There seems to be no
letup of bad news on the Affordable Care Act. Yesterday, Healthcare.gov, the problem-plagued federal health insurance
marketplace, crashed
again. And a pile of news reports focused on
citizen anger over policy cancellations prompted by the law.
Last night, President
Obama addressed the situation. Passing
the act 2010 “was the easy part,” he said. Though he’s done campaigning for
office, Obama said, “I’ve got one more campaign in me – the campaign
to make sure that this law works for every single person in this country.”
To get behind the
headlines, we reached out to a leading expert on the law: Kip Piper, who
advises large health care organizations on Medicare, Medicaid, and health
reform policy, finance and business strategy.
Among other roles, Piper
has worked as senior adviser to the administrator of the Centers for Medicare
and Medicaid Services (CMS), Wisconsin state health administrator, director of
the Wisconsin Medicaid program, a senior Medicare budget officer at the White
House Office of Management and Budget.
“The fact that ACA would effectively nuke most of the
existing commercial individual health insurance market was never in
question,” Piper told us.
In the interview below, which was edited for length and
clarity, Piper discusses cancellations, the apparent surge in Medicaid
enrollments under Obamacare and whether more
transparency would have helped the rollout.
Q. What’s your take on the
coverage cancellations arriving in mailboxes around the country?
A. It was always
known that the ACA would outlaw millions of existing individual or non-group
health insurance policies. From a policy wonk perspective, that was a
no-brainer. It was self-evident in the law in March 2010 and confirmed in
subsequent rules and analyses. Also obvious all along was that consumers
would face a very different marketplace under the ACA, with some seeing lower
premiums (including me), some seeing larger premiums, and most everyone seeing
higher deductibles, higher co-pays, and a narrower choice of providers.
Quantifying the
impact of ACA on the individual — estimating the number of people
affected — was always tough. Whether it would cause 60 percent or
80 percent of individual plans to be cancelled was hard to estimate because
data on individual coverage is hard to come by, rules and products varied by
state, the ACA grandfathering rules came out slowly and in pieces, and even
things like the essential health benefit package varies a bit by state. Also,
not all these policies expire on December 31.
What’s frustrating is
how it took three and a half years, the failed launch of the federal exchange,
and the news media starting the question the administration’s core talking
points for anyone to focus on this. Whether you like or dislike the ACA
policies, the 19.4 million Americans in the various parts of individual market
deserved a heads up.
Q. Could this have been
prevented?
A. From a regulatory
perspective, health insurers in the individual market have no choice but to
discontinue non-compliant policies and, if they wish to keep business, offer
new, compliant policies. Health insurance is a binding contract.
Insurers can’t merely transfer people. They have to cancel policies that
no longer meet federal and state law, give notice, and then try to sell people
into the new one policies. Having said this, the new
policies will generally be more expensive. The ACA requires people to buy
a richer benefit package – it only permits sale of the richer benefit
packages. You can argue that this is better for society but there is no
free lunch and it does eliminate choices many consumers were fine with.
The higher cost
sharing – deductibles and co-payments – that many are seeing
(including me) is an inevitable byproduct of the ACA insurance market rules,
the brave new actuarial risks of the post-ACA marketplace, and competition
based on premiums and brand.
Q. Is Medicaid a success story
here?
A. Medicaid
enrollment data from the states with their own exchanges certainly suggests a
surge in Medicaid. It’s still early but it appears that the surge is a
combination of ACA Medicaid expansion and the woodwork effect – bringing
in individuals already eligible but not enrolled. Medicaid rolls will also
increase somewhat as individual commercial polices are cancelled, high-risk
pools end, and some small and mid-size employers drop coverage.
Today, Medicaid
covers about 74 million Americans. Given all the unknowns, including
economic conditions, projected Medicaid enrollment by 2020 ranges from 85
million to 102 million. Regardless, the role of Medicaid in the
marketplace and impact of Medicaid on federal and state budgets will only
grow.
Q. Should the contractors
behind healthcare.gov be penalized?
A. Determining
accountability for the healthcare.gov mess is very tricky. Both the CMS
and the multitude of contractors were responsible for the project, with a maze
of interdependencies. Parsing out responsibility for the many failed
parts of the federal systems for Obamacare will be
difficult, will take months, and an independent party such as GAO or the
Inspector General. Overall, it appears that there will be considerable
finger pointing in all directions, with plenty of blame to go around.
CMS made several
significant strategic blunders, most notably the decision to manage the project
in-house rather than hiring a systems integrator. Hiring a systems
integrator to honcho the project, serve as a super general contractor, make the
disparate pieces work together, and oversee testing and problem solving was
essential. CMS simply does not have the experience or capabilities to do
this in-house. Retaining an integrator would have been expensive,
probably at least $75 million on a project this size. Perhaps they didn’t
have the budget, but otherwise the decision to handle system integration
in-house is inexplicable and proved disastrous.
The Obama administration
decided to avoid making decisions during the 2012 election year. Given
the nature of elections and the array of winners and losers under the ACA
– most of whom still are unaware they are winners or losers – this
is perhaps understandable. However, CMS had no choice but to follow
orders and avoid making decisions or revealing information about the controversial
law during the election. That meant countless critical decisions that
should have been made in 2011 and 2012 were not made until well into 2013,
leaving little time for problem solving, system integration, and testing. To
this day, nearly 44 months since the law was signed, not all ACA-related
decisions have been made, with many less critical rules deferred.
In the end, whether
in the form of reasons or excuses, the contractors have plenty to point in
minimizing their share of responsibility. It appears they have covered
themselves with a paper trail of warnings to CMS.
Q. You’ve been particularly critical of the administration’s
transparency and follow-through on its own rules.
A. Presidential executive
orders have long required cost estimates and impact analyses for every major
proposed or final rule. In Executive Order 13563, President Obama
reiterated the longstanding requirement and further directed each federal
agency “… to use the best available techniques to quantify anticipated present
and future benefits and costs as accurately as possible.” A Regulatory Impact
Analysis (RIA) must be prepared for rules with economically significant effects
— anything with an impact of $100 million or more in any one year.
Obviously, every ACA rule had an impact of over $100 million.
However, early on CMS
stopped providing cost estimates for rules implementing the Affordable Care
Act. Most were omitted entirely, others watered down to be meaningless
statements the analytical equivalent of saying, “The hell if we know what will happen.”
They even started explicitly saying in ACA rules — including the massive
Medicaid expansion rule — that the rule didn’t have an impact of over
$100 million because, in effect, everybody expected it.
My understanding is
that CMS was directed by the White House Office of Management and Budget (OMB)
to stop publishing the cost estimates and impact analyses with the ACA
rules. They were concerned the information, coming from the CMS Office of
the Actuary, would be used as ammunition by the House and other critics of Obamacare. That is certainly true but no excuse for
ignoring 30 years of executive orders and the President’s own stated commitment
to open government.
Read more of Kip
Piper’s exchange with ProPublica’s Charles Ornstein here.
