The Basic Health Program

November 17, 2010

Stan Dorn, The Urban InstituteJanuary Angeles, Center on Budget and Policy Priorities

The Basic Health Program Option Under the Affordable Care Act:

Issues for Consumers and States November 17, 2010 Webinar

State Coverage Initiatives A national program of the Robert Wood Johnson

Foundation, administered by AcademyHealth

Stan Dorn, Senior FellowThe Urban Institute

Washington, DC202.261.5561 sdorn@urban.org

Topics

What is the Basic Health Program option in the Affordable Care Act (ACA)?

How could states use it? What are the main issues for consumers

and states?

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WHAT IS THE BASIC HEALTH PROGRAM (BH) OPTION?

Part I.

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Who can get BH? Citizens and lawfully present immigrants who:

Are ineligible for Medicaid; Have incomes at or below 200 percent of the federal poverty

level (FPL); and Lack affordable access to comprehensive employer-based

coverage, as defined by the ACA. In other words, two groups:

Adults between 133 and 200 percent FPL Lawfully present immigrants below 133 percent FPL who are

ineligible for Medicaid (e.g., legalized within the last 5 years)

Other federal rules for BH Form of coverage

State contracts with health plans or provider networkso Competitive bids, multiple options for consumers (if possible) o Innovation

BH-eligible people may not use the exchange Premiums no more than what consumers would have paid in exchange Out-of-pocket (OOP) cost-sharing at or below certain levels

o Statute: silver and gold actuarial value levelso HHS may say that OOP costs may not exceed levels in the exchange

At least minimum essential benefits MLR at least 85%

Federal payments = 95% of federal subsidies if BH enrollees had been in the exchange

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HOW COULD STATES USE BH?

Part II.

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Key fact: for the average state, federal BH payments will exceed Medicaid costs for adults

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Sources: Urban Institute/KCMU estimated average Medicaid cost of non-elderly, non-disabled adult inFY 2007, trended forward based on CMS projections of average health spending per capita; CBOestimate of average federal premium and OOP subsidy costs in the exchange.

Possible approaches to BH Many approaches are possible – this webinar

examines two limited variants Variant #1: Medicaid look-alike

Benefits, consumer costs, health plans, providers Variant #2: CHIP for adults

Consumer costso Slightly above Medicaid levelso Well below what BH consumers would be charged in the exchange

Provider payment slightly above Medicaid levels

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ISSUES FOR CONSUMERS AND STATES

Part III.

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Affordability for low-income households

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Sources: Commonwealth Connector (Connector) 2010; author’s calculations

Out-of-pocket cost-sharing under CommCare vs. examples of plans that meet ACA’s actuarial value standards, at various FPL levels: 2010

FPLCommCare Potential ACA plans

General Deductible

Primary Care Visit Copays

Prescription Drug Copays

General Deductible

Office Visits Prescription Drugs

150 None $10 $10, $20, $40 None $20 copays

Copays of $10, $25, $45

175 None $10 $10, $20, $40 $250 $15 copays 25%

coinsurance

200 None $10 $10, $20, $40 $250 $15 copays 25%

coinsurance

225 None $15 $12.50, $25, $50 $1,000 25%

coinsurance25% coinsurance

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Note: Office visit copays for specialty care in CommCare are $18 and $22, rather than the $10 and $15copays charged for primary care visits at the corresponding income levels shown here.

Sources: Lewin Group 2010; Peterson 2009; Snook and Harris 2009; Quincy 2009; Connector 2010

Consumer issues1. Affordability

BH could be much more affordable than subsidized plans in the exchange, increasing low-income adults’

o enrollment and o use of non-preventive care

Buto Without BH, state could use General Fund dollars to supplement federal

subsidies

2. Family unity With BH, more family members could enroll in the same plan But

o Not much solid evidence of impact

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Consumer issues, continued3. Continuity

BH helps consumers with fluctuating income stay in the same plan up to 200% FPL

Buto A state without BH could pursue other policies to promote continuity o With BH, still some discontinuity—just moves from 133% to 200% FPL

4. Health plan choices Fewer mainstream, commercial options in BH

5. Provider networks Biggest consumer problem with BH—provider payment, access But

o Can lessen the problem by raising payment above Medicaid levelso Low-income -friendly networks, supports in BH

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State issues

1. Can end optional adult Medicaid >133% FPL without making coverage and care less affordable to low-income consumers

2. Leverage effects of BH Fewer covered lives in the exchange, hence less

leverage to cut costs and improve quality More covered lives in state-purchased coverage,

hence more leverage to cut costs and improve quality

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What happens to leverage if a state moves consumers from the exchange to BH?

 Leverage Potential quality

effectsPotential cost effects

Coverage in the exchange

Less Fewer quality gains for residents covered in the exchange

Costs may rise for:Residents buying coverage in the exchangeFederal government

State-purchased coverage

More More quality gains for residents in state-purchased coverage

Costs may fall for state government

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More state issues3. Can build on current MCO contracts4. What to do with the “BH surplus”?

BH payments based on subsidies in exchange, which may decline after 2014, relative to health care costs

ACA Section 1331(d)(2): o State must establish a trust fund for federal BH dollarso Trust “shall only be used to reduce the premiums and cost-sharing of, or to

provide additional benefits for” BH enrollees Can raise BH PMPMs (hence provider payment) > Medicaid But what about

o Banking for future use when BH payments may decline relative to cost?o Substituting for baseline state costs (e.g., payments to safety net providers)?

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Conclusion Since HHS has not yet provided guidance,

conclusions are necessarily somewhat tentative For this particular population, the affordability

advantages of BH (using a “Medicaid-look-alike” or “CHIP for adults” approach) probably outweigh the net disadvantages of a Medicaid/CHIP delivery system

Depending on state circumstances and federal guidance, BH may allow meaningful (but probably not enormous) General Fund savings

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