Have States made any progress towards implementing Health Exchanges?

February 6, 2012 in CHIP, Health Reform, Medicaid | 1 comment

The answer depends on the state. Today, I examine an Urban Institute research paper that looks at this progress in more detail.

Dividing States into 3 Group

The most advance States fall into Group 1 (CA, CO, CT, DC, HI, IN, MA, MD, NV, OR, RI, UT, VT, WA, WV). These states have either enacted an exchange establishment law or in which the governor has established one by issuing an executive order. Massachusetts and Utah had already passed exchange laws before enactment of the ACA. All Group 1 states (except Colorado, Massachusetts and Utah) have received an exchange establishment grant.

Group 2 states (AL, AZ, DE, IA, ID, IL, KY, ME, MI, MN, MO, MS, NC, NE, NJ, NM, NY, PA, TN, VA, WI) have not yet established exchanges, but have demonstrated significant interest in doing so. Most notably, 17 of the 21 states have received level 1 federal establishment grants, which represent a second round of funding for state exchange development work beyond the initial state planning grants. Although Wisconsin has not received a level 1 federal establishment grant, Wisconsin is using federal funds to develop an IT system to fully integrate exchange eligibility determination and enrollment with state-based public insurance programs (i.e., Medicaid and CHIP). Recently, however, Wisconsin Governor Scott Walker has rejected all federal funding for implementation of the ACA. Of the remaining four states, Virginia and Wisconsin have passed legislation stating its intent to develop an exchange, although they have not yet passed exchange establishment legislation, New Jersey has establishment legislation pending in its legislature, and Pennsylvania’s governor has recently announced that his administration is taking steps to establish a state exchange.

Group 3 states (AK, AR, FL, GA, KA, LA, MT, ND, NH, OH, OK, SC, SD, TX, WY) do not meet any of the criteria for Groups 1 and 2 and are the furthest from successfully implementing the ACA provisions.

Correlation between Exchange Progress and Potential Increases in State Health Insurance Coverage

A research article from the Urban Institute finds that States with the ‘most to gain’ from the ACA are actually the most likely to fall into Group 3. States that currently have the least generous Medicaid programs and the largest share of uninsured workers are the least likely to have made significant progress in implementing the ACA provisions.

I can think of two reasons for this finding. The first is philosophical. These States began with less generous health insurance programs. Thus, the residents (or politicians) in these States may prefer to have less generous health insurance programs than other States. Hence the natural aversion to implementing the ACA provisions. The second reason is financial. Because these States have the largest share of uninsured individuals, they would also incur the largest percentage increase in cost to finance the ACA provisions. Although it is true that these States would likely receive the largest subsidies, these subsidies will not cover the full cost of the ACA implementation.

Questions States need to answer to implement an Exchanges

  • Should the exchange be run by an existing government agency, a new agency, a quasi-governmental entity or a not-for-profit private entity?
  • What should the composition of the governing board be?
  • How should the administrative costs of running an exchange be financed?
  • Should the exchange be able to actively negotiate with plans over premiums?
  • Can plans be excluded, or must all qualified plans be allowed to participate?
  • In computing premiums, should enrollees in the Small Business Health Options Program (SHOP) exchange and nongroup exchange markets be pooled together, or should their premiums be set separately?
  • What will be the role of agents and brokers in the exchange?
  • Should state insurance regulations be identical inside and outside the exchange?
  • How will Medicaid/CHIP eligibility and enrollment be integrated with the exchange?
  • Should the Basic Health Plan option be implemented?

Source: Blavin F, Buettgens M and Roth J “State Progress Toward Health Reform Implementation: Slower Moving States Have Much to Gain.” RWJF and Urban Institute Real Time Policy Analysis, January 2012.

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Celebrity Product Endorsement in the 1800s

February 3, 2012 in Books, Quotation | No comments

“The first customers bough pairs of telephones for communication point to point: between a factory and its business office, for example.  Queen Victory installed one at Windsor Castle and one at Buckingham Palace (fabricated in ivory; a gift from the savvy [Alexander Graham] Bell.”

The Latest Health Wonk Review is up

February 2, 2012 in Carnivals, Current Events | No comments

Check out the latest edition of the Health Wonk Review at the Colorado Health Insurance Insider.  If the HWR hasn’t fulfilled your need to read, here are some additional links of interest as well.

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How much is rent in your area?

February 1, 2012 in Data, Medicare, Physician Compensation | No comments

The Department of Housing and Urban Development (HUD) is responsible for answering just that question.  To determine what level Section 8 vouchers should be set, HUD measures the rents for every county across the nation.  Specifically, they measure the 40th percentile and 50th percentile (i.e., median) rents in each area.  They choose to use the median so that high prices for luxury residences do not skew the measure of rent for a “typical” person in each area.  How does HUD calculate these Fair Market Rents (FMR)?  Today I will explain.

Read the rest of this entry »

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Does Obamacare Limit Profits for Health Insurance Companies in Your State?

January 31, 2012 in Health Insurance, Health Reform | 2 comments

One of the provisions in the Patient Protection and Affordable Care Act (a.k.a ACA, a.k.a. Health Reform, a.k.a. Obamacare) is that it limits the profits of health insurance companies.  The ACA imposes a minimum medical loss ratio (MLR) on all insurers.  The MLR is the amount of money spent on covered person medical care divided by the total revenue received through premiums.  There is some debate of what constitutes ‘medical care’ (e.g., do investments in electronic health records count as medical care?), but insurer profits certainly are non-medical.

The ACA requires health insurers in the individual and small group market to spend 80 percent of their premiums (after subtracting taxes and regulatory fees) on medical costs.  The corresponding figure for large groups is 85 percent.  According to a recent Kaiser tracking poll, 60 percent of the public views the MLR concept favorably, although only 38 percent was aware that the provision is in the ACA.  Insurance brokers may be getting squeezed for insurers to meet this amount.

Even though the MLR is a national law, it may not apply in your state.  Why?  Because many States are petitioning for a waiver.  HHS is currently reviewing applications from six states: Florida, Kansas, Michigan, Texas, Oklahoma and North Carolina.  According to The National Association of State Budget Officers, HHS has granted waivers to seven states: Maine, New Hampshire, Kentucky, Nevada, Iowa, Georgia and Wisconsin. The department has denied them to Delaware and North Dakota.

Why did these States receive waivers?  For a variety of reasons, but one of the reasons is due to the fact that some states have a less competitive medical market.  Maine, for instance, requested a MLR of 65%.  The reason was that State only has two large commercial insurers, Anthem Blue Cross Blue Shield (with 49% of the market) and MEGA Life and Health Insurance Company (with 33% of the market).  A public-private partnership, DirigoChoice, makes up most of the rest of the market.  Three HMO’s have less than 1% of the market combined between them.  To avoid the case where a large insurer would leave the market due to minimum MLR requirements and create a near monopoly, HHS decided to approve Maine’s request.

Notes:

  • Section 2718 of the Public Health Services Act implements the minimum medical loss ratio requirement.

The National Association of State Budget Officers

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Who are the 1%?

January 30, 2012 in Economics - General, HC Statistics | No comments

Although executives and managers lead the way, in large part, the answer is doctors.  See the chart below.


Sources:

  • John Bakija, Williams College ”Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data.” November 2010, Working Paper.
  • Hat tip: Mother Jones.

 

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Friday Links

January 27, 2012 in Current Events | No comments

Here are a few of this week’s most interesting articles to take you into the weekend:

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Add to Your Skills Toolkit: The Oaxaca Decomposition

January 26, 2012 in Econometrics, Economics - General | No comments

Suppose you look at health care spending in two different regions and observe a significant difference.  You may want to know what the cause of this difference is.  Is it because one region has a mix of people who are sicker; or is because the reason treat patients with a given disease more intensively?

One way to answer this question is to use the Oaxaca decomposition.  This approach was originally formulated by Ronald Oaxaca. This document provides a nice overview of how to use the Oaxaca Decomposition and I apply that framework to the health spending case.

Differences in Health Spending

Assume that there are two regions: Region A and Region B. The spending for the two regions can be modeled using a linear regression framework:

  • YA = βAX + εA
  • YB = βBX + εB

The Y term represents spending and the variable X represents the patient’s health status. Health status could be measured as a vector of factors or as a single indicator (e.g., healthy or sick). The term β describes much an area spending on medical resources to treat a patient with a health status of X. Thus, average difference in spending per person the two regions is:

  • YA – YB = βAXA – βBXB

where XA is the average case mix in the area.

Determinants of Health Spending Differentials

Now the question is whether case mix or spending practices conditional on case mix is the key driver of the differences in spending between regions A and B. One can differentiate these two components using the following Oaxaca Decomposition:

  • YA – YB = ΔXβB + ΔβXA
  • YA – YB = ΔXβA + ΔβXB

In the first equation, the differences in health status (X‘s)are weighted by the coefficients for region B and the differences in the coefficients are weighted by the X’s from region A, whereas in the second, the differences in the X‘s are weighted by the coefficients of from region A and the differences in the coefficients are weighted by the X‘s of from region B.

There are basically three factors that effect health spending in the region: i) differences in health status across regions ii) differences in treatment patterns conditional on health status, and iii) the interaction of health status and conditional treatment effects. One can see this clearly below:

  • YA – YB = ΔXβB + ΔβXB + ΔXΔβ
  • YA – YB = H + T + HT

The equations above show the health status effect (H), the treatment effect (T) and the interaction (HT).

The specification chosen for the Oaxaca decomposition determines whether the interaction effect is placed with the health status effect or the treatment effect.  More precisely:

  • YA – YB = ΔXβB + ΔβXA = H + (HT + T)
  • YA – YB = ΔXβA + ΔβXB = (H+ HT) + T

In effect, the first decomposition specification incorporates the interaction term with the treatment effect whereas the second specification places the interaction term together with the health status effect.

Sources:

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Cavalcade of Risk is up

January 25, 2012 in Carnivals | No comments

The latest edition of the Cavalcade of Risk is up at The Notwithstanding Blog.   The creative format will test your intelligence.

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2012 State of the Union: Healthcare Edition

January 24, 2012 in Current Events, Public Policy | No comments

The full text of the State of the Union is here.  Lots of blogs are analyzing at the State of the Union address, but the Healthcare Economist will examine the President’s health-related remarks.

Healthcare-Related Comments

Medical R&D:“We’ll invest in biomedical research, information technology, and especially clean energy technology -– (applause) — an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.”

Health Reform: “And it’s why we passed reform that finally prevents the health insurance industry from exploiting patients. (Applause.)

Now, I have heard rumors that a few of you still have concerns about our new health care law. (Laughter.) So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses. (Applause.)

What I’m not willing to do — what I’m not willing to do is go back to the days when insurance companies could deny someone coverage because of a preexisting condition. (Applause.)

I’m not willing to tell James Howard, a brain cancer patient from Texas, that his treatment might not be covered. I’m not willing to tell Jim Houser, a small business man from Oregon, that he has to go back to paying $5,000 more to cover his employees. As we speak, this law is making prescription drugs cheaper for seniors and giving uninsured students a chance to stay on their patients’ — parents’ coverage. (Applause.)

So I say to this chamber tonight, instead of re-fighting the battles of the last two years, let’s fix what needs fixing and let’s move forward. (Applause.)”

Cuts to Medicare and Medicaid: “And their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it –- in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes. (Applause.)

This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit.  The health insurance law we passed last year will slow these rising costs, which is part of the reason that nonpartisan economists have said that repealing the health care law would add a quarter of a trillion dollars to our deficit.  Still, I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year — medical malpractice reform to rein in frivolous lawsuits. ”

Health IT:“Veterans can now download their electronic medical records with a click of the mouse.”

The Healthcare Economist’s Take

Your response to these comments are likely, ‘that’s it?!?!’  If you look at the State of the Union address from 2010, you’ll notice that health care reform played a large role in the President’s State of the Union address.  In this address, the President largely avoided the topic. This is not a huge surprise since the President’s Health Reform package (the ACA) is proving unpopular.

Tellingly, the phase “health reform” is never once mentioned in the speech.

He did mention reducing paperwork for small businesses and maintaining the provision to forbid insurers to adjust health insurance premiums based on the patients’ pre-existing conditions. A policy that prohibits rating policyholders based on pre-existing conditions is only tenable with an individual mandate; otherwise healthy people will have no incentive to buy insurance until they are sick. Obama does not mention the individual mandate at all in his speech, however.

The President also says that we need to cut spending for Medicare and Medicaid. He does not, however, offer specifics. In 2010, the President established the bipartisan Fiscal Commission to reduce the cost of Medicare, Medicaid and Social Security. Those efforts largely failed. With so little effort directed towards these cuts in his speech, there is little chance that these cuts materialize or if they do they will be large in magnitude.

In short, on the health care front there is no new news…this would of course change significantly if a Republican takes office in 2013.

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