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.
Bring Market Prices to Medicare
December 16, 2011 in Books, Health Insurance, Managed Care, Medicare, Medicare Advantage | 3 comments
Medicare is a government-run insurance program. Can policy changes be made to add competition to Medicare, maintain quality and reduce cost? A book titled Bring Market Prices to Medicare argues that it can through a competitive bidding process. This book makes a number of sensible arguments which I review today.
The main proposal of the book is a competitive bidding process for all Medicare plans. Currently, there is a form of competitive bidding only for Medicare Advantage (MA) managed care plans. The authors also argues for competitive bidding for fee-for-service (FFS) Medicare (i.e., Parts A and B). There is already a competitive bidding process for Medicare’s prescription drug program (Part D) which has worked well.
One of the main advantages of Medicare FFS is that beneficiaries do not need a referral for any services and are not limited to certain provider networks. However, Medicare beneficiaries do not pay for these added benefits. In addition, even if HMOs are more efficient than Medicare FFS, Medicare FFS beneficiaries still pay the same Part B premiums.
The authors want beneficiaries to face the true price differentials between the lowest cost plans and less efficient plans., regardless if the plan is Medicare FFS or an MA plan. Thus, beneficiaries would be responsible for any premium differences due to choosing a more expensive plan.
Currently, MA plans receive a variant of the average bid in their service area. The authors propose that Medicare would only pay for the lowest cost plan. This proposal would in essence be a transfer from plans and beneficiaries (who would have to pay the cost differential between the plan they choose and the lowest cost plan) to the government. Given the fiscal hole the federal government is facing, this is a good idea.
Authors also propose to eliminate the 25% tax on premiums. According to MedPAC, “Plans that bid below the benchmark also receive payment from Medicare in the form of a “rebate.” The law defines the rebate as 75 percent of the difference between the plan’s actual bid (not standardized) and its case mix-adjusted benchmark. The plan must then return the rebate to its enrollees in the form of supplemental benefits or lower premiums” The rebate structure gives plans a disincentive from lowering their bids since they only recover a share of the cost decreases.
Another issue focuses on regional adjustments. Living in New York is expensive and health care is more expensive in New York than in rural Mississippi. However, should Medicare subsidize New Yorkers because their health care is more expensive. The authors argue no, but poor individuals in high cost areas will be adversely affected by this policy choice.
A major issue is controlling quality. Plans could create low cost plans by providing low-quality care or failing to provide mandated services. Thus, CMS will need to regulate the plans. Plans with quality levels below a specific level would be barred from enrolling individuals or the government could force beneficiaries to pay additional premiums to enroll in these low quality plans. Public reporting of plan quality is also needed.
Strategic bidding is also a problem. Plans could collude to raise the bid price. However, by having Medicare FFS as an option will cap the amount colluding firms could increase prices. Further, a small firm could bid a very low amount and set the market. Medicare could set the benchmark at the lowest cost plan which meets a minimum size requirement.
Source:
Another Review of the Book:
Tags: AEI, Auction, Books, Competitive Bidding, HMO, Managed Care, Medicare