Will All the Exchanges End Up Federal?

Will All the Exchanges End Up Federal?
June 5, 2014

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

Consumer Power Report #422

Yesterday the Wall Street Journal reported on the burdens of troubled state health insurance exchanges, for which the costs are continuing to rise. The question is whether more money should be spent to fix the exchanges or if states should just throw up their hands and shift to the now-functional federal system, which itself comes with costs:

Five states that launched health exchanges under the Affordable Care Act expect to spend as much as $240 million to fix their sites or switch to the federal marketplace, a Wall Street Journal analysis shows.

Maryland, Massachusetts, Minnesota, Nevada and Oregon estimate the money will be needed to fix problems with troubled marketplaces or to join the federal exchange before the next enrollment period in November, according to an analysis of data provided by the state exchanges.

The fresh spending is fueling a pitched debate in some states that could shape how residents buy their health insurance. Some local lawmakers say upgrading or sustaining the exchanges could deplete funding for roads, education or other vital programs.

In Washington, some Republicans lawmakers want a moratorium on spending federal funds on marketplaces still bedeviled by problems. “I don’t think more money will solve the problem,” said Sen. John Barrasso (R., Wyo.). “We should stop the bleeding.”

“We are supporting states’ efforts to operate marketplaces that work for consumers and taxpayers in the most cost-effective ways possible,” said Aaron Albright, spokesman for the Centers for Medicare & Medicaid Services, which implements the health law. “We are closely monitoring how grant money is being spent and working to ensure that all consumers can gain new health coverage options offered in the marketplaces.”

The five states have spent or committed to spend more than $700 million in federal funds, according to the Journal analysis. The U.S. has already granted almost $4.7 billion to states that have built or considered building their own marketplaces, according to the Kaiser Family Foundation.

Assuming these states eventually shift to the federal exchange, that would leave only nine states with functional state-constructed exchanges. This could have interesting ramifications down the road should Republicans take the White House in 2016 but lack the votes in the Senate or House for full repeal of Obamacare. Should that circumstance arise, reform-minded Republicans could take the tactic (supported by some on the right) of dramatically overhauling the federal exchange to create more competition, fewer regulations, and a host of other reforms to essentially gut the worst parts of the top-down exchange approach.

Liberals would almost certainly oppose such steps, while conservatives will think it unacceptable as not going far enough. But the motivations for such changes could be strong considering the need for a broader exchange overhaul. The delivery of subsidies via the exchange is still a significant problem, and as premiums continue to rise in exchanges across the country, the pressure for dramatic change will grow. Whether Obamacare is repealed or reformed, it’s going to change … especially if the problems continue for millions of Americans, as the AP reports.

-- Benjamin Domenech


IN THIS ISSUE:


EXPERIMENTAL DRUG LAWS AND THE RIGHT TO TRY

The current process for pharmaceutical firms seeking Food and Drug Administration (FDA) approval for new medications is long and arduous. And patients seeking to use experimental drugs before FDA approval must go through an exemption process that can take several months, requiring physicians to file paperwork that takes almost 100 hours to complete. Even after this lengthy process, the decision to grant an exemption for the patient’s use of the experimental drug lies solely with the FDA.

To speed up this process and improve the access of terminally ill patients to potentially beneficial drugs, several states have introduced “Right to Try” laws that would allow patients to obtain experimental drugs without getting federal approval. Three states--Colorado, Louisiana, and Missouri--are on track to become the first to pass such laws. Arizona voters will consider a similar measure in November.

The Right to Try model was designed by the Goldwater Institute to address several concerns about patients’ use of experimental drugs. First, the model allows access only to medications that have passed basic safety testing (FDA Phase I). Second, access is limited to use by terminally ill patients who have exhausted other available treatments. Finally, a medication is made available only if the company manufacturing it chooses to do so. A patient’s request for access to an experimental drug would require a doctor to diagnose a terminal disease and declare the drug represents the patient’s best chance at survival with the patient providing informed consent, limiting the legal exposure of the manufacturer of the drug.

Critics of Right to Try claim providing experimental drugs to terminally ill patients creates a false hope. Supporters say any hope is better than the alternative of no hope, which is inevitable when no treatments are made available for terminal patients. Milton Friedman once noted the FDA drug approval process, done in the name of safety, has harmful consequences for both the health of the public and the economy: “The FDA has done enormous harm to the health of the American public by greatly increasing the costs of pharmaceutical research, thereby reducing the supply of new and effective drugs, and by delaying the approval of such drugs as survive the tortuous FDA process.”

According to the California Biomedical Research Association (CBRA), it takes an average of 12 years for a drug to travel from the research lab through the FDA to the patient. In addition, the FDA allows only five in 5,000, or .1 percent, of the drugs that begin preclinical testing ever to make it to human testing, and of those five, only one is ultimately approved for human use. Prior to passage of the 1962 Kefauver Harris Amendment, which added new requirements for proof of efficacy in addition to safety for approval of new drugs, the average time from the filing of an investigational new drug application to approval was seven months.

Right to Try laws allow patients, with the advice of their doctors, to choose what treatments to try. These laws take reasonable steps to ensure the drugs are reasonably safe and that drug manufacturers and patients work to manage legal risk. Legislators in other states should consider passing such laws.

SOURCE: Heartland Institute


WHY THE VA IS SO HARD TO REFORM

First, it is important to understand just how serious the misdeeds of the Phoenix VA hospital (and apparently quite a few others) really are. The core of the scandal is what appears to have been a highly organized effort to cook the books in order to be able to report far shorter wait times for care than were actually achieved. Veterans awaiting care were kept off the formal waiting list (so that the wait-time clock did not start ticking) and handled through a series of ad hoc informal queues, which were themselves carelessly kept and badly mishandled. To work, this system appears to have required the active collusion of a large number of people at each VA facility in question, involving everything from telephone operators keeping some appointment requests out of the system to senior managers turning off audit controls on the hospital’s scheduling software to make it impossible to know who manipulated the system and how. The IG notes that some of these actions were almost certainly outright crimes. It’s not clear if what has happened at the many other VA facilities that have now been drawn into this scandal was as deep and broad, but it does look that way in at least some cases.

Second, the lengths to which VA employees were willing to go to report shorter wait times is a function of a longstanding emphasis (by Congress, successive administrations, and the veterans’ groups) on wait times as a primary performance measure, but this emphasis has not been tied (by any of them) to structural reforms that might actually enable the VA to function more efficiently. Centrally run, highly bureaucratic, public health-care systems that do not permit meaningful pricing and do not allow for competition among providers of care can really only respond to supply and demand pressures through waiting lines. It happens everywhere, but when it has happened at the VA the response has been to criticize waiting times rather than to reconsider how the system is organized.

There is no question that the quality of the VA system has improved significantly over the last three decades, thanks to a series of modernization efforts launched (and very well executed, I should note) by the Clinton administration and continued by both the Bush and Obama administrations. But these efforts began from an extremely low baseline and they have achieved improvements by essentially modernizing the infrastructure that supports a very inefficient bureaucracy. The potential of these kinds of changes to dramatically reduce waiting times was always going to be limited, and the increasingly unrealistic targets set for waiting times put pressure on the system without giving administrators any way to release it.

These targets reached the point of near-absurdity in 2011 when the Obama administration set a goal of 14 days between the time a patient asks for an appointment and the time that patient sees a doctor or nurse. These targets did not account well for the huge differences between different kinds of patients seen by the VA, and they were tied directly to bonuses and salary increases for hospital administrators, creating a huge incentive to distort the prioritization system used by the VA and, as happened here, to just lie about waiting times. The Phoenix hospital in question, for instance, reported that it had managed by last year to get average waiting times down to 24 days. In fact, the IG report found, the average waiting time was 115 days. There’s no way to bridge that gap with “targets.” And there’s probably no way to really bridge that gap at all in a public hospital system like the VA.

SOURCE: National Review


PART D FOR DISASTER

When the administration released the Medicare Part D rule in January, it took some time before the myriad constituencies with interests in the program grasped exactly what the rule did. The proposal was 157 pages long and included major changes to an already complex program that has insurance companies bid through the federal government to offer seniors prescription drug plans.

The most controversial changes included limiting the number of plans that an insurer could offer in a region down to two. Seniors had a choice of at least 23 plans in every region, according to the Congressional Budget Office in 2013. The administration had already moved towards this goal, requiring that plans had “meaningful differences” from one another. Their argument was that this change would simplify things for enrollees who didn’t always pick plans with the best value and prevent insurers from putting sicker, poorer seniors into basic plans.

It also opened up the “preferred pharmacy network” to any pharmacy that wanted to participate and expanded a medication therapy management program. Finally, what arguably sunk the rule because it garnered the ire of Democrats, it would end rules that required insurers to cover all antidepressant and immunosuppressant drugs. Those were two “protected classes” of drugs that were established early on in the program, in an effort to prevent plans from keeping sicker patients out of plans by simply not covering the drugs they need.

In any other year, these wonky yet significant changes may have been argued about in the backrooms of Washington. But thanks to the midterm elections, they hit the campaign trail.

“The whole rule torpedoed Medicare Part D,” Mark Merritt, CEO of the Pharmaceutical Care Management Association, said in an interview. The trade group represents pharmacy benefit managers, which vehemently opposed many of the changes.

“We had to start early on with the fact that this is a major campaign issue, as open enrollment is October,” for Medicare prescription drug plans, Merritt said. That was when seniors might find out they’d have to go on a different drug plan, conjuring memories of the uproar that was created when insurers canceled individual plans when the ACA’s insurance exchanges launched.

SOURCE: Morning Consult


THROWN A CURVE BY HEALTH CARE NETWORKS

[In] December, Chuck Richmond switched to a new health plan that complies with the Affordable Care Act. But when the 63-year-old accountant from Tustin went to see his dermatologist last month, he was surprised to learn that the skin doctor wasn’t in his plan’s provider network.

When he selected the plan, he recalls, “they led me to believe that the only change I was making was to a plan that complied with the Affordable Care Act.” He soon learned that more than half of his physicians -- some of whom he’d been seeing for more than 20 years -- are excluded from the network.

“I thought I was getting a better health plan than what I had before because it was ACA-compliant and had lower deductibles. That is why I paid the higher premium. If I knew half my doctors weren’t in the network, I might have gone for something cheaper,” he says.

The problem involves not just consumers who are discovering their doctors are not covered by their plans. Some doctors have themselves been confused about whether they participate in various networks, making it difficult for them to instruct their patients. Other providers are dropping out of networks, leaving patients in the lurch.

Because the new plan Richmond bought was with the same insurer that had been covering him for years, he says he had no reason to believe his doctors would no longer participate.

“Just because a provider took a Blue’s plan before and you are still enrolled in a Blue’s plan, you assume that the provider would be in-network even with a different product, and that’s not necessarily the case. It’s very product-specific,” says JoAnn Volk, senior research fellow with the Georgetown University Health Policy Institute.

SOURCE: Los Angeles Times


THE RETURN OF DEATH PANELS

The federal government may reimburse doctors for talking to Medicare patients and their families about “advance care planning,” including living wills and end-of-life treatment options -- potentially rekindling one of the fiercest storms in the Affordable Care Act debate.

A similar provision was in an early draft of the federal health care law, but in 2009, former Republican vice-presidential candidate Sarah Palin took to Facebook to accuse President Barack Obama of proposing “death panels” to determine who deserved life-sustaining medical care. Amid an outcry on the right, the provision was stripped from the legislation.

Now, quietly, the proposal is headed toward reconsideration -- this time through a regulatory procedure rather than legislation.

The American Medical Association soon will issue recommendations on what doctors should be paid for advance care planning, or conferring with patients about the care they would want if they were incapacitated. Every year, the AMA makes reimbursement recommendations on a broad range of procedures and services to the Centers for Medicare and Medicaid Services, the federal agency that administers the Medicare program and works with state governments to administer Medicaid. CMS and private insurers don’t have to follow AMA’s recommendations, but they typically do.

SOURCE: Stateline


LIMITING ACCESS TO CHARITY DENTAL CARE

When is it illegal for a licensed dentist in Arkansas to clean teeth? When he also happens to be a licensed orthodontist. In 2013 Dr. Ben Burris ran afoul of Arkansas’ law when he started offering low-cost teeth cleanings at his orthodontic offices. Ben’s practice Braces By Burris has 11 offices around the state. In part because of his success Ben feels a strong need to give back to the community so he started offering simple teeth cleanings for $99 for adults and $69 for kids, a fraction of what other dentists charge for the same service. He saw the program as a great way to expand access to care for Arkansans.

Within weeks, Ben was told by the Arkansas State Board of Dental Examiners that he was breaking the law and that his license would be revoked if he continued offering the cleanings. Arkansas prohibits licensed dental specialists like orthodontists from doing work outside of their specialty even though they are qualified to practice general dentistry. These kinds of restrictions arbitrarily limit access to care and drive up prices for consumers. Faced with the threat of seeing his practice ruined and his 100+ employees out of work, Ben suspended the program. Now Ben and his colleague Dr. Elizabeth Gohl are fighting back. Together with the Institute for Justice they filed a federal lawsuit on May 27, 2014 to defend their right--as licensed dentists--to perform basic dental services. The 14th Amendment protects the right of professionals to offer services that they are perfectly qualified to perform. This case is about eliminating irrational protectionist laws and expanding access to affordable dental and medical care for Americans everywhere.

SOURCE: Institute for Justice

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)