingly ask to have the funding reduced at the same time.
That’s the approach with Medicaid, as well. Trump’s health-care reform website claims that under a Medicaid block grant, “States will have the incentives to seek out and eliminate fraud, waste and abuse to preserve our precious resources.”
Public administration scholar Carl Stenberg’s analysis of block grants, however, found no empirical evidence that the shift to block grants reduced total administrative costs. Rather, these costs are passed from the federal government to the states.
3. Block granting leads to drops in funding because the policies don’t get regular tuneups.
Cornell political scientist Suzanne Mettler’s research shows that just like cars and houses, policies need periodic upkeep to remain effective. Legislators can maintain policies by reauthorizing them to guarantee funding streams, adjusting them for inflation, and periodically reassessing and reforming them.
But legislators often don’t maintain existing policies, leaving them to fall into disrepair. That neglect is not unique to block grants. But certain features of block grants make them particularly susceptible to deferred maintenance and policy drift. Block grants typically do not keep pace with inflation, population changes, rising poverty rates or increased housing costs. [The Washington Post, 1/18/17]
Fact: Medicaid Is “Already Efficient And Innovative,” And Block Granting Doesn’t Increase State Flexibility
CBPP: “Medicaid Is Already Efficient And Innovative.” CBPP’s Edwin Park deconstructed assertions that block grants would provide states “added flexibility,” noting that the “claim doesn’t withstand scrutiny” because “Medicaid costs per beneficiary already are far below those of private insurance.” He also noted that Medicaid costs “have also grown much more slowly, on average, than private insurance per-beneficiary costs.” From the November 30 article:
Medicaid is already efficient and innovative. Block grant supporters, including House Republican leaders, often argue that states could compensate for the substantial losses in federal funding they would experience under a block grant by using added flexibility to cut costs without harming beneficiaries. That claim doesn’t withstand scrutiny. Medicaid costs per beneficiary already are far below those of private insurance, after adjusting for differences in health status, due to lower payment rates to health care providers and lower administrative costs, even though Medicaid provides more comprehensive benefits than private insurance at significantly lower out-of-pocket cost to beneficiaries. And over the past three decades, they have also grown much more slowly, on average, than private insurance per-beneficiary costs. They are expected to continue growing more slowly than costs under private insurance in coming years, according to the Medicaid and CHIP Payment and Access Commission. [Center on Budget and Policy Priorities, 11/30/16]
Families USA: “Medicaid Block Grants Put States And Medicaid Enrollees At Risk” And “Don’t Give States More Flexibility.” A Families USA fact sheet criticized block grant proposals for Medicaid, arguing that the rigid funding structure either shifts increased costs to the states or forces them to “cut services for low income residents, including children, seniors, and people with disabilities.” The report emphasized that “Medicaid block grants don’t give states more flexibility” because they “already have a lot of flexibility” in terms of services, provider payments, and service delivery systems. From the April 2016 fact sheet:
Once the amount is set by the federal government, it will not change, even if a state’s actual program costs are greater than the allotted amount. If a state’s costs exceed the amount of the block grant, it will have to use its own funds to make up the difference or, more likely, cut services for low income residents, including children, seniors, and people with disabilities.
Medicaid Block Grants Don’t Give States More Flexibility
States already have a lot of flexibility in their Medicaid programs. They have flexibility in
» the services covered
» the way health care providers are paid for those services
» how services are delivered, such as whether managed care is used and how managed care contracts are structured
» eligibility levels
Medicaid Block Grants Would Make It Harder for States to Serve Their Residents
The federal government has been a reliable partner for state Medicaid programs since Medicaid was created in 1965. The federal match rate for the traditional Medicaid program is always at least half of all Medicaid costs, and for the Medicaid expansion population, it is much higher. This structure insulates states from unexpected cost increases and ensures coverage for low-income residents.
The current federal Medicaid funding structure also helps states provide better health insurance to their residents than they could do on their own. States can do more to help kids get a healthy start in life, provide long-term and home care to seniors and people with disabilities, and provide health care to pregnant women and low income working families. Turning the program into a block grant would put states—and their residents—at risk. [Families USA, April 2016]