How to Decide if a Policy Designed to Increase Access Is Good

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When I was evaluating Joe Biden’s healthcare plan recently, I talked about how to properly evaluate policies that attempt to increase access. I think this is important enough to discuss briefly in its own post.

But first, as a brief reminder, there are traditionally three issues that healthcare reformers are attempting to solve: cost, quality, and access. And I like to combine quality and cost into one variable–value.

Access-increasing policies are typically evaluated based on (1) how many people they will cover and (2) how much they will cost, but we need to add a super important third metric in: How many barriers the policy creates to improving value.

Just because access-increasing reforms of the past have worsened healthcare value doesn’t mean they always have to do that. It just means healthcare reformers of the past haven’t known how to improve the value of healthcare, so they haven’t been able to evaluate their policies on that metric. But that’s what the Healthcare Incentives Framework is for (specifically this part of it), and that’s why I have been using it to evaluate politicians’ access-increasing policies lately.

And by the way, I’ve already written about how pretty much any universal-access system, properly implemented, can do very well on that third metric.

A Healthcare Platform for President Trump

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Last week, I evaluated President Trump’s healthcare platform. The problem is, he doesn’t seem to have one. At least, he doesn’t say anything about one on his official campaign website. This is in stark contrast to Joe Biden, who gives many details on his healthcare plan (see my evaluation of it here).

So, to help President Trump out, I decided to write a healthcare plan for him. Let me be clear from the outset that this is not my personal healthcare plan–it is just one of many possible ways to implement the principles outlined in the Healthcare Incentives Framework, and it’s a way I could see Republicans going about it.

One other reminder: The President doesn’t make laws! But the modern reality in this country is that people want to hear a President’s plan for fixing all sorts of problems, so there we have it. He does have the power to set the agenda and influence his party, so this is by no means a useless endeavor.

Ok, now on to his brand new healthcare plan, which I am pretending to write on behalf of his staff, with a little rhetoric mixed in just for fun . . .

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President Trump will address both of the major issues in our healthcare system: value and access.

The problem with policies designed to increase access is that they usually create market distortions that become barriers to improving value, so his plan starts by addressing how he will improve value, after which he will show how he has crafted a way to increase access that will not undermine his other efforts.

First, he intends to enable patients to act as consumers and make informed choices. This applies to their ability to shop for the best insurance plans and their ability to shop for the best providers.

Take the insurance side first. To facilitate patients shopping for insurance plans, he has a unique approach for each segment of the insurance market.

For Medicaid, which is administered state by state rather than nationally, instead of allowing states to create and administer a single Medicaid plan, he will require them to contract with multiple insurers to each offer a Medicaid plan. This gives Medicaid enrollees more choices, and their insurance is provided by private businesses rather than government beaurocrats. The good news is, more than 2/3 of all Medicaid enrollees are already such plans (known as Medicaid Managed Care), and when these policies are combined with the other policies described in this plan, they will start to generate significant savings.

For Medicare, President Trump will make a similar change. Instead of the government offering a traditional Medicare plan, Medicare will shift over to relying exclusively on private insurers to create Medicare-compliant plans, and Medicare itself will simply pay those private insurers for each enrollee they have. This is called Medicare Advantage, and 34% of Medicare enrollees are already on such plans. But, again, increasing this number to 100%, when combined with the other changes in this plan, will create greater competition and cost savings.

For the private insurance market, President Trump will continue to rely on healthcare.gov as the marketplace for private health insurance plans. Even though this website was poorly rolled out, it has become a well-known source for health insurance, and now it will rise to its full potential because Medicare Advantage and Medicaid Managed Care plans will be rolled into it, meaning every American who does not get insurance through their employer will be able to shop for their health insurance on healthcare.gov. This will simplify the experience of buying health insurance, and it will strengthen Americans’ ability to find the best plan for them.

On the topic of employer-sponsored insurance, President Trump will take a historic first step in decoupling health insurance from employment because someone who loses their job should not lose their health insurance along with it. He will take this step by extending the employer health insurance tax exemption to all people buying health insurance on healthcare.gov. Employers will also have the option to stop paying for health insurance on behalf of their employees and instead give that money directly to their employees in the form of a pay raise, which allows employees the freedom and choice to use that money to shop for an insurance plan that fits their needs better than their employer’s plan.

President Trump will also get rid of Obamacare’s innovation- and competition-destroying medical loss ratio rule, which will become unnecessary after the changes described here fix the broken insurance markets and allow them to start pricing more competitively on their own.

He will also instruct the Centers for Medicare & Medicaid Services to sponsor bundled payment and reference pricing pilots. These are alternative payment models that enable patients to more easily compare apples to apples the prices of their healthcare provider options and then decide for themselves if they think it is worth it to pay more to go to a more expensive provider (which, in healthcare, usually does not mean better quality!). These pilots will help spread these new payment models as (1) insurers discover it saves them (and their enrollees) money and (2) providers discover that they can also make more money by lowering their prices and winning more patients.

These common-sense policies will transform the healthcare insurance market into one of honest competition and innovation.

President Trump will also make changes to improve the healthcare provider market and allow patients to more easily find the best providers.

First, he will build on the progress he has already made with healthcare price transparency by requiring all healthcare facilities to publish their cash prices for the most common shoppable services. The required price reporting will include bundled prices, when applicable. Over time, as more bundled prices become available, patients will have an even easier time shopping for the best deal because they will be able to compare up front, apples to apples, prices between providers for the same bundle of services.

In additon to price data, patients need quality data. President Trump will require healthcare providers to start tracking and reporting quality metrics that are more useful in helping patients be good shoppers. This means there will be a shift in focus away from aggregate quality ratings and toward the specific metrics that patients need to know most when deciding between different providers.

President Trump will make all those price and quality data publicly available so that entrepreneurs can use them to design creative and simple shopping websites, similar to what we see with flight booking websites.

All those changes to the insurance market and the provider market will help people become better consumers of healthcare. And when our nation has consumers shopping for the best value in healthcare, it will stimulate the kind of competition we have never gotten in healthcare–competition over value. In other words, these changes will shift insurers’ and providers’ focus of innovation onto ways to improve value for patients, and as a result quality and price improvement dividends will accumulate long after these policies have been enacted.

Joe Biden’s plan is costly, and it is fiscally irresponsible because it has nothing in it that will make a major dent in the cost of healthcare, which is the biggest contributor to our growing national deficit.

President Trump also wants to ensure everyone has access to affordable health insurance. How can he make affordable insurance to everyone without interfering with the market changes described above?

His solution is to take the guaranteed renewable insurance approach. Here is how it will work:

At the time of implementation, everyone in the country will have the option to purchase health insurance without their pre-existing conditions being considered. Insurers will only be allowed to set premium prices based on the individual’s age and smoking status.

As long as an individual maintains continuous coverage, they will always be able to continue with the same insurance plan or even switch to a different plan without any of their pre-existing conditions being factored into their premium price.

However, if an individual chooses not to maintain continuous insurance coverage, insurers have the freedom to take pre-existing conditions into account and charge them a different price. If the individual is healthy, they could still be offered a price as low as others their same age and smoking status who maintained continuous coverage. But if the individual has pre-existing conditions, they could be charged as much as the maximum premium, which would be the premium a 64-year-old who smokes would be charged.

Once they have again maintained 12 months of continuous coverage, the prices available to them will revert back to the continuous coverage price being offered to others their same age and smoking status.

This will encourage healthy people to make the choice to maintain insurance coverage without any draconian or unconstitutional big-government mandates. Personal accountability will be maintained.

However, for these changes to work, President Trump will have to solve one more problem that Obamacare created.

Currently, people up to 400% of the federal poverty level (FPL) qualify for subsidies to make sure insurance premiums are not financially grievous. What the middle class above 400% of the FPL has found, however, is that their premiums have rapidly become unaffordable.

President Trump will eliminate that 400% FPL limit and instead switch it to a flat limit of 9% of a family’s income, enabling anyone to afford health insurance if they choose to purchase it.

In summary, President Trump’s plan to fix healthcare starts by making changes to the insurance and provider markets to refocus healthcare competition on innovations that improve value for patients, which will lead to billions of dollars saved. And at the same time, his plan will encourage and enable all Americans to purchase health insurance at affordable prices in a way that does not create market distortions that interfere with value-improving innovation.

And he will accomplish these changes all for a much lower cost than Joe Biden’s foolhardy plan to strengthen the unpopular Obamacare policies and force more people onto government insurance.

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Well, Mr. President, there you have it. A ready-made health policy platform, complete with rhetoric, to win over those last few independents and propel you into another four years as President. Let’s just hope you have congress on your side with this plan or it will go nowhere.

My Evaluation of Joe Biden’s Healthcare Platform, Part 3

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This is the final part in the series. Part 1 was direct quotes from Joe Biden’s official campaign website about his healthcare plan. Part 2 explained the main parts and rationale of that plan. And in this final part I share my assessment of that plan.

First, as a brief summary, let me remind you of the main parts of Joe Biden’s plan.

He is going to get rid of the limit (400% of the federal poverty level) on who qualifies for health insurance premium subsidies when they are buying insurance on the private market, and he will replace it with a flat percentage of income (8.5%). Anyone whose health insurance will cost more than 8.5% of their annual income will qualify for a subsidy. And he’s going to make those subsidies more generous, so whether someone qualifies for a subsidy will be calculated based on their income compared to the price of a gold-level insurance plan rather than a silver-level plan. And, to top it all off, he’s going to create a new government-run health insurance company that will offer an insurance plan on the private market. This “public option” will be available to other groups as well. For example, employers could, instead of administering their own employer-sponsored insurance plans, have their employees get on the public option. And in states where Medicaid eligibility is more restrictive, many of the uninsured will qualify to be on the public option plan for free.

Ok, now for my thoughts on all of that.

First, I like to start by thinking in terms of the big picture. There are three problems healthcare reformers are usually trying to solve. They want to (1) increase access to care, (2) decrease the cost of care (prices), and (3) improve the quality of care. But I merge the last two goals into one by saying that they want to improve the value of care (which takes into account prices and quality).

So how will Joe Biden’s plan do at increasing access and improving the value of care?

Let’s take the increasing access one first. Remember from last week that there are about 30 million uninsured people in the U.S. Joe Biden’s website quotes that this plan will get 97% of Americans insured, which means there will only be about 10 million uninsured people when all this is implemented. Whether that is too many or not is purely a judgment call based on your own personal moral and political beliefs, so I won’t give any comment on that.

What I will comment on, however, is the other aspect of access-increasing policies that needs to be taken into account. You see, there are two questions that need to be considered whenever you are evaluating a policy designed to increase access. The first is what I already mentioned: How many people it will get insured? The second question, which is almost universally forgotten, is this: How will this policy impact our efforts to improve the value of care? If we increase access and, at the same time, impair our efforts to improve the value of care, we have taken one step forward and one step backward all at the same time.

If you’ve read any of my other writings, you will already know that I believe the key to improving value in healthcare is to get more patients to choose higher-value insurers and providers, which comes from giving them price and quality information about their options and then making sure nothing interferes with their incentives to choose the highest-value one for them. When that is happening properly, market share flows to the higher-value providers and, therefore, it stimulates competition over who can offer the highest value to patients.

Single-payer systems, such as Medicare for All (where a single insurance company run by the government insures everyone in the country), typically are implemented in a way that creates many barriers to that value-improving competition. (By the way, to be clear–I am not saying those barriers are intrinsic to single-payer system designs, just that that’s how they always seem to be implemented; if you want to know more on this topic, see my description of an optimal single-payer system and my evaluation of Elizabeth Warren’s healthcare platform.)

In contrast to Medicare for All proposals, improving the Affordable Care Act is pretty much the most value-improvement friendly way to increase access; it doesn’t create any major new barriers to the changes that need to be made to improve value.

Summarizing this analysis of how Joe Biden’s plan does with the first issue (increasing access), fixing the ACA rates poorly on getting everyone covered (although he is going about it in the most reasonable way possible) but it rates highly on not creating new barriers to fixing the second issue.

And now, speaking of that second issue, improving the value of care, let’s see how Joe Biden’s plan does at that.

. . . Crickets. In spite of choosing an access-increasing plan that will not create too many barriers to our efforts to improve value, I don’t see much in his plan that will take advantage of that. I don’t think this is necessarily an oversight. I just think he and his team don’t know what needs to happen to make transformative changes in healthcare value (although that’s what this blog is all about–apparently they haven’t found it yet). But he has at least proposed what he can to try to lower drug costs, which makes political sense because that’s been a hot topic these days.

I haven’t yet mentioned the public option, so let me say something about that before I close this series.

Creating a public option is a workaround. It’s trying to solve a problem without getting at the root of the problem, which severely hampers its effectiveness at solving that problem and also risks causing collateral damage.

The primary problem that a public option is trying to solve is the issue of non-competitive insurance markets. But no other market in society needs a government-produced option to keep the market’s pricing honest, so why does healthcare insurance? The answer is that it doesn’t. What the healthcare insurance market needs is what other markets already have, and it’s the same thing I mentioned above: It needs shoppers to be able to readily identify the highest-value insurance plan and then choose it. Eliminating barriers to this will do more to stimulate competition over value than a public option will, and it risks no collateral damage.

A public option is also a gradual way to shift more of the population onto public insurance and slowly phase out private insurance, which essentially results in a single-payer system. You could call it Medicare-and-Medicaid-and-Public-Option for All. Whether that’s his goal or not, it doesn’t matter, because it opens up an avenue for that to eventually take place. And I’ve already mentioned my concerns about single-payer systems above.

Overall, I am impressed with Joe Biden’s approach to fixing the ACA. It’s a very rational approach, which is why it’s exactly what I described in my KevinMD post in 2019 about a possible optimal future U.S. healthcare system. But I am very concerned about his addition of a public option, which I think will distract from the real changes that need to be made in the health insurance market and will also create serious risk of new barriers to improving the healthcare system’s value. And as for his plan to improve healthcare value, he doesn’t really have one. So it’s only half a plan, really, with some positive aspects and some negative aspects. Drop the public option and propose some things to improve the value of care (here are some suggestions), and we’ve got ourselves a solid option for the future of our healthcare system.

My Evaluation of Joe Biden’s Healthcare Platform, Part 2

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Last week, I posted the salient direct quotes from Joe Biden’s official campaign website talking about how he will try to fix the healthcare system. This week, I’d like to go through the main big-picture parts of his plan and explain their context and rationale. Then, next week, I’ll conclude this short series by making some predictions about how effective his plan will be and recommending some important changes.

First, possibly due to political feasibility, he isn’t pushing for Medicare for All. He wants to keep the Affordable Care Act (the ACA, or “Obamacare”) and fix the parts of it that aren’t working so well.

So let’s take a look at that.

There are many parts to the ACA, but its main thrust was to increase insurance coverage. Here are some 2019 data to show what kind of numbers we’ll be working with in this discussion:

People over age 65 are on Medicare (60,000,000 people), so that’s straightforward.

But for the rest–the under-age-65 people–they fall into one of four insurance groups . . .

  • Employer-sponsored insurance (160,000,000 people) if they’re lucky enough to work for an employer that provides benefits
  • Medicaid (70,000,000 people) if they’re poor enough to qualify
  • Private insurance from the “private market” (10,000,000 people) if they make too much to qualify for Medicaid and don’t have an employer that provides benefits
  • Uninsured (30,000,000 people) if they don’t get insurance from their employer, they don’t qualify for Medicaid, and they don’t want to fork out the dough for insurance from the private market

Now, how did the ACA work to decrease the number of uninsured people? There were many ways, but here are the two biggest ways:

First, it allowed states to liberalize their eligibility criteria for Medicaid, and it offered federal funds to pay for most of the costs associated with all those new Medicaid enrollees. That accounts for about 12,000,000 of that 70,000,000 number listed above, some of which were previously uninsured, and others of which were previously on private insurance.

Second, it created a tax (also called a “health insurance mandate”) for anyone who didn’t have health insurance. This was to push the uninsured who didn’t qualify for Medicaid to buy insurance. And because everyone was going to be required to buy insurance, they had to make sure it would be affordable for everyone, so they promised to help cover the cost of insurance premiums for anyone under 400% of the poverty level. And to prevent insurance companies from taking advantage of the government’s willingness to help pay for people’s insurance premiums, they made a rule that insurers have to charge everyone the same premium (although that price can be adjusted up or down to a limited extent depending on two factors only: age and smoking status).

So, an easy way to describe the ACA’s second way it was trying to increase insurance coverage is by saying it was attempting to shift uninsured people into that private market. The ACA even created a nice website (healthcare.gov) to make it extra easy for people to shop for insurance plans on the private market by listing them all there side by side in a standardized fashion, and the website went so far as to pull in people’s tax information to calculate their premium subsidy right up front as well.

Unfortunately, most of the uninsured who didn’t newly qualify for Medicaid still didn’t buy insurance, not only because the tax/mandate was initially weak, but because it was subsequently eliminated. But the sick people are still buying insurance in the private market because it’s worth it for them since their premium is the same as everyone else with their same age and smoking status. This has left that private market’s risk pool with horribly high average risk and, therefore, horribly high premiums, especially for anyone who earns more than 400% of the poverty level and therefore doesn’t qualify for any premium subsidies. And that’s why there are still 30,000,000 people who are uninsured.

The natural solution to this would be to restore the mandate and to get rid of the 400% poverty level limit and just decide to subsidize the premiums for anyone whose premium will amount to, say, more than 8.5% of their annual income. This would shift many healthy people back into the private market and bring premiums down a whole lot by lowering the average risk, which would then pull even more people from the uninsured group into the private insurance group.

And that’s exactly what Joe Biden plans to do. Except for the reinstating the mandate part, which would probably not be popular nor even possible. I guess he hopes that if his subsidies are generous enough, he will get more healthy people into the market even without a mandate.

He is making the subsidies extra generous. Not only can anyone qualify now (as long as their premium is going to be more than 8.5% of their annual income), but also the benchmark plan these subsidies are based on are gold level plans rather than silver (meaning out-of-pocket costs, especially deductibles, will be a lot lower). So we will see how many of those 30,000,000 people will be enticed into buying health insurance.

But he’s gone further than that. I think he feels that insurance companies don’t truly competitively price their plans because he’s also going to create a new publicly run insurance company that will offer its own plan (known as a “public option”) in the private market alongside all the other private insurers’ plans on healthcare.gov. If the public option ends up being way cheaper than all the other private insurance companies’ plans, everyone will choose to get on that public option, and it will force private insurers to start pricing their plans more competitively. This should also help to lower prices in the private market, which will price even more uninsured people into the market.

There are lots of other details to his plan (you can read them in last week’s post), but the parts discussed here are what I believe to be the biggest core pieces. Everything else is somewhat peripheral.

I have lots of thoughts about how this plan into fits into/contributes to/detracts from the overall changes that need to be made in our healthcare system, so look forward to those next week.

My Evaluation of Joe Biden’s Healthcare Platform, Part 1

Official portrait of Vice President Joe Biden in his West Wing Office at the White House, Jan. 10, 2013. (Official White House Photo by David Lienemann)

Let’s take a look at Joe Biden’s healthcare plan! This is important because, if the democrats win the senate and hold the house, there’s a reasonable chance his healthcare reform plans will, in some shape, become law. But remember the expected caveat: Even though he can have a big influence on setting the priorities and agenda for his party and congress, and even though there is latitude in how he implements laws, it’s still congress that makes the laws.

As usual, I am relying only on the official campaign website for information. Joe Biden has a number of different pages talking about different healthcare issues, such as coronavirus-related issues, gun violence, and the opioid epidemic. But the main one that reviews his plans for the healthcare system as a whole is here.

And what is his plan? Here are what I believe to be all the relevant quotes, copied directly from his website:

  • Instead of starting from scratch and getting rid of private insurance, he has a plan to build on the Affordable Care Act by giving Americans more choice, reducing health care costs, and making our health care system less complex to navigate.
  • He’ll also build on the Affordable Care Act with a plan to insure more than an estimated 97% of Americans.
  • [Give] Americans a new choice, a public health insurance option like Medicare.
  • Whether you’re covered through your employer, buying your insurance on your own, or going without coverage altogether, the Biden Plan will give you the choice to purchase a public health insurance option like Medicare.
  • [Increase] the value of tax credits to lower premiums and extend coverage to more working Americans.
  • Help middle class families by eliminating the 400% income cap on tax credit eligibility and lowering the limit on the cost of coverage from 9.86% of income to 8.5%.
  • Increase the size of tax credits by calculating them based on the cost of a more generous gold plan, rather than a silver plan. This will give more families the ability to afford more generous coverage, with lower deductibles and out-of-pocket costs.
  • [Offer] premium-free access to the public option for those 4.9 million individuals who would be eligible for Medicaid but for their state’s inaction, and making sure their public option covers the full scope of Medicaid benefits.
  • States that have already expanded Medicaid will have the choice of moving the expansion population to the premium-free public option as long as the states continue to pay their current share of the cost of covering those individuals.
  • Biden will ensure people making below 138% of the federal poverty level get covered. He’ll do this by automatically enrolling these individuals when they interact with certain institutions (such as public schools) or other programs for low-income populations (such as SNAP).
  • The public option, like Medicare, will negotiate prices with providers, providing a more affordable option for many Americans who today find their health insurance too expensive.
  • Because the premium tax credits will now be calculated based on the price of a more generous gold plan, families will be able to purchase a plan with a lower deductible and lower out-of-pocket spending.
  • The Biden Plan will bar health care providers from charging patients out-of-network rates when the patient doesn’t have control over which provider the patient sees (for example, during a hospitalization).
  • The concentration of market power in the hands of a few corporations is occurring throughout our health care system, and this lack of competition is driving up prices for consumers. The Biden Administration will aggressively use its existing antitrust authority to address this problem.
  • Lower costs and improve health outcomes by partnering with the health care workforce. The Biden Administration will partner with health care workers and accelerate the testing and deployment of innovative solutions that improve quality of care and increase wages for low-wage health care workers, like home care workers.
  • The Biden Plan will repeal the existing law explicitly barring Medicare from negotiating lower prices with drug corporations.
  • For these cases where new specialty drugs without competition are being launched, under the Biden Plan the Secretary of Health and Human Services will establish an independent review board to assess their value. The board will recommend a reasonable price, based on the average price in other countries (a process called external reference pricing) or, if the drug is entering the U.S. market first, based on an evaluation by the independent board members. This reasonable price will be the rate Medicare and the public option will pay. In addition, the Biden Plan will allow private plans participating in the individual marketplace to access a similar rate.
  • As a condition of participation in the Medicare program and public option, all brand, biotech, and abusively priced generic drugs will be prohibited from increasing their prices more than the general inflation rate. The Biden Plan will also impose a tax penalty on drug manufacturers that increase the costs of their brand, biotech, or abusively priced generic over the general inflation rate.
  • [Allow] consumers to buy prescription drugs from other countries.
  • Biden will end [the] tax deduction for all prescription drug ads, as proposed by Senator Jeanne Shaheen.
  • The Biden Plan supports numerous proposals to accelerate the development of safe generics, such as Senator Patrick Leahy’s proposal to make sure generic manufacturers have access to a sample.
  • Vice President Biden supports repealing the Hyde Amendment because health care is a right that should not be dependent on one’s zip code or income. And, the public option will cover contraception and a woman’s constitutional right to choose.
  • Stop the rash of state laws that so blatantly violate the constitutional right to an abortion, such as so-called TRAP laws, parental notification requirements, mandatory waiting periods, and ultrasound requirements.
  • Biden will reissue guidance specifying that states cannot refuse Medicaid funding for Planned Parenthood and other providers that refer for abortions or provide related information and reverse the Trump Administration’s rule preventing Planned Parenthood and certain other family planning programs from obtaining Title X funds.
  • California came up with a strategy that halved the state’s maternal death rate. As president, Biden will take this strategy nationwide.
  • [Double] America’s investment in community health centers.
  • As Vice President, Biden was a champion for efforts to implement the federal mental health parity lawimprove access to mental health care, and eliminate the stigma around mental health. As President, he will redouble these efforts to ensure enforcement of mental health parity laws and expand funding for mental health services.

Well, I think those quotes already make this week’s post plenty long. Let’s have a week to digest all that, and next Tuesday I’ll provide some commentary on how those proposals do or don’t address the core causes of the issues in our healthcare system.