1. The Basic Health Program November 17, 2010 Stan Dorn, The Urban Institute January Angeles, Center on Budget and Policy Priorities

2. 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 Fellow The Urban Institute Washington, DC 202.261.5561  sdorn@urban.orgsdorn@urban.org

3. 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? 3

4. WHAT IS THE BASIC HEALTH PROGRAM (BH) OPTION? Part I. 4

5. 5 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)

6. Other federal rules for BH Form of coverage  State contracts with health plans or provider networks o 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 levels o 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 6

7. HOW COULD STATES USE BH? Part II. 7

8. Key fact: for the average state, federal BH payments will exceed Medicaid costs for adults 8 Sources: Urban Institute/KCMU estimated average Medicaid cost of non-elderly, non-disabled adult in FY 2007, trended forward based on CMS projections of average health spending per capita; CBO estimate of average federal premium and OOP subsidy costs in the exchange.

9. 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 costs o Slightly above Medicaid levels o Well below what BH consumers would be charged in the exchange  Provider payment slightly above Medicaid levels 9

10. ISSUES FOR CONSUMERS AND STATES Part III. 10

11. Affordability for low-income households 11 Sources: Commonwealth Connector (Connector) 2010; author’s calculations

12. Out-of-pocket cost-sharing under CommCare vs. examples of plans that meet ACA’s actuarial value standards, at various FPL levels: 2010 FPL CommCarePotential ACA plans General Deductible Primary Care Visit Copays Prescription Drug Copays General Deductible Office VisitsPrescription 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% coinsurance 12 Note: Office visit copays for specialty care in CommCare are $18 and $22, rather than the $10 and $15 copays 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

13. Consumer issues 1. 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  Bu t o 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 13

14. Consumer issues, continued 3. Continuity  BH helps consumers with fluctuating income stay in the same plan up to 200% FPL  But o 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 levels o Low-income -friendly networks, supports in BH 14

15. 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 15

16. What happens to leverage if a state moves consumers from the exchange to BH? Leverage Potential quality effects Potential cost effects Coverage in the exchange LessFewer quality gains for residents covered in the exchange Costs may rise for:  Residents buying coverage in the exchange  Federal government State- purchased coverage MoreMore quality gains for residents in state- purchased coverage Costs may fall for state government 16

17. More state issues 3. Can build on current MCO contracts 4. 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 dollars o 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)? 17

18. 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 18