(This post is based off an assignment for a class in Health Policy, which explored how the debate around healthcare access factors into political races. It follows a more informal style. The Hennessy Center believes that Beto O’Rourke’s beliefs are superior to those of Ted Cruz).
The race in Texas is a competitive race, in large part because Ted Cruz made his opposition to the Affordable Care Act a cornerstone of his policy positions (above all other issues), even shutting down the government with a prolonged filibuster in 2013 to express how strongly he opposed the Affordable Care Act. Beto O’Rourke, on the other hand, takes an even more expansive approach than existing law, arguing that Texas needs to expand Medicaid and that some form of Medicaid should be available to all Americans.
-Question: Mr. Cruz, given that you shut down the government in 2013 to defund Obamacare, are you satisfied with how your party handled healthcare, generally, and the Affordable Care Act, specifically, since obtaining majorities in both houses and control of the presidency?
-Discussion: This is an important question because Texas has not chosen to expand Medicaid. Articles in the Houston Chronicle (and here too) and a report from the Kaiser Family Foundation highlight that Texas, despite having the highest uninsured rate in 2013 and 2016, passed up $100 billion in federal assistance, and was unable to offset the burden of uncompensated care with federal cost-sharing. As a reminder, EMTALA requires hospital emergency rooms to stabilize patients, even if they are uninsured or unable to pay; and states are required to provide reimbursement to hospitals for doing this. In other words, because the costs are on the back end (state subsidies to hospitals) and not on the front end via insurance, it can be harder to identify how the cost of care is allocated in reality.
Congress was not able to pass comprehensive healthcare reform and was only able to dismantle the individual mandate via tax cuts. The individual mandate was intended to remedy economic incentives around adverse selection by compelling younger, healthier people to enter the risk pool and offset older, sicker Americans, but was widely seen as an ineffective incentive and hard to enforce.
Ironically, eliminating the individual mandate increased this adverse selection problem, even if it wasn’t a strong counterweight to it in the first place. Ted Cruz’s statements about repealing Obamacare to make healthcare more affordable seem hollow as the individual mandate repeal caused premiums on the exchanges to rise in response to the adverse selection effect, and, by extension, served to increase the two associated subsidy payments from the government (cost sharing reduction and premium tax credits), which seem anathema to Cruz’s rhetoric about the Affordable Care Act
Question: Mr. O’Rourke, you propose a public insurance option on the Affordable Care Act to compete with the existing insurers. There are already problems with adverse selection on those exchanges. How would you avoid the public option, which guarantees affordability, from becoming a de facto high-risk pool or “death spiral?”
-Discussion: The ACA exchanges use private insurers that are reimbursed by the government. These exchanges filled a gap in the individual marketplace. Prior to the passage of the ACA, many individuals without health insurance through the VA, their workplace, Medicare/Medicaid, or Tricare were unable to purchase health insurance on the individual marketplace due to concerns about preexisting conditions.
Insurers feared an adverse selection problem, where sicker people would be more likely to purchase insurance even if they didn’t fully reveal their health information to the insurer. Insurers were also leery of the moral hazard problem (sadly, in the context of legal gender discrimination too), whereby someone would purchase insurance and engage in activities in which they would be putting themselves at higher risk, such as unprotected sex (i.e., increasing the risk of pregnancy). The ACA was able to get insurer participation in this marketplace, as the insurers were guaranteed federal reimbursement via subsidization programs.
A public option could inject efficiencies in the marketplace which could unintentionally crowd out private insurers due to attainment of economies of scale across multiple states. However, these efficiencies could unintentionally trigger private insurers to structure their policy offerings on the ACA to only attract the healthiest individuals (e.g., by offering “Cadillac” plans that far exceeded minimum benefits requirements and that would be more expensive, when compared to simple public option plans with simple essential coverage guarantees). This “tiering” between public and private insurers could lead to adverse selection problems, whereby the public option would attract a relatively sicker population each year and become a modified version of a high-risk pool.
The public option seems like a liberal battle cry to galvanize voters, when the heart of the issue is perhaps best addressed by simply expanding Medicaid in the eighteen states that have not expanded Medicaid?
Would a public option replicate Medicare with its patient cost sharing and varying coverage benefits under parts A,B,C, and D? Or would it replicate Medicaid with its relatively low reimbursement rates and customization by state?
image credit: https://www.steveriddellfortexas92.com/new-blog/2018/6/11/ecfpf7ic5vlc3kxno8thzzaemdh38x