If You Like Your Drugs, Can You Keep Them?
Consumer Power Report #400
One of the major sources of concern for those within Obamacare’s new exchange plans is a simple, problematic question: If you like your prescription drugs, can you keep them? As Scott Gottlieb outlines here, it could be a real problem for many people:
Simply put, many drugs may not be covered at all, and the costs patients incur by buying them with cash won’t count against out of pocket caps. This has repercussions for drug makers with big portfolios of specialty and primary care drugs (more on that later). But most of all, it has implications for patients.
Drugs on your health plan’s formulary will typically have fixed co-pays. These costs usually count toward your deductible and the out of pocket and lifetime limits on the total amount of money that your health plan can ask you to spend. …
Consider an even bigger problem lurking inside the law. The out of pocket caps on consumer spending only apply to costs incurred on drugs that are included on a plan’s drug formulary. This is the list of medicines that the health plans have agreed to provide some coverage for. If the drug isn’t on this formulary list, then the patient could be responsible for its full cost (with little or no co-insurance to help offset that cost). Moreover, the money they spend won’t count against their deductibles or out of pocket limits ($12,700 for a family, $6,350 for an individual).
These are the ways that Obamacare cheapens the health coverage in order to pay for all of its expensive mandates. … In response to the drug formulary issues, and the potential for important drugs to remain completely uncovered, staff at the Centers for Medicare and Medicaid Services is arguing that patients will have the option to appeal formulary decisions -- to try and compel a health plan to cover a given drug. But this appeals process can take months. And there is no sure chance of winning.
The availability of these more-expensive drugs is going to be problematic for the chronically ill – and it’s an issue already sparking backlash from key groups:
The nation’s new health-care law says insurers can’t turn anyone away, even people who are sick. But some companies, patient advocates say, have found a way to discourage the chronically ill from enrolling in their plans: offer drug coverage too skimpy for those with expensive conditions.
Some plans sold on the online insurance exchanges, for instance, don’t cover key medications for HIV, or they require patients to pay as much as 50 percent of the cost per prescription in co-insurance -- sometimes more than $1,000 a month.
“The fear is that they are putting discriminatory plan designs into place to try to deter certain people from enrolling by not covering the medications they need, or putting policies in place that make them jump through hoops to get care,” said John Peller, vice president of policy for the AIDS Foundation of Chicago.
As the details of the benefits offered by the new health-care plans become clear, patients with cancer, multiple sclerosis, rheumatoid arthritis and autoimmune diseases also are raising concerns, said Marc Boutin, executive vice president of the National Health Council, a coalition of advocacy groups for the chronically ill. …
Insurers say that such accusations are unfounded, and that the drug coverage is more than adequate, with many plans exceeding the minimum levels required by the Affordable Care Act. But they acknowledge that to keep premiums low, they must restrict the use of some costly drugs if there are alternatives. And they say that when high-priced medications must be used, it’s reasonable to expect patients to pick up more of the cost.
This is the type of government-knows-best disruption that is going to be the most damaging to people’s lives. The inability to keep your plan was one thing – an inability to keep the drug you’ve been on for years is an even more tangible loss.
-- Benjamin Domenech
IN THIS ISSUE:
For months, the Obama administration has heralded the low premiums of medical insurance policies on sale in the insurance exchanges created by the new health law. But as consumers dig into the details, they are finding that the deductibles and other out-of-pocket costs are often much higher than what is typical in employer-sponsored health plans.
Until now, it was almost impossible for people using the federal health care website to see the deductible amounts, which consumers pay before coverage kicks in. But federal officials finally relented last week and added a “window shopping” feature that displays data on deductibles.
For policies offered in the federal exchange, as in many states, the annual deductible often tops $5,000 for an individual and $10,000 for a couple.
Insurers devised the new policies on the assumption that consumers would pick a plan based mainly on price, as reflected in the premium. But insurance plans with lower premiums generally have higher deductibles.
In El Paso, Tex., for example, for a husband and wife both age 35, one of the cheapest plans on the federal exchange, offered by Blue Cross and Blue Shield, has a premium less than $300 a month, but the annual deductible is more than $12,000. For a 45-year-old couple seeking insurance on the federal exchange in Saginaw, Mich., a policy with a premium of $515 a month has a deductible of $10,000.
In Santa Cruz, Calif., where the exchange is run by the state, Robert Aaron, a self-employed 56-year-old engineer, said he was looking for a low-cost plan. The best one he could find had a premium of $488 a month. But the annual deductible was $5,000, and that, he said, “sounds really high.”
By contrast, according to the Kaiser Family Foundation, the average deductible in employer-sponsored health plans is $1,135.
SOURCE: The New York Times
The federal health care exchange is incorrectly determining that some people are eligible for Medicaid when they clearly are not, leaving them with little chance to get the subsidized insurance they are entitled to as the Dec. 23 deadline for enrollment approaches.
State and industry officials haven’t quantified the problem yet, but the National Association of State Medicaid Directors may release information next week after following up on reports from around the country, says Executive Director Matt Salo.
Here’s what happens: When consumers applying for insurance put their income information into subsidy calculators on HealthCare.gov -- the exchange handling insurance sales for 36 states -- it tells them how much financial assistance they qualify for or that they are eligible for Medicaid. If it’s the latter, consumers aren’t able to obtain subsidies toward the insurance, although they could buy full-priced plans.
If the Medicaid determination is wrong, consumers should file an appeal with the federal marketplace, says Department of Health and Human Services spokeswoman Joanne Peters, but she says she does not have an estimate on how long that would take.
Brokers are reporting that some of their clients are in insurance limbo as they wait for the error to be corrected by HHS or their states so they can reapply.
Jessica Waltman, top lobbyist for the National Association of Health Underwriters, says she’s heard a number of reports from around the country of people making as much as $80,000 a year being told they qualify for Medicaid on HealthCare.gov.
“I have heard on multiple occasions from brokers in various states over the past eight weeks that they have had wacky Medicaid determinations with people who clearly make way too much money for Medicaid,” she says.
SOURCE: USA Today
Arizona has responded to financial incentives in the Affordable Care Act (ACA) by expanding Medicaid eligibility. What will be the impact of the expansion? There are three primary outcomes, say Michael Bond, a senior fellow the National Center for Policy Analysis, and Stephen T. Parente, the Minnesota Insurance Industry Chair of Health Finance in Carlson School of Management and professor in the Finance Department at the University of Minnesota.
- The number of privately insured individuals will fall 333,000 in 2014 and, by 2023, the number of privately insured will be 450,000 fewer than it would be otherwise.
- The net number of Medicaid participants will increase1.07 million in 2014 and, by 2023, the number of Medicaid enrollees will be 1.65 million higher than it would be otherwise.
- The total cost to the state of covering these new Medicaid beneficiaries will reach $906 million annually within the next decade.
Using a microsimulation model, Bond and Parente estimate the specific effect on the state of Arizona of the Medicaid expansion. The net result of the expansion in Arizona is an increase of Medicaid recipients. Given that over two-thirds of the expected national increase in the insured from ACA was to come from Medicaid expansion, this is not surprising.
However, the ACA offers subsidies to private insurance coverage purchased through state and federal exchanges. Individuals with incomes from 100 percent to 133 percent of poverty are eligible for subsidized coverage in the health insurance exchange if their employer does not offer coverage and they are not eligible for Medicaid. Nearly one-third of nonelderly Arizonans in this income group have employment-based or individually purchased private insurance coverage. Thus, Medicaid expansion will significantly shrink the individual and employer-offered private insurance market.
The model allows Bond and Parente to project the loss of private coverage by insurance type. Some of the individuals eligible for expanded Medicaid would otherwise be covered by high-deductible private insurance plans. Some would be covered by narrow-network preferred provider organizations (PPOs) and others would be enrolled in health maintenance organizations (HMOs).
The two Democrats on the state Legislature’s 12-member Joint Appropriations Committee questioned on Monday Gov. Matt Mead’s recommendation against expanding the Medicaid program to cover about 16,000 uninsured residents.
The governor, a Republican nearing the last year of his first term in office, said his decision was not political, but was instead pragmatic. Mead made the comment during an explanation to the committee of his recommended $3.3 billion budget for the two-year budget period that begins July 1.
He said he is convinced the Affordable Care Act -- often known as Obamacare -- is not the solution to the state’s problem of uninsured citizens.
Mead noted the state joined other states in unsuccessfully challenging the constitutionality of the health care reform law. The U.S. Supreme Court largely upheld the law.
Sen. John Hastert, D-Rock Springs, said a state Department of Health report said the Medicaid expansion could save the state money. Hastert said that he also was disappointed with the rollout of the bulky health care exchanges created under the new law, but pointed out the exchanges are separate from Medicaid.
Mead said there is a performance issue with government delays of pieces of the program without legislation or debate. The program is based on the premise that young, healthy people will sign up, but that’s not happening, he said. He also questioned whether the federal government will follow through with its financial promises.
South Dakota Governor Dennis Daugaard says he doesn’t plan to expand Medicaid in South Dakota under the Affordable Care Act.
Under the new health care law, states have the option to expand Medicaid to those who don’t qualify for subsidies under the law, but who also don’t make enough money to buy health insurance on their own.
About 48,000 South Dakotans fall into that category. The federal government will pay for a majority of the costs, and while the governor is hesitant to grown the program, the legislature may push for the expansion.
Daugaard told lawmakers during his annual budget address last week that the federal government has been too unreliable and that’s why he’s decided not to expand Medicaid in South Dakota.
“I am not recommending to expand Medicaid in FY2015 budget. The implementation of the Affordable Care Act continues to be unpredictable and chaotic,” Daugaard told lawmakers.
The expansion would mean anyone making less than $15,000 a year or a family making less than $32,000 a year could be covered under Medicaid. The federal government would pay for the entire expansion for the first few years and then scale funding back to 90 percent by 2020, with states picking up the other ten percent. It’s why South Dakota Democrats including State Senator Angie Buhl will keep pushing for expansion.
“Without expanding Medicaid, we’re leaving money on the table. We’re subsidizing the folks in other states through our federal taxes who are expanding Medicaid. So, I think this is really a win-win option for South Dakota,” Buhl said.
South Dakota is one of 20 states that has declined to expand Medicaid under the Affordable Care Act. Buhl says there will likely be a push during the upcoming session to strike South Dakota off that list.
Pilot Project for MSAs. These early attempts to implement MSA plans were at a disadvantage under the tax law. Unlike employer-paid premiums, MSA deposits were subject to income and payroll taxes, and unspent funds could not be rolled over to accumulate and earn tax-free interest. In 1996, however, Congress created a pilot project allowing tax-free MSAs for the self-employed and small businesses. The program mandated a cap of 750,000 policies, but numerous restrictions resulted in only a tenth that number being purchased. One of those restrictions was the design of MSA plans.
In the early 1990s, [NCPA President John] Goodman drew a diagram of a possible MSA plan for Ways and Means Chairman Bill Archer. [See the figure.] Subsequently, this design was codified -- both in the pilot program and current HSA law. By contrast, the South African government took a similar approach, but allowed the market to innovate and experiment.
MSAs in South Africa. In 1993, Goodman helped Discovery Health launch an MSA plan in South Africa. The plan was very successful and rival insurers quickly copied it. Within a decade, MSA plans captured about two-thirds of the private insurance market.
In a typical South African plan, there was no deductible for hospital care, on the theory that patients typically exercise very little discretion in a hospital setting. By contrast, there was a high deductible for out-patient care on the theory that patients exercise more discretion when choosing those services. However, the most popular South Africa plans would not be allowed under the rigid parameters that govern the U.S. market.
In 2014, in the United States, the health insurance policy that accompanies an HSA must have an across-the-board deductible of at least $1,250 for an individual or $2,500 for a family, with exceptions for preventive care.
Health Reimbursement Arrangements. In June 2002, encouraged by the NCPA and the Wye Group on Health, the U.S. Treasury Department issued a Revenue Ruling clarifying that unused funds in Health Reimbursement Arrangements (HRAs) -- employer-funded accounts similar to HSAs -- could be rolled over from year to year tax free. HRAs are very flexible. Employers, for example, can alter copayments and deductibles to encourage employees to buy medications for chronic conditions or to encourage preventive care.
There are some limitations: HRAs can never be cashed out and taken as compensation by the employee, and they are generally not portable. Thus, HRAs are essentially expense accounts with use-it-or-lose-it incentives. Nonetheless, they have been very important politically in building large employer support for consumer directed health care.
Health Savings Accounts. In contrast to HRAs, HSAs create an actual savings account that belongs to the worker, can travel from job to job, and be passed on to heirs. To a large extent, they allow people to choose between health care and other uses of money. Funds can be withdrawn and spent for nonhealth purposes after age 65, after paying normal income taxes. Prior to age 65, a 20 percent penalty applies.
Why have health care costs moderated in the last decade? Some have suggested the Great Recession alone was the cause, but health expenditure growth in the depths of the recession was nearly identical to growth prior to the recession. Nor can the Affordable Care Act (ACA) take credit, since the slowdown began prior to its implementation. Instead, we identify three primary causes of the slowdown: the rise in high-deductible insurance plans, state-level efforts to control Medicaid costs, and a general slowdown in the diffusion of new technology, particularly in the Medicare population.
A more difficult question is: Will this slowdown continue? Here we are more pessimistic, and not entirely because a similar (and temporary) slowdown occurred in the early 1990s. The primary determinant of long-term growth is the continued development of expensive technology, and there is little evidence of a permanent slowdown in the technology pipeline. Proton beam accelerators are on target to double between 2010 and 2014, while the market for heart-assist devices (costing more than $300,000) is projected to grow rapidly.
Accountable care organizations (ACOs) and emboldened insurance companies may yet stifle health care cost growth, but our best estimate over the next two decades is that health care costs will grow at GDP plus 1.2 percent; lower than previous estimates but still on track to cause serious fiscal pain for taxpayers and workers who bear the costs of higher premiums.