Pulling It Together: Predictions
I usually don’t make predictions, unless they are backed up by the kind of statistical modeling we often produce. But here are three predictions I am confident about that form the basis of this latest column.
GROUP HEALTH INSURANCE PREMIUMS WILL CONTINUE TO RISE AT HISTORICALLY MODERATE LEVELS, AT LEAST FOR THE NEXT FEW YEARS. One reason for this is the lingering effect of the recession. Employers will have little trouble attracting workers in the current economy without improving health benefits. The other reason is the continued growth of high deductible health plans, which are holding down premium increases as employers switch to cheaper plans with higher cost-sharing, and also causing consumers to delay and forego care. The steady growth of high deductible health insurance is changing the face of health coverage in the country and likely impacting utilization. While attention is focused on Accountable Care Organizations and other small scale experiments and pilots in delivery and payment reform, high deductible health insurance is the default national cost containment strategy for health we don’t seem to know we have.
Last year employer premiums rose a very modest three percent; I expect a similar increase this year, far below the double digit increases in the group market we became accustomed to not so many years ago (the highest recorded increase was 18.9% in 1989). Our comprehensive employer health benefits survey, which we put out every September, will give us an indication if this prediction is on track. Keep in mind, even moderate increases in premiums by historical standards can be a serious burden for employers and employees when they are rising faster than inflation and much faster than wages. For workers the concept of a “moderate increase” has little meaning if their overall out of pocket costs continue to go up and their incomes remain flat.
The smaller non-group market is, of course, an entirely different story. In the individual market increases of 20% or more are not uncommon. One claim is that this is largely because the recession drove healthier workers from the market leaving sicker and costlier ones behind and driving up rates. There are no good independent data to substantiate this assertion. Whatever the explanation, the practical effect is a market that is out of control and increasingly unaffordable for the roughly 14 million people who need to rely on it at any one time.
THE RETURN OF TIGHTER MANAGED CARE. Recently in my home state of Massachusetts, reports surfaced about Blue Cross Blue Shield offering a more affordable insurance product by contracting selectively with less expensive community hospitals, requiring patients to pay more if they want to go to the state’s renowned and powerful major academic centers. Other insurers in the state have also introduced tiered network plans that have higher patient cost-sharing for more expensive hospitals or exclude them altogether. In the mid and late nineties, in what was called “the managed care backlash,” the American people revolted against tighter forms of managed care with limited provider networks and tough utilization review. Looser forms of PPOs became the dominant mode for delivering health insurance in the country as a result. Anecdotal evidence from around the country suggests the Massachusetts plan may be the canary in the coal mine. What was not palatable in the late nineties may be more palatable today as people and employers accept tighter managed care as a less onerous alternative to ever increasing deductibles and cost-sharing. Faced with higher and higher out of pocket payments, the public may be willing to accept limitations on what doctors they can see and which hospitals they can go to as well as stricter review of what services they use. For many, compromising on provider choice and utilization review will be the lesser evil compared with a $5,000 deductible.
MEDICAID BLOCK GRANT: FUNDING CUT TRUMPS FLEXIBILITY. States are all for greater flexibility when it comes to Medicaid. And they like the idea of block grants when they bring them more federal funding, as happened with the Medicaid block grant secured by the state of Rhode Island through a federal waiver. But the block grant proposal adopted as part of the House budget framework reduces federal Medicaid matching payments to the states by $1.4 trillion over its first ten years, both by instituting a Medicaid block grant and repealing the Affordable Care Act. The effect of these reductions would vary by state but in every state they are significant, ranging from a 25% reduction in Washington to a 44% reduction in Florida. A recent analysis by Kaiser and the Urban Institute shows that 31-44 million people could lose Medicaid coverage as a result of these reductions in federal funding, with most becoming uninsured. There could be as much as a one third reduction in Medicaid payments to hospitals over the ten year period. These projections are based on assumptions about likely state responses to reduced federal funding of this magnitude. For sake of argument, assume the study is off by as much as half (there is no reason to believe it is off at all); millions of people would still lose coverage. The study also looks at the impact of the block grant alone, uncoupled from repeal of the Affordable Care Act. This could mean a still sizeable loss in Medicaid coverage of 14-27 million people and $750 billion in federal funding to the states over ten years.
As a former state human services commissioner who oversaw a Medicaid program for a Republican governor, it certainly seems to me that consequences such as these will be too severe even for conservative governors and state legislators to accept. When their voices are heard in Washington the Medicaid discussion will move on to other ways to change Medicaid and reduce spending. Already battle lines have formed around new Medicaid issues, most notably, the proposal to repeal the so-called state “maintenance of effort” requirement, which would give states flexibility to make changes and cuts in Medicaid but potentially undermine the goal of expanding coverage. States will also turn to the federal waiver process to try to gain flexibility to make the changes they want to make in Medicaid without having to absorb big funding cuts from Washington. Several states are gearing up now to submit waiver proposals to HHS.
These three predictions are a comment on the times. We have seen big health policy debates before but seldom has so much been up for grabs and in flux at the same time: health reform, Medicare, Medicaid, and the insurance and delivery systems themselves. While the most politically charged issues – health reform and Medicare – get the greatest attention, potential changes to Medicaid and beneath the radar changes in the insurance system could have equal or even greater consequences for people.