[This commentary, written by me and Dr. William Seligman of the Harvard Chan School, was published today on the Commonwealth Magazine website.]
IF PRESIDENT DONALD TRUMP and Congressional Republicans were to decide that fixing rather than destroying the Affordable Care Act, especially its private health insurance marketplaces, was in their self-interest, could they do it? And, could they do it in a way that aligns with Republican policy preferences?
The answer to both questions is “yes” – if Republicans heed lessons from their two favorite public health insurance programs. The programs are Medicare Part C, called Medicare Advantage, in which enrollees join private health insurance plans, and Medicare Part D, in which enrollees join private outpatient prescription drug plans.
While Republicans defend and brag about both of these reasonably successful programs, they may be surprised to learn that features of both point the way to successful stabilization and growth of the ACA’s private health insurance marketplaces. Here’s how.
Medicare Advantage: From Bust to Boom
Consider these two quotes:
“People’s premiums are going up 35, 45, 55 percent … The market is disastrous, insurers are leaving day by day, it’s going to absolutely implode.”
“They’re anguished, upset, frustrated and angry by the demise of their plans. … They’re facing increasing premiums and…plans are leaving the market.”
The first quote is President Trump talking recently about the instability of the ACA’s marketplaces. While most non-partisan observers disagree with the severity of his characterization, most – not all – of the federal, and some state, marketplaces are experiencing undeniable distress.
The second quote is from former congresswoman Nancy Johnson, a Connecticut Republican, talking in 2001 about the “Medicare + Choice” marketplace in which Medicare enrollees join a private health plan instead of participating in traditional fee-for-service Medicare (Parts A & B).
The 1997 Balanced Budget Act, signed by President Bill Clinton and passed by a Republican-controlled Congress, sought to reform the Medicare private insurance market but had disastrous results. By 2003, more than 2 million Medicare enrollees had been involuntarily disenrolled from their private plans with few choices in their home counties as insurers deserted those markets; 20 percent of enrollees had no other private plan choice, only traditional Medicare A & B.
If Republicans treated Medicare + Choice the way they regard the ACA marketplaces, they would have repealed Medicare Part C. Instead, in 2003, a Republican-controlled Congress and Republican President George W. Bush passed the Medicare Modernization Act, which reinvented Medicare + Choice as “Medicare Advantage” with many technical tweaks and lots of new money. It worked. Between 2003 and 2016, the number of Medicare enrollees in Medicare Advantage plans increased from 5.3 to 17.6 million, and the share of Medicare enrollees in MA plans rose from 13 to 31 percent.
Lesson: Just because a market is performing poorly does not mean the market is unfixable – just look at Medicare Advantage.
Medicare Part D Also Looks a Lot Like the ACA
In the 2003 Medicare Modernization Act, President Bush also kept his 2000 campaign promise to create an outpatient prescription drug benefit in Medicare. Rather than pleasing Democrats with a government run program, he created new private prescription drug plans. Medicare enrollees choose among drug plans offered in their home counties in a model resembling ACA insurance marketplaces. This is not surprising because key architects of both were Sen. Chuck Grassley, an Iowa Republican, and Sen. Max Baucus, a Montana Democrat, who swapped roles as chairman and ranking member of the Senate Finance Committee in creating Part D in 2003 (Grassley/Baucus) and in creating the ACA in 2010 (Baucus/Grassley).
A common challenge facing Part D and ACA architects was how to attract and keep private insurers in these new, risky and untested marketplaces. One way utilizes three premium stabilization devices called the 3 R’s: Reinsurance, Risk corridors, and Risk adjustment, all included as permanent features of the Part D law to stabilize this new marketplace. And they worked. After a clumsy launch in 2006, the Part D market settled down.
While the 3 R’s also appear in the ACA, reinsurance and risk corridors were only included through 2016, and faced constant attack from Republican lawmakers, especially Sen. Marco Rubio, while risk adjustment has also been undermined. Reintroducing reinsurance (by which the government partially protects insurers with high claims) and risk corridors (in which the government shares financial upside and downside risks with insurers) would immediately stabilize ACA marketplaces. Indeed, in mid-2016, Alaska state government created its own reinsurance program for its individual marketplace and saw projected premium increases for 2017 plummet from the 40 percent range to about 7 percent.
Medicare Part D went even further than the ACA with another feature. In Part D, if a county or region has two or fewer insurers offering drug coverage, the US Department of Health and Human Services is empowered to provide additional financial “risk corridor” support to insurers. If that doesn’t work, HHS is authorized to establish a federal government-backed fee-for-service option in that region.
In the ACA legislative process in 2009-10, the politically unsuccessful effort to establish a national “public plan option” preempted consideration of this sensible backstop. It’s not too late now.
Lesson: Sometimes needed changes are systemic and structural – and sometime they are just technical. The needed fixes for the ACA marketplaces are much more technical than structural.
As we write this, the fate of Speaker Paul Ryan’s American Health Care Act is still unresolved in Congress, and may yet be approved in the House even as it faces dismal prospects in the Senate. If Republicans reach the point where they choose to fix rather than decimate the ACA, viable and reasonable policy options are available with their fingerprints all over them.