2020 OPEN ENROLLMENT ENDS (most states)

Time: D H M S

Washington State's Public Option: Do I hear 100%? 150%? SOLD for 160% of Medicare rates!

A couple of weeks ago I wrote an extensive piece laying out what seemed, at first glance, to be a bona fide state-level Public Option bill quietly working its way through the Washington State legislature:

Democrats in Olympia push through governor’s 'green' agenda and public healthcare coverage bills

...Another key item on the governor’s agenda is the so-called “public option” socialized health care coverage measure, SB 5526. This bill would create subsidized state-funded public health plans managed by regulated insurance companies. It would require the State Insurance Commissioner and the Health Care Authority to set up the socialized plans by 2021.

,,,These plans would be available through the state’s health care exchange to all residents, but the state would pay subsidies to individuals with incomes of up to five times the poverty level. Premiums would be limited to no more than ten percent of adjusted gross income, and payments to doctors and other health care providers would be restricted to Medicare-level limits.

Extending ACA subsidies up to 500% of the Federal Poverty Level (FPL) is important, but the biggest eyebrow-raiser was the part about only paying doctors and hospitals Medicare rates. Since Medicare only reimburses providers around 60% of private insurance rates on average nationally, this would be a massive game changer...if they were able to somehow not only convince a statewide network of doctors and hospitals to agree to a 40% pay cut, but to also manage to make such an arrangement work without driving those hospitals, clinics or physicians into bankruptcy.

Unfortunately, it soon became clear that this same dilemma had also occurred to at least a few of the state lawmakers in Washington, from the original wording of the bill...

(d) The qualified health plan's fee-for-service rates for providers and facilities may not exceed the medicare rates for the same or similar covered services in the same or similar geographic area. For reimbursement methodologies other than fee-for-service, the aggregate amount the qualified health plan pays to providers and facilities may not exceed the equivalent of the aggregate amount the qualified health plan would have reimbursed providers and facilities using fee-for-service medicare rates.

...to the "substitute" version...

(e)(i) Except as provided in (e)(ii) of this subsection (1), the qualified health plan's fee-for-service rates for providers and facilities may not exceed the medicare rates for the same or similar covered services in the same or similar geographic area. For reimbursement methodologies other than fee-for-service, the aggregate amount the qualified health plan pays to providers and facilities may not exceed the equivalent of the aggregate amount the qualified health plan would have reimbursed providers and facilities using fee-for-service medicare rates.

(ii) For services provided by rural hospitals certified by the centers for medicare and medicaid services as critical access hospitals or sole community hospitals, the rates may not be less than one hundred one percent of allowable costs.

...to the "engrossed" version...

...where the reference to "may not exceed medicare rates" has been completely removed...with this being the only reference to Medicare rates:

(g) For services provided by rural hospitals certified by the centers for medicare and medicaid services as critical access hospitals or sole community hospitals, the rates may not be less than one hundred one percent of allowable costs.

...to the "adopted and engrossed version"...

(g)(i) The total amount the qualified health plan reimburses providers and facilities for all covered benefits in the statewide aggregate, excluding pharmacy benefits, may not exceed one hundred fifty percent of the total amount medicare would have reimbursed providers and facilities for the same or similar services in the statewide aggregate

Yep...in the space of three revisions, we've gone from 100% of Medicare, to 100% of Medicare except for rural hospitals, to no specific cap, to 150% of Medicare.

And that's where things stood until this weekend, when the final version of the bill was passed and sent to the Governor's desk to be signed:

Senate Bill 5526, a public health plan which would be known as Cascade Care is heading to Governor Inslee's desk.

...The bill passed with a 56-41 vote in the House, and a 27-21 vote in the Senate. It now goes to the governor for signing.

...“Every Washingtonian deserves access to consistent and affordable health insurance,” Frockt said. “We need to ensure that people in every county of our state have options to buy into the individual market. Cascade Care takes imperative steps to establish lower premiums and deductibles. This new option with standardized plans will not only make insurance coverage more affordable, but will allow people to have better access to care when they need it.”

So I took a look at the final version of 5526 as passed by the state legislature, and sure enough:

(g)(i) The total amount the qualified health plan reimburses providers and facilities for all covered benefits in the statewide aggregate, excluding pharmacy benefits, may not exceed one hundred sixty percent of the total amount medicare would have reimbursed providers and facilities for the same or similar services in the statewide aggregate;

(ii) Beginning in calendar year 2023, if the authority determines that selective contracting will result in actuarially sound premium rates that are no greater than the qualified health plan's previous plan year rates adjusted for inflation using the consumer price index, the director may, in consultation with the health benefit exchange, waive (g)(i) of this subsection as a requirement of the contracting process under this section;

(h) For services provided by rural hospitals certified by the centers for medicare and medicaid services as critical access hospitals or sole community hospitals, the rates may not be less than one hundred one percent of allowable costs as defined by the United States centers for medicare and medicaid services for purposes of medicare cost reporting;

(i) Reimbursement for primary care services, as defined by the authority, provided by a physician with a primary specialty designation of family medicine, general internal medicine, or pediatric medicine, may not be less than one hundred thirty-five percent of the amount that would have been reimbursed under the medicare program for the same or similar services;

Yup, there you have it: The new Washington State public option is authorized to contract to pay most healthcare providers as much as 160% of what they're currently receiving from Medicare. As it happens, another way of saying that Medicare pays 60% as much private insurance is to say that private insurance pays around 166% as much as Medicare.

Put another way, if I'm understanding this correctly, the WA public option will likely end up saving perhaps 5% or so compared to other private carriers on the ACA exchange, give or take. Ah, well.

Furthermore, if I'm reading part (ii) correctly, starting the third year, they might scrap even that 160% cap anyway. In other words, the Public Option may end up costing pretty much exactly the same as other exchange options.

On the other hand, primary care doctors, including pediatricians, internists and family doctors, should be thrilled about the public option. These specialties tend to be underpaid by Medicare, so bumping up their pay by 35% should be very helpful in getting them to sign up...although that, in turn, will also presumably eat up that 5% or so savings.

In addition, that "Medicare pays 60% of private insurance" estimate is just that: An estimate. It could be higher or lower in Washington compared to other states; if it's lower, then there could still be significant savings to be had. If it's higher, it's conceivable that the public option will cost a bit more than some competitors.

In the end, having a public option is still a Very Good Thing for other reasons: It provides an important check on private carriers looking to price gouge or cut services, and it also negates any possibility of bare counties in the state, which also removes any potential for blackmail on the part of a private insurance company. Plus, it gives the PO concept a foothold and proof-of-concept for other states to study and use for their own models.

I just wouldn't expect massive savings if I was a Washington resident, that's all.