You can add this to the list of proposed conservative “reforms” to the healthcare system that won’t work to lower costs and is a terrible idea in general: gutting the list of essential health benefits required to be covered by every Obamacare plan.
David Anderson of Duke points us to a recent paper by Milliman, the preeminent cost-analysis firm in healthcare, about how much these essential benefits actually add to the cost of health insurance and the consequences of removing the mandates. The paper finds that eliminating the most vulnerable mandates, such as maternity care, will reduce average premiums somewhat but drive costs for people who need those services sky-high and transfer much of the cost to other public programs. The net gain for society is almost invisible. To put it another way, the savings are an illusion. In fact, eliminating the mandates might even cost the federal government more money.
Nevertheless, according to reports out of Washington late Wednesday, the Trump White House and Republican Congressional leaders were offering to repeal the essential health benefits as a lure to get the most conservative Republicans, the House Freedom Caucus, to support the leadership’s repeal bill. The measure is scheduled for a floor vote Thursday, but the Freedom Caucus thus far has been united in opposition, saying the repeal leaves too much of Obamacare in in place.
The Affordable Care Act mandates that every qualifying health plan cover 10 essential health benefits. These are outpatient services, emergency room care, hospitalization, maternity, mental health/substance abuse services, prescription drugs, rehabilitative and habilitative services, lab tests, preventive care such as vaccines, and pediatric vision and dental care.
There’s no mystery why Republican cost-cutters have their scissors out for the EHBs: Anderson estimates that they account for at least 89% of ACA plans’ claims dollars and more than 99% for the “overwhelming majority.”
So Republican critics of the ACA consistently have pressed to eliminate or pare back the essential health benefits as a path to reducing premiums. The original version of the American Health Care Act, the repeal measure the House is scheduled to vote on Thursday, didn’t entirely accomplish that goal, largely because of concerns that any such change would be subject to a Democratic filibuster in the Senate.
There also are concerns that the Congressional Budget Office, which issued a horrifically negative analysis of the GOP repeal bill, would deem health plans lacking essential benefits as qualifying coverage. Owners of policies that failed to offer “financial protection against a high-cost or catastrophic medical event,” the CBO said in December, would not count as “having coverage.” That means the CBO might determine that the repeal plan increases the ranks of the uninsured even more than the 24 million people it estimated would lose insurance under the original repeal bill.
The AHCA did take some steps toward paring back mandated benefits. It would allow states to adjust the benefit package for plans under their control, such as Medicaid. And it would remove Obamacare’s floor on the actuarial value of qualified health plans — the percentage of medical costs each plan covers, on average — which was set at 60% for the skimpiest bronze plans. One way for insurers to reduce actuarial value is to eliminate benefits.
Republicans have signaled that an attack on the essential benefits will be part of the next phase of Obamacare repeal, assuming the AHCA passes. Conservatives in the House have been demanding that the EHB’s be repealed now, despite that idea’s uncertain fate in the Senate. And some Republicans have argued that they can be eliminated at least partially by administrative action at the Department of Health and Human Services. The HHS is now headed by former Georgia Congressman Tom Price, a foe of EHBs.
But only minimal savings can be squeezed out of EHBs, in part because the most common and costly benefits are probably immune to cutting; even if Congress removed the entire mandate, consumers and state regulators would probably expect legitimate insurers to cover outpatient and hospital care, emergency room visits, prescription drugs, and laboratory tests.
But what if regulators don’t step in, and consumers become less discriminating or more desperate? That could lead to a market chockablock with meager health plans—and to higher costs for the government. How? With no government standard established for what needs to be included for a health plan to qualify for the subsidy, insurers would offer plans that are skimpy, but priced just low enough to be covered by the tax subsidies that are part of the GOP repeal bill. Perversely, more Americans would use their subsidies — to buy lousier insurance. This would be the worst of all possible worlds: more federal spending, on crappy coverage that doesn’t really protect its buyers from risk.
The authors of the Milliman paper, Rebekah Bayram and Barbara Dewey, judge that the benefits most vulnerable to repeal and subsequent disapperance are pregnancy/maternity/newborn care, mental health and substance abuse, habilitative services (such as physical and occupational therapy and other disability services), and pediatric dental and vision care.
We’ve explained before the folly of saddling only women aged, say, 18 to 38 with the costs of propagating the species, especially since males are invariably part of the process somewhere along the line. Milliman provides some numbers for the discussion. According to its calculations, segmenting the insurance market would drive up premiums by as much as 70% for policies with maternity benefits, compared with policies without them.
If the change means leaving “virtually no affordable coverage” for prenatal and delivery benefits, that means out-of-pocket costs of about $15,000 for even uncomplicated prenatal and delivery services. The losers, Milliman says, would be pregnant women who would have to “pay out of pocket, seek public assistance, or forgo medical care.” None of those is a great choice from a society-wide standpoint. The cost of keeping the benefit in place: $8 to $14 per month on the premiums of all members of the risk pool.
One problem spotlighted by this roster is that those benefits, taken together, amount to no more than 10% or 15% of the cost of essential health benefits. So cutting them would have a minimal effect on premiums in general.The biggest costs are in outpatient care, hospitalization and prescriptions, which Milliman doesn’t expect to be on the chopping block.
The other problem arising from removing these benefits from the mandate involves the mismatch in the cost that imposes on those who need them, measured against the cost to all insurance customers of leaving them in.
Consider prenatal and maternity care. This mandate is a common target of lawmakers and others who don’t understand anything about how insurance works, and that’s because there’s a discrete population of insurance buyers who know they won’t need it — males and people older than childbearing age.
“Rolling maternity benefits up into the standard benefit package,” Anderson observes, “raises everyone’s rates by the price of a single entree at Olive Garden every month.” Medicaid already covers nearly half of all American births. Remove maternity as an essential benefit, and you can expect it to be covering a lot more — and since the GOP also wants to slash Medicaid benefits, that means even higher costs will be pushed onto lower-income women and families.
Excluding these benefits would only return the healthcare system to its pre-ACA condition, when maternity benefits were hard to find in individual insurance and often unaffordable when they were available. In that era, only 18 states required maternity coverage for any plans, and only 11 required it for all plans. California, Georgia, Illinois and Alabama, for instance, required a maternity benefit only for HMOs.
A similar effect is seen from excluding a pediatric dental benefit, Milliman estimates. Including it in all plans, including adult policies, adds $5 per month to all premiums; excluding it would raise the cost of plans covering children by about $30.
This process generally counters the very point of expanding health insurance, which is to spread the cost of certain services to the entire community. The consequences of poor maternal, prenatal and pediatric health extend beyond the patients themselves or their families — they include poor educational attainment for the affected children and presage higher costs in adolescence and adulthood, some of which may land in the laps of public programs. Gutting the essential health benefits is the very definition of being penny-wise and profoundly pound-foolish.