House Energy and Commerce Subcommittee on Health Hearing
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Today's hearing is focused on implementation, not policy. Accordingly, my remarks are intended to focus only on the challenges of implementation. It is not my intent to neither re-open past policy debates nor prolong current ones. However my avoidance of those policy discussions, in which there is great passion on both sides, should not be mistaken for support of the positions taken by the
The Reality of the Current Budget
While today's hearing topic is uncertainty, I would like to share some of our realities. The cost of our current
In the current negotiations surrounding the "fiscal cliff," states are understandably concerned about potential cost shifts from the federal government to the states. In fact,
In regards to the economy, even though the unemployment rate has declined, we have nearly 200,000 more parents, caretakers, non-disabled childless adults and children on
Who is Currently Uninsured in
From the 553,600 non-elderly individuals who are uninsured, 267,200 are below 133 percent of the federal poverty level (FPL). Of these, 41,300 are children and 45,843 are parents/caretaker adults who are already eligible for
We estimate there is a total of 178,461 childless adults below 133 percent of FPL who are uninsured for whom the state would receive the temporary 100 percent match rate. Of these individuals, 130,350 childless adults are below 100 percent FPL. For the 48,000 individuals between 100 and 133 percent FPL,
There are 21,709 childless adults currently enrolled in
Four Areas of Uncertainty
Even with some of the additional limited guidance HHS provided earlier this week, PPACA represents massive disruption to the distribution system of health insurance. To participate, will the health plans be required to hold financial risk as well as medical risk? Simply put, who pays and who collects? At this point, we do not know how advanceable tax credits will be transferred from the federal Treasury to a health plan. Nor do we know how the low income subsidies for cost sharing will be processed.
Insurers are struggling with great unknowns as to how to price their products. Without utilization data, it is difficult to determine rates that will be actuarially sound and competitive. Everyone simply needs to know what the rules are in order to be compliant.
Getting at the heart of today's hearing, we find uncertainty and unforeseen outcomes in four areas: administration, affordability, cost, and simplification.
In addition to the 553,600 non-elderly individuals who are uninsured in
To put this in greater perspective, even if only 20 percent of Americans try out the new exchange tool - one in five Americans, that is more than 62 million people nationwide. Or in other words, approximately the entire state populations of
Many of these individuals will not know whether they are eligible for
. In Person......36,687.....10%
. In Person...4,000,000
Assuming the federal government will end up processing half of the applications (participating state based exchanges and partnership states the other half); it will need to prepare to handle applications for seven million people who will conclude the internet does not meet their needs. Further, it is likely that a portion of the individuals applying on-line will require assistance from an eligibility worker. In
We are very concerned that the lack of federal preparation will mean many of these people will turn to our local and county agencies by default and in frustration. It costs
Technical specifications related to the federally facilitate exchange (FFE) and federal data services Hub are just now starting to be released and HHS has stated publicly that the specifications are not complete and will be continuously updated. States do not have resources sitting on the bench waiting for HHS to provide complete information, and will be unable to integrate with the FFE on the timeline established. In building systems, especially when dealing with something so complex, sensitive, and critical as eligibility, you build, test, revise, and then implement. States are now in a position where they must accept the fact that work completed to date must be reviewed and significant rework may be required to comply with the ever changing federal guidance. To complicate this even more HHS has placed too many conditions on the enhanced funding for systems development. Frankly, the most prudent decision for a state may be to forego changing their systems and avoid the Hub.
In short, we are not confident that the federal government has adequately prepared for handling an unprecedented number of applications, verifications, and enrollments. This leaves us uncertain on whether the federal government will be ready to effectively administer this program less than 10 months from now.
The federal government insists that health insurance will be more affordable. But what is affordable will be decided by people, not government rulemaking. People do not always live their lives according to the assumptions made by government officials. Some
40 percent of people currently in
Since July, we have been applying the PPACA premium rules to adults on
The results on average are consistent with our assumptions about participation rates. Overall, 77 percent are paying the required premiums. But as the premiums increase, participation declines. Individuals do not typically think about payments as a percentage of income, they view prices in absolute dollar terms. Enrollment of individuals with income between 200 and 300 percent FPL with an average monthly premium of
And ultimately, we still do not have final rules on two fundamental issues - who is eligible and how will a health plan get paid - leaving us again uncertain about the affordability of PPACA.
The federal government assumes that adding 36 to 40 million covered lives to the health insurance market will lead to increased competition and a reduction in (premium) costs. But PPACA also fragments the market by separating the non-disabled, non-elderly
We are concerned that the federalization of health insurance will lead to consolidation among health plans, which will ultimately drive costs higher yet. The big insurance companies can afford to become the banker if that is what the payment system demands.
The impact on employer sponsored insurance is perhaps the greatest unknown. We have 180,000 people in the individual market. There are more than three million lives in the large group market. Some health carriers fear its erosion, while others are planning for it and positioning themselves for massive employer disruption over time. It is not difficult to see that the large health plans that can play in all four spaces--large group, small group, individual, and
We see consolidation throughout the health care sectors--pharmaceuticals, hospitals, and physician practices. Federal officials frequently convey their belief that PPACA will stimulate competition. It is not difficult to foresee the opposite may occur.
Even if a state chooses not to expand
Additionally, while the federal government will cover the benefit costs of the primary care provider rate increase for
Second, health care providers are also employers and will be affected by the mandate to provide health coverage to their own workers or pay a tax penalty. This may particularly affect small and mid-size employers such as personal care agencies or nursing homes that employ lower skilled workers. The
HHS seeks to create a streamlined process and application so that there is "no wrong door." In reality, HHS will force
While federal officials talk simplification, implementation of PPACA seems to be going in the opposite direction. CMS needs to move to simpler solutions instead of more complex ones such as relying on the Hub which does not even exist today. We have yet to be able to match
MAGI-based eligibility rules are a set of new household composition and income counting rules established by PPACA. MAGI refers to "Modified Adjusted Gross Income," which is defined by U.S. tax code and will be used as the basis for determining
MAGI, by virtue of basing eligibility on tax filing status and tax relationships, creates significant inequities in eligibility results for families that are nearly identical in make-up. It is expected that these complex rules will cause mass confusion for
A few examples of the inequities and complexities of migrating to MAGI are attached as Appendix A.
The FFE will begin using MAGI to assess/determine eligibility for state
The FFE may tell consumers it looks like they are eligible for
Finally, in a previous governmental role, I served at the
Bear in mind that PPACA is far more complex than MMA. In MMA, we knew exactly the universe of people we were going to serve. We knew a great deal about their utilization of health care. We had a well-functioning enrollment system called the
These were tremendous advantages compared to what CMS faces today in implementing PPACA. To increase the chance for success, the federal government needs more partners, not fewer. It needs to offer greater flexibility to solve problems, not less. But the hard line taken by the federal government, as further evidenced in the guidance this week, in response to state requests likely will mean federal officials and the American people will have to adjust their expectations for 2014.
Thank you for the opportunity to participate in today's hearing. I look forward to any questions you may have about
All examples below assume
MAGI and Tax Filing Examples
Mary and Brad are not married. They have a daughter in common, Jessica (age 10), and Brad has a son, Kris (age 15) from a previous marriage. Mary has
Both Mary and Brad are filing taxes. Brad is claiming Jessica and Kris as his tax dependents.
Mary's group includes herself. For a household of 1 with income of
Brad's group includes himself, Jessica and Kris. For a household of 3 with income of
Jessica's group includes herself, Brad, Mary and Kris. For a household of 4 with income of
Kris' group includes himself, Brad, and Jessica. For a household of 3 with income of
Both Mary and Brad are filing taxes. Mary is claiming Jessica as her tax dependent and Brad is claiming Kris as his tax dependent.
Mary's group includes herself and Jessica. For a household of 2 with income of
Brad's group includes himself and Kris. For a household of 2 with income of
Jessica's group includes herself, Brad, Mary and Kris. For a household of 4 with income of
Kris' group includes himself and Brad. For a household of 2 with income of
There are a number of other inequities that are created as a result of basing
The "Marriage Penalty"
Jack and Diane are married and will file their taxes jointly. They have two children, ages 5 and 8, whom they will claim as tax dependents. Diane earns
Rob and Anna are not married. They have two children, ages 5 and 8, whom Anna will claim as tax dependents. Anna earns
In this scenario, Jack and Diane are both above 133% FPL and ineligible for
Child Support Disregard
Lyle and Kate are married and have two daughters, ages 7 and 9. Kate has a son, age 13, from a previous marriage. Kate's son receives
Mike and Liz have two daughters, ages 7 and 9. Liz has a son, age 13, from a previous marriage. Mike and Liz are filing jointly and claiming all three children as tax dependents. Mike earns
Under this scenario, total income for both families is
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