Thoughts on the Basic Health Plan
|May 6, 2011||Posted by Lucien Wulsin under Blog, Delivery Systems, Insurance Exchange||
The ACA permits states to cover individuals with incomes between 133 and 200% of FPL through a Basic Health Plan (BHP).[i] States who choose to do so would receive 95% of what the federal government would have paid for their coverage through the Exchange. This is based on the Washington Basic Health Plan that was a signal success in that state.[ii] California could seek federal approval of a Basic Health Plan that builds off its Medi-Cal program or its Healthy Families program. [iii] BHP could be administered by the Exchange, by MRMIB or by the Department of Health Care Services.[iv] It could be the sole choice for subscribers with incomes between 133 and 200% of FPL or it could be one of the coverage options offered in the Exchange that would be more attractive to local safety nets.
Conceptually, a Basic Health Plan would look more like the Healthy Families program for children than like commercial private insurance. This means lower out of pocket (smaller copayments and low or no deductibles) but tighter utilization controls (by providers and plans) on the use of medical services.
1) Simplicity of integrating programs
The Exchange will be purchasing private insurance, which typically has substantial copays and deductibles and higher provider reimbursement rates than Medi-Cal.[v] The Medi-Cal program by comparison has nominal copays, broader benefits and lower reimbursement rates. The Basic Health Plan might be Medi-Cal-like with lower copays, but it could pay plans and providers at higher reimbursement rates than Medi-Cal (e.g. 95% of commercial rates). This could ease the integration of some aspects of Medi-Cal (such as medically needy and pregnancy only coverage) that reach some individuals in the 133-200% of FPL income brackets and Healthy Families (for children 133-200% of FPL). Alternatively, Basic Health Plan could be built off the Healthy Families program that already covers children and then could expand to add in their parents and other low-moderate income adults. While BHP could simplify as described above, it could also add another level of complexity – adding in an intermediate program between Medi-Cal (0-133%) and to-be-revised Exchange (200% of FPL and up).
2) Lower cost
BHP could be lower cost to low and moderate income persons as the co-premiums, copays and deductibles would be less than in private insurance through the Exchange. It could be lower cost to the government at 95% of Exchange costs. Lower costs to plans could also be achieved due to lower transactional costs by avoiding the selling and administrative costs associated with the sale and purchase of private individual insurance. A win-win-win is possible.
Medi-Cal is a very familiar program needing little explanation for low-income populations and the safety net providers and plans. Healthy Families is somewhat less well known, but does have a strong track record and positive brand familiarity for children over the past dozen years.
4) Lower out of pocket
Medi-Cal has very low copays (compared to private insurance) and no co-premiums and no deductibles. Healthy Families has no deductibles, somewhat higher copays and co-premiums with limits on out of pocket exposure. The Exchange will have sliding scale limits on co-premiums and out of pocket exposure. All of these programs have no copays on preventive services of demonstrated clinical effectiveness. Past research found that out of pocket causes consumers to stint their use of health services; to the extent that unnecessary care is reduced, this is a good result, but this can also operate to the detriment of low-income consumers who under use prevention.[vi] In recent years, there have been trends towards ever higher out of pocket responsibilities for consumers that have led some to drop coverage and others to stint on needed care. [vii] Lower or no co-premiums is likely to increase program participation. [viii]
1) Lower payments to providers and thus less robust provider networks
Medi-Cal pays many providers significantly less than does private insurance and partly as a result fewer providers are willing to see Medi-Cal patients. If the BHP were to mirror Medi-Cal rates, it would have a similar experience; however if it paid at for example 95% of private insurance reimbursement, it is likely to assure adequate access.[ix]
2) Uneven playing field for privates and publics
Medi-Cal payments for doctors and hospitals are often far less than private insurance, less than Medicare and not uncommonly below the average cost of delivering services. Federal and state policies assure that some clinics (FQHCs and look-alikes) and some hospitals (counties and UC’s) are paid at cost and some hospitals (DSH and DSH look-alikes) receive supplementary payments to offset their uncompensated care. This creates a highly uneven playing field in the Medi-Cal program.[x]
3) Negative perceptions of Medi-Cal
Some have negative perceptions of Medi-Cal because it is a public program, others because it grew from welfare programs and the stereotypes associated with them, and still others from the history of red tape associated with enrollment of subscribers and delayed and low payments of providers. While Medi-Cal is a very different program today than its inception,[xi] a Basic Health Plan could be an opportunity to shed much of the red tape and programmatic complexity[xii] and create a positive image with providers and subscribers.
4) Fewer plan and provider choices
A smaller number of plans and providers participate in Medi-Cal, and in some communities there is poor access to doctors and especially specialists. Healthy Families has had better participation of plans and doctors. Paying providers and plans at 95% of private insurance rates is likely to attract ample participation.
[ii] For a thorough analysis of Washington’s BHP, see Oregon Health Policy and Research, Study of Washington State Basic Health Plan (June 2002). http://www.statecoverage.org/files/A%20Study%20of%20Washington%20State%20Basic%20Health%20Plan.pdf Program enrollment had increased to 136,500 in 2002. The program is under financial stress due to declining state tax revenues and increasing enrollment due to the recession; the state legislature froze enrollment and is transitioning the residual program to a program financed through a federal waiver. Enrollment caps and budget cuts had cut enrollment to 56,000 by January 2011 with 136,500 on a wait list. See Washington State Medicaid Receives Federal Approval of National Health Care Reform Bridge Waiver. http://www.basichealth.hca.wa.gov/press_release/washington-state-medicaid-receives-federal-approval-of.html
[iii] See Dorn, The Basic Health Program Option Under Federal Reform (Urban Institute, March 2011) at www.urban.org/publications/412322.html
[vi] http://en.wikipedia.org/wiki/RAND_Health_Insurance_Experiment See Ku, The Effects of Copayments on the Use of Medical Services and Prescription Drugs in Utah’s Medicaid program (Center on Budget and Policy Priorities, November 2004) at www.cbpp.org/11-2-04health.pdf, and Newhouse (Copayments and the Demand for Medical Care: the California Medicaid Experience). Bell Journal of Economics, 9:192-209 (1978)
[viii] Ku. The Effects of Increased Cost Sharing in Medicaid: a Summary of Research Findings (Center on Budget and Policy Priorities, July 2005) at www.cbpp.org
[ix] While the comparative levels of provider payment are important in securing provider participation; the design of provider payments can and should be far more important in improving patients’ health outcomes.
[xi] Cash assistance (SSI and TANF) recipients make up only a fraction of program participants and the bulk of Medicaid program spending has been on long term care where many nursing home residents using the program are from middle income strata who simply cannot afford the enormous and sustained annual costs of nursing home care.