OP-ED | Connecticut Should Be Careful Building A Public Insurance Option Through Medicaid
Health insurance is too expensive in Connecticut and it may get worse with troubling new federal policies. But one proposed state solution isn’t as simple as it sounds. HB 5463, An Act Concerning a Medicaid Public Option, proposes to study the idea of creating a public health insurance option based on Connecticut’s successful, very efficient Medicaid program.
Paid for by Stevenson4CT, Michele Berardo, Treasurer
Part of the Affordable Care Act (ACA) drafts in 2009, a public option was to be a government-run health plan that would compete with private insurance plans to give consumers more choices and keep costs down. Unfortunately it was removed from the final bill because of lobbying by the insurance industry and strong resistance from former Connecticut Sen. Joe Lieberman. Several states, including Connecticut, are now considering creating a public option to stabilize ACA insurance exchanges and larger state markets.
States are naturally looking at their Medicaid programs as the foundation for a public option. Medicaid covers almost one in four Connecticut residents allowing a public option to leverage that substantial market power to lower costs and improve value. Because of its size and the fragile populations it serves, Medicaid can be a platform for important population health innovations. It can be easier to innovate in a large, single public program with a societal view than in the profit-this-quarter-driven private sector. A transparent, public program can engage energy and wisdom from diverse, independent experts and stakeholders who would not support private sector health plans.
Connecticut’s Medicaid program is doing very well. The state is saving hundreds of millions of tax dollars every year since we fired private insurers from the program six years ago. Per person costs in our program are well below private plans and have been going down. Access to care in Medicaid is up, more providers join the program every month, and quality levels in many areas now rival or exceed private coverage. We did it by increasing primary and preventive care, rewarding quality, and coordinating care; innovations that have challenged private plans.
But that progress is fragile. Connecticut Medicaid now faces serious, self-inflicted challenges. Despite warnings, the state has chosen to return to a payment scheme similar to the insurer-based model that failed miserably, and to rashly expand the experiment next month, without monitoring or evaluation of access, quality or costs to the state. And all bets are off when a new administration is elected for next year.
Even if not for the risky experiment, building a public option onto Medicaid faces serious obstacles. The Charter Oak Plan, a similar well-intentioned Medicaid buy-in experiment begun in 2008, slid into a death spiral only a few years later, as predicted. While the health care landscape has changed in the last decade, much is still the same. Most importantly, the state’s capacity for program design, monitoring and evaluation are no better than in the past. If there are problems, it’s unclear if we’d know it, and even less clear if we could do anything about it. Medicaid has always been at the mercy of political winds.
Created before the ACA, one cause of Charter Oak’s downfall was the lack of an individual mandate. The ACA’s individual mandate requires all Americans to secure health coverage or face a tax penalty. Without the mandate, people with expensive health problems were more likely to buy into Charter Oak, so premiums climbed. But the federal tax bill passed in December repeals the ACA’s individual mandate effective next year. States, including Connecticut, are struggling to pass state-specific individual mandates. Theoretical economists are big believers in the mandate, arguing that it gets healthy people to join insurance pools, lowering the cost for everyone.
The Congressional Budget Office agrees, predicting that the mandate repeal will result in 13 million more uninsured Americans by 2025 and increase insurance premiums by 10 percent. But from the real world, there are serious doubts about how effective the poorly-designed mandate actually is. Drivers are legally required to have automobile insurance, but 9.4 percent of Connecticut drivers are uninsured. Laws can’t fix everything.
Beyond capacity issues, there are lots of challenges to developing a Medicaid public option. A big question is what rates providers in the new public option would be paid. One reason that Medicaid costs less than private coverage is because providers are paid less. A wonky, but important, question is whether the public option would join the larger Medicaid risk pool.
There are financial risks to Medicaid of adding a potentially higher-risk population, but that is the best way to keep the public option affordable. For many reasons Medicaid cannot subsidize non-Medicaid members’ costs. If they are kept separate, it is critical for taxpayers that Medicaid not become a de-facto high risk pool for the public option. Affordability will require approval of a federal waiver, a gigantic question mark, to allow use of ACA premium subsidies for the public option.
Policymakers are right to carefully study the concept. It has potential, if well designed and monitored, to help both populations and keep coverage for everyone more affordable. But the dangers are serious. Policymakers need to publicly vet this idea engaging knowledgeable, independent, non-conflicted voices. It could be the start of turning around Connecticut’s poor history of health policymaking, or it could be more of the same.
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