Q1. Why would a state be willing to take a risk on potential federal subsidy shortfalls and having a state expenditure vs. a guarantee of no cost if using an exchange for these FPL levels?
A1. It seems likely that HHS can provide solid advance estimates about the federal payments a state would receive if it implements BH. This should let states enter into contracts with health plans and providers that avoid a significant risk of federal BH payments falling short of the cost of providing care.
Q2. What were the baseline assumptions that led to the savings? How do those savings accrue to the general fund, given the trust structure?
A2. There are several ways that BH might lower costs for states, none of which are affected by the trust fund structure.
BH will provide a state with more leverage in its direct purchase of health coverage and health care, because it will be buying on behalf of additional covered lives—that is, BH will be added to a state’s purchase of public employee/retiree coverage, Medicaid/CHIP, prison health care, and the like. This additional leverage can be used to lower costs for the state’s existing health care purchases as well as for BH.
Moreover, a state can structure BH benefits to cover services (like the in-home services referenced by another question) that, in the past, were funded entirely with state and local dollars, thus saving some of those dollars. A state could achieve similar results by requiring plans in the exchange to cover these services, but the state would need to pay the resulting increased cost of tax credits and cost-sharing subsidies—an ancillary cost that BH avoids.
Some states might also experience savings in their medically needy programs. A state could implement BH in a form that involves significantly lower out-of-pocket cost-sharing than will apply in the exchange. If so, medically needy beneficiaries with MAGI between 133 and 200 percent FPL will take longer to meet their share of cost (sometimes called a “spend-down”), thus lowering the remaining costs paid by Medicaid.
Finally, some states may want to avoid imposing new costs on current-law Medicaid beneficiaries with incomes above 133 percent FPL, such as low-income pregnant women. BH structured with very low cost-sharing could shield these low-income residents from increased costs while shifting them out of Medicaid and into coverage that is funded entirely by the federal government.
Of course, the same savings could also be achieved by simply ending these adults' Medicaid coverage and moving them into the exchange. But providing BH in a form that resembles Medicaid or CHIP lets a state realize those same savings without raising health costs for state residents.
Q3. Is there a separate venue for state administrative costs, or does the 95 percent subsidy/tax credit dollar amount need to cover eligibility administration as well as medical care/capitations? (Slide compares ACA/Massachusetts medical costs only, I believe).
A3. HHS has not indicated whether states can use some BH funding for administration. If HHS permits this, and if an exchange follows Massachusetts’ example and funds its administrative costs by a surcharge on premiums, the state would receive almost 95 percent of the per capita administrative costs paid by the exchange. For BH members, the Massachusetts-style surcharge would be paid largely by health insurance tax credits, 95 percent of which would be included in BH payments to the state.
If a state uses other mechanisms to fund the exchange’s administrative expenses, the BH payment may not cover administrative costs. Such a state might allot to BH the administrative funds that the exchange would otherwise have spent if the BH members were in the exchange. HHS has not yet indicated whether federal exchange grants can be used for this purpose before 2015, when exchanges become self-supporting.
Q4. Does the CMS prohibition against cost-sharing in law for Medicaid extend to Basic Health Plan?
A4. No, Medicaid cost-sharing limits do not apply to BH. The state can impose cost-sharing up to the amount that would have been charged in the exchange (and potentially slightly more, depending on how HHS interprets the statute). A state can also implement innovative approaches to cost-sharing, including value-based insurance design and incentives for beneficiaries to use more efficient or higher-quality providers.
Q5. Can the state exchange subsidy program (tax credit) be offered by carriers that do not offer unsubsidized coverage? If not, the Basic Health Plan is a good way to keep in Medicaid managed care plans that are not offering commercial coverage.
A5. While HHS has not yet interpreted this part of the law, it appears that health plans in the exchange’s individual market must be open to all participating consumers, including those who are ineligible for subsidies. As the question suggests, many Medicaid managed care plans may not be set up to operate in a commercial market, which could make them reluctant to enter the exchange. Depending on a state’s approach, the BH option might allow Medicaid managed care plans to cover individuals with incomes just above Medicaid eligibility levels. Put differently, BH could be structured so consumers with incomes between 133 and 200 percent FPL retain access to Medicaid plans, even if they lose access to commercial products offered in the exchange.
Q6. What are the BH impacts on state-plan in-home personal care programs?
A6. A BH plan could be structured to provide benefits chosen by the state, so long as minimum essential benefits were covered and federal standards on actuarial value were met. This would leave room to cover in-home personal care services with greater generosity than otherwise might be available in the exchange.
As noted above, a state could accomplish a similar objective by requiring plans in the exchange to cover such services. But in that case, the state would be required to pay the resulting increase in subsidy costs. By contrast, covering these services through BH would avoid imposing costs on the state, so long as the total amount of the BH contract was covered by federal BH payments.
Q7. How do you address questions about the BH option pulling healthy people from the exchange risk pool, who might be younger/cheaper to cover?
A7. Circumstances will differ by state, so each state will need to make its own assessment of risk pool impacts. Some BH enrollees may be young and healthy, but others may have health impairments.
Even if pulling BH enrollees out of the exchange would increase the risk level of the remaining pool, the adverse effects will be ameliorated, to a significant degree, by the Affordable Care Act’s risk adjustment provisions and similar mechanisms.
Q8. If states do not do a BH plan, will lawfully present immigrants below 133 percent FPL have a coverage option if legalized within last 5 years?
A8. Yes. They can receive subsidized coverage in the exchange. Unlike in Medicaid, however, these individuals will face premium and cost-sharing charges that exceed nominal levels.
Q9. In Illinois, we already cover parents up to 185 percent FPL in Family Care and all children through All Kids. Would the advantages of Basic Health be minimized because of that?
A9. Not at all. BH lets you move these parents to federally-subsidized coverage, thus saving the state money, without raising the premiums or cost-sharing amounts those parents must pay.
While maintenance of effort requirements for adults end in 2014, they continue for children through 2019. However, if Congress fails to continue CHIP allotments after 2015, children who otherwise would be covered through separate CHIP programs would move to the exchange. If that happens, BH would let such children with incomes at or below 200 percent FPL retain something like CHIP benefits and cost-sharing, entirely at federal expense, rather than face higher costs and perhaps fewer covered benefits in the exchange.
Q10. Mathematica has done a study in Indiana showing that this population looks more like an SSI population than the TANF-related population. It seems unlikely that states will "benefit" from the subsidy payments. Will CBPP`s TA include this type of data to help states make these decisions?
A10. Federal BH payments will be based on subsidy amounts that would have gone to BH enrollees in the exchange, which take into account their risk level. If BH consumers have above-average costs, federal BH payments will likewise be above average.
These kinds of state-specific data analyses are outside the scope of the TA that will be provided by CBPP. CBPP, however, will provide guidance on other important issues to consider in designing BH programs. In addition, the Urban Institute hopes to use its microsimulation model to develop state-specific numbers (a) estimating the effect of BH implementation on the exchange’s size and risk pool and (b) comparing federal BH payments to average Medicaid costs for non-disabled adults under age 65.
Q11. Do you believe the 95 percent federal share will apply to both the premium credit and the cost sharing subsidy?
A11. Yes, as provided in ACA §1331(d)(3)(A)(i).
Q12. On slide 8, is the Medicaid amount federal only or federal plus state?
A12. Federal plus state.
Q13. Can the state require the BHP beneficiary to pay the 5 percent balance of the premium tax credit?
A13. There is not actually a 5 percent balance that must be paid on an individual basis. States receive federal payments that aggregate 95 percent of all premium tax credits and cost-sharing subsidies that BH enrollees would have received in the exchange. While states can charge BH premiums up to the maximum level permitted by the statute, there is no requirement to make up the 5 percent differential
Q14. Will people covered under the breast cancer treatment act be shifted into the exchange?
A14. If their incomes exceed 133 percent FPL then states will be free to terminate their coverage beginning in 2014, when maintenance-of-effort requirements for optional Medicaid adult categories end. At that point, these women can qualify for subsidies in the exchange, provided they meet applicable requirements. If their incomes do not exceed 200 percent FPL, they could be included in BH.
Q15. On slide #6, can you verify your indication of "silver and gold actuarial value levels" vs. "gold and platinum actuarial values" which I believe were referenced in ACA?
A15. Thank you. This was a mistake. Gold and Platinum are the levels specified in the legislation.
