the employee contribution, and the economists will tell you they're all employee contribution, is $18,000. right? where the medium income in america is $56,000. one third of income is health insurance premiums. i don't know, is that unaffordable to you? it seems outrageous to me. >> you can see all of that event with dr. emmanuel tonight beginning at 8:00 p.m. eastern on our companion network cspan. the alliance for health reform hosted the health insurance policy forum to consider the state of the industry and the future of healthcare in the u.s. this portion features a conversation with former senate democratic leader tom daschle and former centers for medicare and medicaid services administrator tom scully followed by a discussion about the individual health insurance market.

>> so without further delay i'll introduce our first -- actually, our moderator who introduced before as an alliance board member is going to introduce our first panel and take it away, reed. >> thank you very much. and we really excited about presenting this conversation with you. we want to make sure we get your voice in the conversation. at about 30 minutes in, we'll turn to audience participation. so just know that you will have an opportunity to participate. this conversation is designed to set the stage for the more in depth panels that will follow. we're going to kick it off and talk about how to stabilize the individual insurance market. and what's likely to happen with medicaid going forward. this is -- there's been a lot of, obviously, activity lately. and we're sort of looking at the state of play where washington is going. but also from the point of view of our two panelists, where should we be going. let me begin, senator, tom

daschle. you served in the -- as the united states senate democratic leader for more than a decade. you're the founder and ceo of the daschle group, a strategic advisory firm that advised clients on a broader way of policy and political issues, particularly relevant to this discussion you're a co-founder of the bipartisan policy commission and co-chair its position on political reform and health project. if we're to achieve bipartisanship, if we are to have solutions that cross differences, it's clear that we have to understand where people are coming from. how do they think about problems. it would be good to understand the motivation and objectives of the different camps. in a non-politicized environment most people would see the objective of covering all americans for healthcare and access to health insurance as a terrific social good. what are the priorities and

purposes that drive the various factions. i'm curious as we think about what could be on people's minds maximizing the health outcomes of americans, providing cost effective care for all, decreasing federal expenditures, paving the way for major tax reform and entitle reform. political ideologies focused on diminishing the role of federal government verses state control and flexibility. keeping campaign promises or just sticking it to the previous administration. what are the motivations you see that are defining how people from different camps approach this issue some. >> that's an interesting question and a good way to start the conversation. let me just say, how pleased i am to share the dias with tom scully. it's been a while since we've seen each other. it's great to be with him on such an auspicious morning.

in the context of health reform in particular, i think it's surprising to a lot of people to -- as you talk about the similarities that may exist in terms of what motivates people, i think people are motivated by the realization that healthcare costs too much in this country. it's not as accessible as it should be in this country. the quality isn't what it needs to be in this country. i think there's a lot of consensus around the reasons why those problems exist. there may be a consensus generally about what the goal is. what are we trying to accomplish. if you would ask a liberal, conservative or republican or democrat it seems to me like they would say something to the effect what we'd like to do is build a high performance, high value healthcare sector with better access, better quality and lower cost. that's what motivates i think most people as they think about health. i think the real rub comes on what the role of government is. for the last 100 years we've

attempted to try to resolve that question. what is the role of government in achieving a healthcare marketplace? through a series of compromises we've come to a point where i believe we have a $3 trillion public/private partnership. that's what we've got now. we've got public entities and private entities, commercial and government and that colo culodg created that partnership. the aca was the latest iteration in describing what that partnership looks like. it comes down to what is the role of government today and that i think will continue to be a source of division within the ranks. >> tom scully, you are a former administrator of the centers for

medicaid services during the george w. bush administration. you're now a general partner at a private equity firm. particularly relevant to our conversation you served as president and ceo for the federation of american hospitals which represents more than a thousand investor held hospitals. how do you see the motivations of the different camps? >> it's not fair to put me after senator daschle. anyway. we've been friends for a long time. when i was running cms he was the leader of the democratic senate. shockingly we talked to each other and he was very nice. i would advocate that. we were also in the same law firm for a while. i assume my reason for being here is to give the republican side. i'm not saying i agree with all this, i think republicans look at it as they were angry in 2010 that this thing passed on a party line vote.

they said you should have been more bipartisan. now they're going roughly back the same way and trying to repeal it on a party line vote. it's a better model, if senator daschle remembers we did medicare advantage in 2003 and '04 and we did make a huge effort to pick off ten democrats in the senate. i think there were nine. and a handful in the house to take the edge off it. it's never good to do healthcare policy. creating the aca or repealing it by a party line vote. we're in a much tougher world than we used to be. i wish it was friendlier. the republican point of view, they look at aca is too big. ft y i would have been comfortable with doing 50% of it. just on the medicaid side. i think medicaid gets too little attention. when i got to o&b in 1989 we had 20 million people in the medicaid program and it cost

$50 billion a year. before the aca, we had 55 million people in the medicaid program in 2010. i think it cost $400 billion a year. today we have 77 million people in the medicaid program. and it's about $600 billion a year. okay. so what's the real difference in the next ten years republicans want to do if you look at the ryan bill. if you look at what the ryan bill does you have millions of people. but the growth of mode caedicai to $7 billion. it's done too much, we're going to freeze it in place. if you continue with aca for the next ten years you go to $950 billion. and you go from $77 milli77 mil7 million people. if you look at the republican point of view, it's too big, out of control, freeze it where it is. most of the northern states have

already done the expansions, the 31 states will stay where they r. where is it unfair? it's the 19 states that didn't take medicaid. those governors seem to be okay with that. that's what the republicans is saying, enough is enough, we're not doing anymore. we're going to make the states pay some of their match after 2020. doing that spending goes to $750 billion a year in medicaid. it's largely a fiscal issue. how big and how fast and how much. so you're not really cutting medicaid. you're freezing it where it is and some of the northern states are telling the governors are getting 9500% matches. we're going to scale you back to your match rate. so it's basically to me. if you look at the bill, the republicans are irritated. a lot of people in this room, you don't put the two together. in the republican bill you had a 9a .9% intaxes.

3.8% on top of that. those are permanent taxes those drove republicans crazy. a tax on devices, insurance companies. that's what paid for it. $880 billion is what you save versus the taxes disappear. it's almost dollar for dollar. getting rid of the taxes today and freezing medicaid where it is. that's the republican fiscal conservative side of it in a nut shell. that argument is you're heartless and don't care about poor people and don't want to expand it. i'm somewhere in the middle of that debate. i would probably do a little but not all of it. i don't think either side is completely wrong or completely wrong as usual. the right thing to do is probably somewhere in the middle i don't think we have too many middle discussions anymore. >> we'll come back and drill into some of the details in your opening comment. when you were in the senate there was a much more

opportunity for folks to get together from the different sides. a lot of that was driven i think by perhaps more compassion, more sense of caring. a sense that we are a great country that can solve problems. we have enough money to solve our problems for those we consider to be important. why isn't that the case now and why is that -- are you seeing that as a major stumbling block to getting folk to sit in a room together and try to work it out. you're sitting in those rooms, what is it going to take to make those conversations happen and be productive? >> i think it takes leadership. you know, i sometimes don't think we see the leadership necessary to bring people together. there has to be more opportunities for a better communication. trying to resolve this. and tom said something i just couldn't be more emphatic about. anything that's done on a partisan basis is a temporary solution. the aca became a temporary solution because -- we can

decide who is responsible for the fact that it became so partisan -- but you just know that if it passes on a unilaterally single partisan vote, you're going to come back and revisit that. the only real bipartisan legislation is permanent legislation. the only permanent legislation is bipartisan. i would go to a -- my assertion about the role of government i think is so much a part of how i look at this. i think a lot of times at the federal level there's no disagreement with the importance of insuring that people have access to health, the real question is whose responsibility is it? there are a lot of republicans who believe it's not the responsibility of government. that it ought to be the responsibility of non-profit organizations, churches, of others to assist those who are in need of care. they also would shift a lot of responsibility to state and local governments, not the

federal government. i worry a little bit as federal policymakers that they tend to do something -- i'm guilty of this myself. i did this many times. that our solution is just to cut and shift. to cut the federal program, whether it's medicaid or medicare or s.h.i.p. or anything and shift it to the state, to the individual. cutting and shifting is a common practice done by both sides. that doesn't solve the problem, it just shifts the problem and responsibility to somebody else. much better approach is to redesign and improve and go after the real core issues that are causing those costs to go up. and those people not to get care. and that's a little harder to do. >> tom, you -- shifting then from the federal government to the state government, medicaid, what's your just overall assessment again on how stable the medicaid program is? what does it look like from the point of view of governors, you mentioned 19 southern states

that didn't accept the opportunity to expand coverage. but what's going on in the governor's minds around medicaid? >> well, so medicate is a wonderful program that provides a lot of great services for 77 million people this year, actually 98 million people -- during the coast of the last year, it was 98 million people. it's a great program. structurally provides great services. it it's a structural disaster. i've been a fan of a cap for one basic reason. since i got involved in the program in the late 80s, the states do a great job, but it was a matching program. for many years. so the match was supposed to be 50/50 for the wealthiest states, you know, the connecticuts and californias up to 70% for the mississippis. over the years the states have come up -- i would have done the same thing if i were a state medicaid director. cost shifts for donations, so

the states found a way to change their matches. the medicaid system is broken. there's not a human being in the united states, zero, even cms that can tell you what the match rates are for the 50 states in the six territories. if you went out and looked at it new hampshire puts not one penny into its medicaid program. romney care, i love him, he's a great guy, do you know how much massachusetts money is in the romney care program? zero. it was funded through a medicaid scam. massachusetts knows that. the point is the program is broken. it has to do with staying let's stop musical chairs, get rid of what they have, whether it's south dakota or virginia, give you what you have today and per

capita. i think the gfrs aovernors are looking for flexibility. one of the programs is if you're a medicaid director you spend more of your time trying to figure out how to cost shift to the federal government than trying to run your program. the program is a great program. for $600 billion, by the way, if you're not on medicaid each one of you is paying $4,000 in taxes each year to pay for medicaid. i'm more than happy to pay for that program but i'm not happy to find out there are no rules. it's outrageous the way it works financially. whether you're going to shrink or grow or expand it, the mechanism mechanism behind it is broken. >> when you think about the 1115 program, that allows for sharing costs, is that a good way to approach it? a reasonable model we can use

going forward? >> tom is exactly right with regard to the formulas, there's no -- the fmap system is so convoluted right now. it's really ended up sort of a clauj of deals. and there's an unfairness as you look at the distribution today. it's always one of the most contentious aspects about healthcare generally is the allocation of resources through medicaid, through the fmap system. so that needs fixing without a doubt. we have a demographic explosion about to occur with seniors. and i think as we look at ways with which to address that demographic explosion it's going to be all the more important that we give states flexibility. i'm a huge believer in waivers and the 115 program is a good example of that. we've got to give states as much

opportunity to adjust to the demographic changes as we can. but we still are going to be faced with enormous financial challenges going forward. with or without all the waiver systems that exist today. so we've got to work on ways with come to finance and organize. i do think that medicaid, one can say what you will about the financing of it. the one thing i'm encouraged by is the degree to which managed care has become part of the system, unlike medicare where we haven't seen the same degree of evolution and opportunities for dressing that. the opportunities really to experiment and to find ways with which to explore more efficient ways of providing care. in part because we have the waiver systems. has allowed for managed care to play a more important role in medicaid -- >> one of the sparpts people are

talking about is forcing medicaid eligible people to work. >> i think that's overplayed as an issue. 13% of the people are affected by it. very small percentage. most of the fact is most medicaid recipients do work. a lot of those who don't are taking care of an elderly or sick member of the family and don't have the capacity to work. i think it's an issue that generates a great applause line in front of crowds, but i don't think it's really that necessary. >> i agree. in some states it's going to be popular. if a government wants to do it to get a waiver, i'm not troubled by it. i don't think it's caused huge disruptions but i think it's overblown as an issue. waivers are great. if you look at the states, if the waivers are done for creative financing which is why a lot of them were done. i'm not a big fan. if you look at california which is heavily managed care, spends a third what new york does.

it's a big but efficient program. it's a liberal state, one of the first to go to heavy managed care. giving the states to run their programs effectively which california has, arizona has done a great job with their managed care program. they were the last state into the medicaid program. i think the state should have the flexibility. that's terrific. >> i think peter lee is happy to hear you say that. before we turn away from medicaid, you talked a little bit about alternatives to block grants. can you give a little bit more color on that so we make sure we understand where you are on block grants and alternatives to block granting? >> the two alternatives -- they're completely different animals. a block grant says if the new york's budget for this year for

medicare is $60 billion. you'd be saying to new york, here's $60 billion. give that adjusted to cpi or medical cpi for the rest of the time. if we have recession and your population goes up, tough luck. that's how much money you're getting every year. that's not sensitive to various disruptions in the economy. percapita cap says if you're spending $60 billion, say it's 10,000 -- it's broken up in different categories for aged and women and kids. let's say it's $8,000 a person. the percapita cap puts in per person the benefit remains an

entitlement per person which is a big difference. and if you have a recession and the population goes up, you're funding goes up per capt tu, per person. that's a much more flexible system for the states and protects more the fundmeamental do you have a cap. sometimes health costs far exceed the costs of living generally. so having some mechanism that accounts for those significant increases in costs will be one of the key questions. but there is a big difference. i really don't think block grants have much of a chance of getting much attention in congress. there are those that support it. >> let me switch to the exchanges and try to get a sense. june 21st is upon us soon where the insurers have to make a decision about whether they will be in or out. we've seen in iowa some important exit.

21,000 people will have negative effects. etna is out in iowa. is the administration going to prop up the markets or let them implode or explode? >> i'll let tom answer that question. >> i think they are going to -- i don't know. i haven't talked to secretary price. he is a great guy. i have known him for a long time. i don't think they are going to prop up the markets. i think they are probably pretty upset about a lot of things that happen including the obama administration, republicans created these premium support payments that went beyond the law. you are going to continue this for a year. that's a very tough call. they were probably not appropriate. $7 billion that they basically inserted into the payment system, $7 billion subsidies for insurance premiums that are not in the law. are they going to continue for another year? i bet they probably will.

they are not happy about it. i think they would love to change the risk rating bands and i think they can't do that without a change in law. i think they are going to do everything they can to support the insurance company toss make their lives easier. if i had to bet, i'll bet they will continue the premium subsidies, low-income premium subsidies. i think they will try to ease out of those. the insurance companies are looking for stability and predictability. i spent a lot of time with senator dashle, we were down to 3% of people in medicare plus choice, medicare advantage in 2001. the insurance companies were dropping like flies. they didn't want to be in that business. we threw a lot of little things at them for a couple of years to show them we felt their pain and we were going to talk to them and listen to them. if you are running an insurance company. the insurance company in my view, i'm chairman of the board in a small insurance company, is

a predictable business. you are going to make a 4%, 5% margin and you want to know there is some certainty there. if you are going to lose money, you are going to get out. i don't have to try to blow up obamacare. they want to keep this going and phase out what they consider the excess subsidies. i think they will do everything they reasonably can. >> let me make sure on the predictions. i'll go to you and you in terms of the important, magical date of may 22nd when the decision has to be made about whether the government is going to challenge or drop the suit on cautionary. these subsidies are going to happen or they are not. we are going to know very shortly whether or not the lawsuit by the house is going to be dropped. what do you think is going to happen? >> well, i don't know. they haven't asked me. if i were them, i probably wouldn't drop the suit. >> wouldn't do it? >> i would probably pay the premium payment this year for next year to keep the system going. the fundamental suit has been

more about, this is effectively correct in the law. i happen to think it was not in the law. so i would not drop the suit in principle, because i don't think in the long run they want to do it. to keep the companies in and keep it going, i think it is highly likely. a lot of people on the hill want to keep the subsidies going. they can't stand them. they are not happy it is going. in reality, they don't want the market. it is a very tough call. >> i think the subsidies, one way or another are going to continue. only because of the viability of the individual market is so dependant upon them. that's one-third of the formula for survival and viability. the subsidies are key and i think tom is right. they are not happy about it. but the reality is, without subsidies, you are going to see a dramatic decline in enrollment. that's going to devastate the individual market. the second issue, though, is equally as important, to retaining that pool and that's

having some sort of a mandate, some sort of a requirement for participation. republicans have come up with a different option that i don't think even cto doesn't believe this is effective as a mandate, keeping a healthy and robust pool is critical to the individual market as well. we may not have that. the third thing is the thing that tom really deserves a lot of credit for we created a risk sharing program for part c and d that have been incredibly successful. i have advocated for a long time, if we did that for the aca, most of the risk-sharing challenge would be gone. we don't have adequate risk sharing today in the affordable care act. until we address it, reinsurance or some other way to ensure that the public/private partnership is a partnership, there is

balance. we are not going to get there. all we have to do is to do what tom and the smart people around him at the time realized was necessary to make parts c and d viable. if we did that, we would be in a very good position today. >> let me just ask you in terms of you weighing in on the individual mandate. >> i think sometimes things are semantics. he was involved back in 1990 bh we were having a big fight over child care. republicans wanted vouchers and democrats wanted to change the name. we changed it to certificate and we got a big child care program, because it wasn't vouchers. if you are putting in a tax penalty and requiring people to get insurance, question have to get way from the mandate. the original mandate was a republican idea, a heritage foundation idea.

i think it is necessary for the markets to work. they set off markets with conservatives. we don't like to tell anybody what they should do. we are willing to do tax penalties, various tax incentives. we have to come up with a middle ground that's a non-mandate similarity. >> we are a couple of minutes away from "q" and "a" from the audience. i want to make sure there is a mike there. >> we talked a lot about access and different ways to get access. how do you afford it? >> the question also becomes access to what. you can really make stuff cheap if you give people crappy plans. how do you think about this notion of essential benefits, what should be in it and who should decide it. >> again, that's another great question about the role of government. i don't think that the silver plans are all that great a deal,

frankly, when you have 7,500 dolz deductibles. it makes it hard for a lot of people to afford health care even they are insured. at least the essential benefits program just as we do with almost anything. you buy a car. you have certain expectations about what that car has to do. you buy a house or you buy a furnace or an air conditioner or a refrigerator. there are certain minimum requirements to find that particular product or service as a product or service you think you are buying. that's what essential benefits are. in the past, whoo we had in the dark days was insurance being sold and people not having a clue what's in it. when they first find out they aren't insured for half the things they thought they were, it created even greater uncertainty. having that floor is an essential part of the insurance system. it is a very arguable question.

i do think preventative health services are key. also, if you look at what that pool is supposed to be, making sure that you have healthy people helping to fund the unhealthy ones is a part of it as well. it's an insurance element. >> since i am a cheap, cold hearted republican, it is about who do you want to subsidize and how much. >> i would average covering people to 138% of poverty. i think it may be the right thing to do. you should subsidize them and give low income people health care. i'm a huge critic of what the aca did. 67% of the population. if you go to rural south dakota, $97,400 a year is a firairly go

living. if you buy a silver plan, you get a $5,000 subsidy. in my view, we should cover low income people on medicaid. above medicaid, you should probably subsidize people but where do you stop? i don't think you go to 67% of the population. i have had a lot of debates. peter orszag, he says, skully, we want to go to 300%, 400% of poverty. that's not that big a deal. there are 50 million people in that range. who do you want to subsidize, how much? the republicans view is subsidize poor people. subsidize middle income people on the lower end. at some point, people should get a catastrophic stop loss. if you are at 55%, 65% of the population incomewise, maybe you need a catastrophic stop loss if

you happen to get cancer or hit by a bus, you may have a $700,000 loss and not have to pay a $400,000 bill. to make sure people who are not poor and were not insured and going to the hospital and having a $1 million bill they had to eat. the biggest issue for the hospital is not the $200,000 but the $2 million bill. >> outside of the finance can, should anyone determine what is the basic floor, the essential package? if at the end of the day, you try to sell this politically, people are going to want to know, what am i getting? are we going to try to avoid that? are we going to say it is state by state. what is the approach you think is going to occur. >> you get 50 states. let's come up with the basic federal subsidy level for people up to 300, 350% of poverty for a catastrophic loss and let the states decide.

>> utah may have a different idea of what essential benefits are. i'm not sure that's the answer everybody wants to hear but i think that's the way it is going. >> i, obviously, would disagree with that. chronic illness in this country is something we haven't adequately addressed or long-term care or catastrophic plans that only address acute illness. it ignores the need for preventative health and good prevention efforts overall, population health. it doesn't address the many issues. there was a poll recently. people were asked, if you had an unexpected $400 medical bill, could you afford to way it? >> 52% of the people said no, they couldn't afford a $400 unexpected medical bill. >> we are the only

industrialized country that doesn't have universal health care. every other country has figured it out. it seems like in 2017 we should be able to figure it out. >> the prevention plan, is that complicated to keep that? is there any reason why there couldn't be a bipartisan provision to keep the prevention fund intact? >> it is being used as a piggy bank for almost everything else. it is there but it is not for prevention. that's the sad thing. no. na shouldn that shouldn't be controversial. initially, the concept makes so much sense. frankly, i think it is going to be drawn down for other purposes. >> good morning. my name is chris urban. i am with kaiser permanente. i would argue that out of control health care costs are attributable in part to three keywords. that is fee for service.

i'm curious when do you see our system whether it is a public program such as medicaid or medicare or private sector offerings, moving from a fee for service concept to a value-based reimbursement concept? >> well, maybe i will start. py many emphatically in agreement. i think we are going to be moving much more slowly on fee for service reform. the migration away from fee for service to other approaches, bundled, captaited, global. i think value-driven care is something most people can support. i think it is harder to define. in part, if value is quality over cost, quality is still a measurement issue that challenges us and we haven't been able to figure how to address quality in a value-driven context as much as we should. that's going to take some time.

one of the biggest driver toss doing that is probably medicare. i think the previous administration was on a track to do that. they have set some pretty ambitious goals under the medicare program to do that. frankly, i don't know if it shares the same priority in this administration. i'm not as optimistic as i would have been a couple of years ago. >> tom, let me ask you on that. specially looking at it through a private sector lens, i wonder whether you would agree that the private sector hasn't made some in-roads into being able to establish guidelines and criteria for doing value-based reimbursement. >> i think we should put everything in ckaiser. >> kaiser is a great system. we have made big changes. i have got this to hedge funds. cms in 2001, we had 3% in the medicare participation program.

i think it will be 53%. medicaid went from 10% in 2000 of medicaid managed care. it is now, over 80% led by california and other primarily democratic states. i think the move to private health care is happening. the reason i like it and have always liked it is because i don't like to pay for service. price fixing has never worked in the history of mankind any place any time. i was very involved? creating the fee for service 1989 thing we did. at the time, i thought it was a great idea. in hindsight, paying every doctor in every hospital the same thing has turned out not to be a problem. as long as it is well-regulated and instead of the government fixing prices and give it to kaiser and etna, here is $15,000, call me next year. you can make a 4%-5% margin. having a little bit of market

coming to bear, that's roughly what's happening. these are big programs. things happen relatively slowly. if you asked anybody in 2001 if they thought we would have a third of the program in medicare advantage and the same with medicaid. if kaiser wants to build a couple more hundred buildings, we can do more. kidding. >> one other thing on this question i would be surprised if we didn't agree with. the lack of transparency. health care is one of the services that you don't know what it is going to cost and who is going to way. we have to work on that if we are going to get there. you can't have a great system without transparency. >> mike miller. >> a physician that does health policy for a long time now. >> a long-time troublemaker.

>> yes, but just like you, tom. in the mid 1990s, people didn't need access to health insurance, access to health care was sufficient. that concept petered out, went away, went extinct. in the last 6, 12 months, i have seen it rea peer. i don't expect either of you to agree with that concept that access to health care is all people need. they don't need access to health insurance. i am wondering how prevalent you think that concept is and how it might be impacting how we move forward, if at all? >> i think it is a critical question that we've attempted to address in a series of ways. the community health center program is an example of health care. that doesn't necessarily imply

access to health insurance. i've always associated all health care systems anywhere in the world in the form of a pyramid. at the base of the pyramid, you have preventative care and primary care. you work your way up and become more and more technologically inclined until at the very top of the pyramid, you have mris and heart transplants. every society starts at the base and they work their way up until the money runs out. in the united states, we start at the top and work our way down until the money runs out. that's the question in large measure. how do you get to the bottom of the pyramid care that precludes the need to go up higher? we are not doing a very good job of that, even today. that ought to be one of our challenges. how do we get full pyramid coverage? >> you are always going to have something if you have universal

coverage to insurance. there will be some people that o don't like that. we have community health centers. we have undocumented, nonresidents that are not going to get medicaid. you have to have something certainly in the border states. there is always going to be some population that is never going to be insurable. you see more people talking about access to health care. yeah. i think to me the real issue is, most people, most conservatives even think low income access is the thing to do. further up in the income, they feel lbetter about it. >> i am a physician that recently left the obama white house. what do you think the trajectory

for macro will be under this administration. what sort of changes should we anticipate or expect from this new administration? >> well, tom is the administration expert better than i. i will let him start. >> i think fundamentally, macro was written by the house and senate staff larnlly on the represent cap side. they are pretty wedded to it. certainly, i don't think tom price in the house at the time was very aware of it. i think macro is pretty fundamentally locked in with most republicans. it was a house and senate thing. it was somewhat bipartisan. i think it is pretty much locked in. i don't think there are a lot of feelings about rolling it back. >> i agree completely.

just when we think that polarization in health care couldn't get much worse, we past 2 st century cures and macro. we did things that most people wouldn't have predicted. there was an overwhelming bipartisan vote on macro. everybody wanted to get rid of the prior system, a crazy, convoluted way of reimbursing physicians. it was a statement from everybody wanting to eliminate fee for service that we come up with a mechanism statutorily that at the federal level creates the opportunity to move to a more rational system. a lot has to do with the way it is implemented and enforced and how much a priority it is. that's the open question right now many. to what extent will this have

priority in this administration? i don't think anybody knows. >> we had that question around what's causing the escalation in prices and health insurance. one thing the insurers talk about is the insurers tax and they beg that into pricing. is there much realistic conversation about getting rid of the tax on insurers? >> there is always talk. we have seen over the last couple of months, it is almost impossible to reach consensus on how to address whatever changes we are going to make to the aca. i am sure most people would be supportive of repealing taxes. how do you fill that void? is there an offset. what do you do if the aca remains? is it further deficit spending. i think insurers have raised this as a priority.

>> in the house, speaker ryan's bill is gone. it is highly likely that all the taxes on insurers will be gone. you can debate the merits of it. i think they are going to pass something for july 4th. the frayeight train has slowed down a little bit. a little further right and they lose their moderates. i think they will get there before july 4th and pass the bill and send it to the senate and the senate will are more moderate and that will cause it to get something done. i would be shocked if they don't get 218 votes for something. >> the last 15 seconds each. what's the one thing you didn't say you wish you had said or the one thing you said that you love and you want is to say it again.

>> bipartisanship, bipartisanship, bipartisanship. let's try to figure out a way to do this on a bipartisan way. the american people are yearning for it. they don't want to see the uncertainty around that. one of the troubling things that the speaker said, if trump didn't work with republicans, he might work with democrats and he was saying what a tragedy that would be. i don't know if he meant it the way it would come out. he has worked with democrats. tom was incredibly good at working with democrats. >> i think it is unlikely they will start to work together on a bipartisanship basis. i wish they would. senator schumer likes to cut

deals. ron weiner is a great guy, easy to work with. he knows health care really well. if you look at 2012, a month before speaker ryan was picked as the vice-president candidate. senator ryan and weiner were good friends and spent a year together working with the bipartisan moderates. all the rational people said this is the answer to health care. they know each other well. they are very good guys. the politics drives a lot of things. most of these guys if you left them in a room together, they could work things out. ryan is a great guy and a smart guy. ron weiner is a great guy and a small guy. if it weren't for the grenade throwing on both sides, they probably would get along pretty well. >> ladies and gentlemen, thank the panel, please. [ applause ] .

thanks again reed tucken, senator daschle and tom skully, our first pam. we are going to move right into our next panel. we are going to dig deeper now into stabilization of the individual insurance market while our next panel is coming on is to stage to give you an idea of what is to come after that. we will take a short break and let you stretch your legs and refill your coffee after this panel and we will come back and dig deeper into medicaid moving forward and we'll get the on-the-ground consideration and implications after that. if you are tweeting with us, the #is futureofhealthcare. my partner, sarah dash. >> thanks again, everybody. thanks to senator daschle, tom

skully and dr. reed tuxen for the previous enlightening panel. we now have one hour to fix the individual market. we have until 10:45. we are going to focus, as marilyn said, on stabilizing the insurance market. what that means in the short-term and the long-term. while this market covers fewer than 10% of americans under 65, it obviously has an outside focus in today's health policy debate. concerns about stability have arizing and they are interconnected with questions about affordability, subsidies, access and incentives to be in or out of the market. we have a fantastic panel. to my left is karen bender. she is president of snowway actuarial and health care

consulting. she is currently the chairperson for the individual and small group committee for the american academy of actuaries. among many other qualifications. if you want to know how to be an actuary, you come and talk to karen after. we have peter lee to her left, the executive director of covered kra krachlt the first health exchange created after the affordable care act. he held leadership positions in the obama administration working on health care delivery, reform and quality improvements. next, tom miller is a resident fellow at the american enterprise institute where he studies health care policy and market base alternatives to the affordable care act. ed hizle myer is senior research fellow in the center for health policy studies at the heritage foundation and has worked object a vast array of health policy issues. finally, last but not least, chris holt is director of health care policy at the american

action forum and spent almost 6 years on capitol hill for senator scott brown. >> is the individual market in crisis? why or why not? how did we get here? i'll ask anyone who wants to start it off. jump right in. >> i guess i'll say something. in 2017, there are certain pockets that had limited choice in the country. with some of the announcements that have already occurred with r humana pulling out and wellcare pulling out, it makes 2018 potentially more problematic. let me build on that. we may be in crisis. we'll know in the next six weeks. across the nation, there is 400 health plans making decisions on

do they participate or not do they far it is pate in raising rates 10% or 50%. that plays on decisions before the trump administration right now. >> insurers are about spreading individual risk. if they have big uncertainty, they are going to step back and not play. they aren't going to be rolling the dice. they are looking for the signals that they have enough certainly to play next year. >> also, the insurers need to be able is to make money. they can't consistently lose money. the statistics are pretty well in for the first three years of obamacare and in the individual market. a lot of insurance companies have lost a lot of money in the individual markets. not all. >> a lot of plans made a lot of money. the place that agrees strongly is the plans that four years ago were ready to lose some money on

a long-term bet are not willing to lose anything next year. the year after next year, more uncertain. every plan for 2018 is saying, if i don't see a way to make money this year, i'm leaving the market. plafr doob fever offer medicare, medicaid, which is 90% of their business. a pln can walk away from the individual market and do fine. if they are going to lose money in the individual market, they will walk. if we give them that uncertainty, they will walk. that might be part of the triage. what we have is a chronic condition. we may have brain dead health policy. it doesn't mean it is physically death. we move the rubble around and move on to something else. what the language of crisis usually is used to do is to encourage worse policy.

saying we couldn't do any worse than this next policy. >> i come back to the point that there are really two markets we are talking about, the subsidized market and engs change the other is the unsubsidized market and the part inside should be counted with that. the subsidized market is continuing its path to its natural equilibrium state. it is basically a giant high-risk pool with one or two insurers covering it in a state of maybe more than that in a bigger state like texas or california, or florida or new york. so we're seeing that very clearly. will that continue to peter's point. i think it is quite possible that will continue. is that a catastrophe?

no. because if it gets to that point, you can just recognize it for what it is and bid is it out to somebody. just like you do with medicaid managed care. the other market is the nonsubsidized individual market. that's the one i worry about. we are in the early but disturbing phase of crisis. i would give the example of wellmark in south dakota and iowa, which was never on the exchange. even though they are the blue cross carrier, the biggest carrier in those two states, to peter's point, they don't need that individual market business. they were never on the exchanges. yet, the spillover effect is such that as of last fall, they announced and they were advertising compliant coverage

off the exchange just as good or better. they have now changed that. as of this year, they are out of aca compliant coverage off the exchange and still continue grandfather plans. they are out in south dakota. they went into the exchange this year in iowa. only in 40 of the 99 counties. only where they had a link-up of subsidiary with the local hospital monopoly. that's what worries me. there are two markets. the whole point of what the aca is trying to do, make them one market and subsidize lower income healthy people to benefit those that aren't subsidized. >> that's the theory. >> in many places, it has worked. california, the average rate increase over the last four years has been 7%. that's far lower than double digit increases and the main beneficiaries of that are not

the subsidized people. they get a subsidy. it's the 1 million people that aren't subsidized. >> that's where you have to say, did it work? it seems to have failed in a lot of other places. the solution is to unwind and separate those markets. >> otherwise, you have a situation where the anchor is pulling the boat under like in south dakota or iowa. >> let me give chris a chance to jump in. i want to follow up on this inside-outside issue. >> peter beat me to it. it is not just that we will find out in six weeks if we will have a crisis. that i are areas of country where we have real problems. there are additional areas we could have more problems and areas that are doing very well. we need to keep that in mind.

it is different depending on where you are. i was just building. this is really one market. this is going to become an issue when we talk about how to deal with a lack of offering in exchange. one of the proposals is to allow subsidies to go to nonexchange plans na are still qhps. in some cases, they aren't going to be there. so that's an issue that we haven't really figured out how to address yet. >> so, point of clarification, they say required but inside and outside, they change plans to count as a single risk pool. the rules of the road for the plans inside and outside of the exchanges, did the states make those decisions, the exchanges? in california, you had a very specific rule about plans being sold inside and outsuide the exchange being similar.

>> identical. how did that affect the address selection or not? >> there are federal rules that plans on exchanges are generally offering their same products, same prices off exchange. they are still with the standard actuarial rules and health benefit rules, et cetera. the common risk pool markets are offering broadly the same. in kra krarks tcalifornia, the products and market and network. that's what's covering california. >> i should note that d.c. and vermont eliminated off-exchange sales. you can't buy off the exchange. >> the aca theory is premised on the old advice of president eisenhower. if you can't solve it, enlarge it. the problem is, they just created a bigger problem. >> you have a valid point.

the differences between any benefits you can sell on and off the exchanges are minimal, very, very minimal. initially, the more distinguishing factor was maybe off exchange you had more wider networks being available than you did on exchange. the on exchange focused more on narrow networks. i'm not sure if that is the case anymore. as experience has gone out, a lot of the companies have sort of streamlined their benefit portfolio. >> importantly, there is a lot of discussion and arguing about which of the three rs, risk, corridors, reassurance and risk adjustment made sense. risk adjustment is across the entire market. on and off exchanges, subsidized, unsubsidized. if people off exchange are getting healthy people, they are contributing. i think that's a healthy thing. >> except when risk adjustment doesn't work. >> the notes, here is the

reality that we are today. there is a lot of really healthy discussions of how to change things for two years out, whatever. we are in a reality where there is 20 million americans in the individual market of which 30% may have no insurance. this is acree eight created cri. health plans making decisions of whether or not to play. >> there is only one thing we do well, which is kick the can down the road and move the cost to someone else. we are not solving anything. >> we have real solutions. it is good sound bites or kicking the can. the people we're kicking down the road are 4 million americans that you are taking away their insurance. that's not a can i want to kick. >> that woos sas set in motion several years ago by other people. >> let me jump in. i should have sat between those two. >> if you tied people to the railroad tracks and called them hostages, i suppose you can get

money. >> let's just backtrack. we heard senator daschle talk about this collage of health care we have in this country. the individual market, it has always been the trickiest market to fix. the employer market pretty stable. we talked about medicare, medicaid, pretty stable in terms of the actual provision of coverage. wloo were what were the problems the aca was trying to fix in terms of access, cost, affordability? that's the first question. whoo are t what are the problems we are trying to solve? what do we need to do from here? >> this gets back to the point i made all along. i was making these points before the aca. there were issues in the individual market that needed to be addressed. my criticism is that what they

did instead of using a scalpel, they used a sledgehammer and the process made things worse. if you go back to hippa and the port ability rules, they were good and have worked for group to group portability. they were not so good for group to individual portability. at least there was something there. that needed to be improved. then, where they were lacking was the lack of what was what we called individual to individual portability. that's where i started working on this in d.c. whether the g.w. health plan went away. people that were self-employed and bought that, were being treated as if they had just come in off the street and had no prior quoncoverage and they wer older and sicker. you are not putting the right incentives there if somebody who has done the right thing can now be created as if they had never had insurance. you had a template, hippa with some tweaks. you could have extended it.

that would have addressed some of the biggest problems. what they did was took a sledgehammer to it and said, no pre-exes under any circumstances. they nided to come up with another way, the mandates and subsidies came in. that was a mistake. then they decided to load on to this market because it is a small market a lot of weight that it doesn't bear. we were now going to make this small market the vehicle for covering people with subsidies and regulate it and turn it from being a financial service product for self-employed middle class people into a social welfare program for low income people. that was the thing. that's the problem with linking the two markets together. how do you get out of the benefit man dads and all the other stuff that made it a social welfare program for lower

income people and give the middle class self-employed people back whoo they wanted, which is basically a financial service product that doesn't cost them an arm or a leg. >> when you say financial product. >> you don't have to cover everything through insurance. you don't have is to have loco-pays and deductibles. i'm self-employed, middle income. i want something in case i get hit by a bus, that takes care of me. the illustration i have is if you take two people in their 20s with low incomes and one has low income, because they are middle class and in graduate school and the other has low income because they come from a poor family and they are working part time at minimum wage, the first group, i get these all the time. the parents saying, look, i want to make sure my kid in grad school has some basic catastrophic coverage. it is not a question of can they

afford to go to the doctor? >> if they need to, they will go to the doctor. if i need to, i will pay for it. the kid from the poor background doesn't have that. if you design the whole thing around the one group and not the other. they are two different groups with two different needs. >> the unique feature in the individual market pre-aca is that unlike any of the other markets, the individual is paying is 100% of the premiums and cost-sharing, whatever cost-sharing you have. prior to the aca, i remember this statistic, the average actuarial value purchased in the individual market was about 50%. it varied again. it varied dramatically from state to state and all that. it made sense. these are people who they are paying both sides. it is not like your

employer-sponsored insurance, your employer is paying you 70%-80% of the premium. you are paying the 20% but you have all the cost sharing. here, you are paying the whole thing. people elected to have lower cost price was higher cost sharing because you are paying it either way. >> the point i would make is for that 55% of the individual market that is not subsidized today, about 11 million subsidized and 10 million outside nonsubsidized. none of that has changed except their premiums have gone through the roof. >> what were the problems being addressed. number one, affordability. for the people on the individual market, they get no financial help. all they could afford was really cheap products. everyone else in america, we may disagree, get federal tax support to buy health care. you get employer-based coverage, 30% is covered.

this one slice got no help. number two, the issues around excluding people with prior e d health problems. people with prior conditions were getting excluded from coverage. the third problem, and it comes back to, we have long talked about 50% a.v., which meant people were briiuying products t weren't covering stuff, products that didn't cover cancer, exclusions for hospital, a lifetime cap of 100,000. these are the extremes. the aca tried to address that by saying, let people understand what they are buying. those were three problems the aca tried to address. people were getting bankrupt who had coverage, because the coverage didn't cover a lot of the stuff they got sick for. they tried to take care of that. >> two other problems you left

out, the high loading cost. motor of that was marketing expense. now, not even underwriting. it was really marketing. the other problem was a majority at that time wanted to take more political control over the health care sis system. >> this is a question of degrees, not so much binary. peter pointed out that people didn't know what was in it. there is a difference between providing transparency. if you say you have to tell people what the actuarial value is. if you say you have to tell people what the loss ratio is, if you say you have to tell the people what the fuel economy is on the car, that's different than saying, okay, now, we're going to have a minimum for each of those things. so just as you distorted the automobile market and killed off the station wagon and brought in the suv, because of the fuel economy rules, which didn't

apply to trucks. if you put the same thing on a truck chassis -- you are distorting the market by saying there is a minimum a.v. that you must meet, which made it impossible for some plans. >> let me also insert one other thing. i don't have the exact numbers. it might have been 35 or 38, did have high risk pools for those that could not pass health underwriting. the problem in my opinion, i am not representing any organization here, was the funding for knows high-risk pools. because there wasn't any external funding, they became very, very expensive. a lot of times there wasn't any funding to help people with premium support for them. there was access. there were several states where the blue cross blue shield plan was the carrier of last resort. so there were ways for people that had high-risk conditions to

get insurance. it was an affordability and funding issue. >> pre-aca, i was working with states like massachusetts and utah on this. when you took those things, you say, how could you improve that? one of the recommendations is to say, instead of segregating people, give them the hippa kind of rules in the individual market and then, instead of a separate high risk pool, have a risk transfer pool and apply it beyond the individual market to the whole commercial market. >> let's talk about this issue of risk. we talked about access for healthy people. we have heard the arguments that we should take away regular ligs lations and make it easier for younger, healthier people to buy in. what does that do? are we just shifting more costs to sicker people and people with chronic conditions, et cetera? how do we create a stable marketplace that creates

affordability for people that have -- who are both healthy? maybe they do just want a product that helps them in case they break their leg skiing. the people that have serious chronic illnesses of which there are many. we have seen public health statistics. life expectancy is even deyeesideyee decreasing across the country. what is the balance? how do you do that? >> the economics are that you can transfer in pool similar risks. the politics are we don't want to do that. we like to hide the other costs under a different bushel. the main way to bring that down is some type of external funding. if you simply transfer those costs across the individual insurance market, you still have the same problem that people who can't afford policies have their premium go up as well. the reinsurance on their a.c.a. is to put a tax on everybody who is covered. states have done this mostly at their main funding source for high-risk pools. the better approach is to dive

into broader, general revenue in a way in which you are using the larnler t larger tax base. we are reluctant to do that politically because it is too transparent. >> i am hesitant to do that too because of policy reasons. >> i want to take an opportunity to join arms. you don't always need to sit between us. it is absolutely right. in the individual market, it is a somewhat sicker pool. one is set up high-risk, segregate and fund separately and the other is reassurance, lowering the cost for everyone. it worked really well in the first few years of the affordable care act. the american health care act proposed a $15 billion fund for 18 and 19 to stabilize the market. it is taking money from someone else to lower the cost for

everybody. who do you take it from? that's the political issue. to stabilize the market, that's ek aex actual exactly what they want to do. >> they want them invisible because they don't want you to see the cost. you are not getting real reinsurance. you pay a premium to handle the extra risk and vol stillitatili. >> i may disagree when the actuary comes in. in california, we sit down with our health plans every year as they are developing rates. we knew exactly what reinsurance was worth in 2014, 2015, and 2016. if there was a $15 billion pool, that would be worth next year 15% coming off premiums. it is covering certain people with certain risk and what it costs. is it visible where it is coming from? >> i think tom's point was

pricing in the sense of a classic private reinsurance contract as opposed to pricing in the value sub suddy. >> one is the risk and one is the result. >> my disagreement on that, my concern is that it becomes a giant game of tag. you have now set up the government/tax payers as it. it creates incentives for carriers to shift costs on to there. i am saying, it raises some issues. at some point, you have the potential where as the public cost grows for the response to be, okay, tell you what, we're not going to let you submit any and every claim. we are going to control the price and decide whether this is a legitimate service. you have a whole set of issues

with public dollars. the answer prodbroadly is, yes, broaden this. if you had given instead of a very narrow and substantial tax benefit, which is what the a.c.a. did, it gave into a very narrow slice of the population and it was quite substantial. for most single people, the value of the aca tax credits went to zero at 250% of poverty. very narrow slice of the population and very substantial amount. instead of doing that, do less and spread it over a larnler population. if you had just given everybody sort of like through the republican proposal, basic tax credit, that would have addressed some of the issue. the other thing is, to say, look, if you adopt these kinds of hippa rules in the individual mark market, you will have some

costly effect. the big one is now individual market coverage becomes preferable to cobra coverage. you will have a selection effect. the answer to that is your risk pooling needs to income pass not just individual but at least the commercial employer group market. i would do it on the back end with a retrospective adjustment to focus on, did anybody get an outside of the norm distribution of risk? >> the wider the rug, the more we can put under it. >> well, yeah. the obstacle to that would be folding in the self-insured employer market, which is a federal law. if you were to fold them in, they would have to -- anybody you bring in to pay for it has to have the same rights to seed risks into it as well. >> if you want to lower the cost for the individual market, i shouldn't say the cost. the premiums. if there is a different between low care cost and premiums, you

are absolutely right. it has -- that funding has to come from external individual markets. >> that's alaska. they use external state money. >> otherwise, if you are just pooling among, you are just trading dollars and costs for the whole pool, it will not be lowered. >> it is not a big enough pool. >> so it is not a big enough pool. >> the other thing, i'm sorry to interrupt. >> you need a pool, you need an ocean. >> the other thing we have discovered, we are seeing a lot of really high claims, much higher than we anticipated in this individual pool. much higher than i have seen in group policies. >> what reform might have caused that to happen? >> the elimination of the lifetime maximum, because we didn't see that before. there are probably other

factors. i'm not going to try to guess. this pool is sicker than we athought thought it was going to be. >> this is the problem. there were these other dynamic effects where you allowed people by doing the wrong things or by not being as careful, you now create a worse situation for people to jump in and out of the market. that's a big problem. if you would have adopted the hippa rules, you could have prevented that type of behavior. that's a big driver of costs. you also have this situation where you have actually had a migration of people who had coverage elsewhere but were high cost into this subset of the market from elsewhere. >> let me jump in on that. are we essentially just playing a big game of hot potato with people that are really sick and have high costs, high need, high quost. how do we address that?

senator daschle earlier said, most people can't afford a 400 dolz do dolz unexpected medical expense. they certainly couldn't afford a $2 million claim. >> because of the removal of life f lifetime caps, there are some multimillion-dollar cost. the vast majority of people aren't using health care that much. one of the things we need to make sure is that we get and keep healthy people in. we want to get money out of them. >> insurance is about covering uncertainty things that may happen in the future. if people don't have it, the number one thing for personal bankruptcy is going to be health care. >> are those uncertainties for a lower cost condition than you are talking about? >> let's talk about the uncertainties for the lower cost conditions. we have heard argument that is

the deductibles are too high. they can't access primary care. they can't access the things that should be at the bottom of that pyramid. there have been analogies made, for your car's oil change, you buy insurance for the car crash. is health insurance different, and, you know, peter, in california you created standardized benefit plans that did not create an access barrier to some of those preventive services. is that what we need to do? >> there's a reasonable policy argument insurance shouldn't be for preventive care, but the argument around deductibles, to me, is a huey argument. you don't need to have a deductible between you and your doctor. even at a silver plan, yes, it's got a $2300 deductible, but in california we priced it so no outpatient services are subject to the deductible. whenever you hear somebody say

high deductible, you have to ask what is subject to the deductible. a silver product where you have no outpatient care, drugs, tests, specially visits, primary care. and in california, our bronze plan, which has a much higher deductible, you get four office visits a year not subject to a deductible. and the issue is, and you could argue saying you don't want people to go to the doctor, it's a choice. i want people to see their primary care doctor so they avoid more expensive care, and if you have a big deductible in between someone and getting their care, they are not going to get it. i really want to challenge everyone, whenever you say deductible, ask what is subject to the deductible? no insurance plan at 60% and above needs to have everything subject to the deductible. 70% no outpatient care needs to be subject to the deductible. i'll note, in the right question, there are winners and losers. there are a small number of

people who get hospital care that will stay paying marginally more, but the reality is, you show up in a hospital, you're going to hit your maximum out of pocket for that year no matter what. on the margin, i don't care that much. >> you're talking about where do you move the donut hole around, and by the time you're finished, the donut hole is closed. >> the sound bites of donut holes. i'm talking about 2.5 million californians that don't have a deductible between them and their doctor. that's not a donut hole. that's people getting access to doctors. >> peter, i'm listening to this and when you were sort of having a brainstorming session we had a doctor there, and here you have direct primary care where you go in and it's $99 a month, okay, and it's retainer medicine. there's no deductible, because there's no fee for service. and it's not insurance, no, but what it is, where is it written you have to run primary care

through insurance? that's the thing, i'm looking for these innovations where you get out of this box. one of the things they do do, and it is allowed under the aca, is to say, look, we're going to have primary care paid for on a retainer basis just flat out. it's patient self capitation, really. you know, the old hmo bottle was you pay the hmo and they cap at a time to the primary care doctor. this is the patient self cap at a timing and the insurance covers the nonprimary care stuff, specialty care, hospital care, et cetera. these models are out there and they can work. it's a totally different way to do it. >> the innovation benefit the design, absolutely. >> i just want to make sure in setting all these rules because you're concerned about can people pay their deductible, you don't invert ently create a barrier. >> i think now you have to cover a minimum of some outpatient and

in, so i wouldn't be able to, as an insurer, really limit what i would be offering for services would be the hospital services or those services that were covered by this, and i'm not sure if that would -- >> and that's the problem when you start saying you have to match this essential benefit, you have to have this preventive service. >> and how do i verify this individual really did go buy or enroll in this primary services that you were talking about. i have no way of verifying that. then you have someone that will just buy -- nothing wrong with that, i don't know. >> let's bring this -- >> can i ask peter a question real quick? you talked about how your deductible works. where does the deductible hit, to tom's point? >> nowhere. we want to keep moving it until we don't find it. >> in the california plan, where is it i, as an enrollee -- >> basically, your deductible applies when you go to the hospital, so basically -- and it

actually parallels largely your out of pocket maximum, so it does hit some people, but the 7% that go to the hospital, so -- but those people, again, are largely protected from the catastrophic by their maximum out of pocket cap. >> but the other thing we have to remember is -- i don't have the statistic maybe exactly right, so humor me a bit. 5% of the population accounts for 50% of the total cost, and used to be like 15% accounted for 85%. so it's really the people who are driving the cost of really sick people, you know, they are a small percentage of the people, but everyone else is -- >> that's a great -- i want those 95% that aren't going to the cost to get the right care at the right time and i want to come back to ed's note about meeting innovations. one of the things that's talked about a lot is the benefit of health spending accounts. put it with the consumer. we're going to be looking at it, california for 2019, funding health spending accounts in

bronze with cost sharing reduction funding. cost sharing exists, but the idea of giving low income people a spending account, if they don't have the money, it's meaningless, but are there innovations we need? absolutely. are there ways to give consumers better incentives and tools? absolutely. but let's not have them be the footballs we're playing with. >> i want to get to the question of cost sharing subsidies, because we talked a lot about affordability, we've talked about deductibles, but for all the people under the federal poverty level, the csrs have been an important affordability tool, to the point of there's a lot of concern of what happens if those go away. i want to talk about those and maybe ask another couple questions before we give our audience an opportunity to ask some questions. so karen, do you want to start us off, what is the effect if the csrs go away, what's going to happen and what do you think is going to happen soon?

>> we need to know. okay, i'm an actuary. we're pricing right now, as we speak, for these policies. and if the cost sharing reduction subsidies, those payments, are not going to be made to the insurers, we have to build that into our premiums right now as we speak, because the insurance companies do not have the margins to absorb this loss of revenue. and when the aca first came about, it was our understanding that these were going to be paid by the federal government, an external source, another external source, and we priced our products accordingly. but now if we have to continue to pay these benefits without any external funding source, we have to increase our premiums. and just to give you an idea -- there's different ways of increasing them. do we increase them throughout the whole pool, spread across the whole pool? that could result -- i've seen some rough figures, anywhere

from 7% to 12% increase right then and there across the whole pool, might be a little higher in some areas. or is it just going to be in the silver plan? and not to get too wonky with the silver plan, that would mean that the silver plan, and i've seen estimates, are going to go up 15% to in some cases more than 20%. that's before any other adjustment. that's before trend, before adjustment for what's going on in the risk pool, aging, yada yada yada. and it would also mean the silver plan would probably be higher costs than the gold plan. for those that are on the subsidies, premium subsidies, probably won't have too much of an impact, but for the 40% that are not receiving premium subsidies, how you price this makes a big difference. all of a sudden if you spread it across the whole thing, the bronze plan, all the plans are going to go up. even those that are not getting any benefits from it will have

to pay up. so whenever you raise rates, if you were going to say how do we get a better pool, low rates get better pools. simple as that. the lower the rate that you can have, while still meeting your costs, that's the key. you need lower rates. this is going to push the rates up. i would expect to have adverse reaction as a result. >> can we build on that? even senator daschle's brilliant, but there's some confusion. the cost sharing subsidy will be in place for 2017. it is baked in the law. the question is, how is it funded. it's either going to be funded directly by the federal government, by a check written, or it's going to be funded by the federal government by paying more premium tax credit, because premiums go up 17% of silver and the premium tax credit goes up, so let's be really clear as federal policy makers the decision to not directly fund

the cost sharing reduction subsidy will cost the federal budget about 30% more. about $2 billion more to fund the same thing. but not funding it will mean some plans will say this is yet an additional uncertainty for me for pricing, maybe this means i don't play at all. to cover it you have to have 17%, and that's more uncertain, half the people who don't get subsidies, if that adds a factor, it means health plans have more uncertainty to deal with. it's bad math. i don't get it, not funding it directly. >> couple other factors when we talk about this, which is give me the money right away and close your eyes, it's a crisis. first, the subsidies were illegal. the court decision, hate to mention that, but they weren't appropriated by congress. now, the congress should put up or shut up. they can try to say no i've decided to appropriate it. that's a political decision, which this congress is probably not capable of doing, or it could change those cost sharing

subsidies. maybe they shouldn't be structured the way they are. the other issue karen was talking about in terms of the cost, if you start loading these costs on to other parts of the market, you're going to lose people. and so those calculations are more dynamic. it's not just stick to the costs over here and everybody will just pay it. you end up with fewer people going into those plans. >> sir, can i simplify, because the economics are pretty simple. this is simply a back door premium payment, so the reality is, if you take the 70% actuarial silver plan and make it 94%, the actuarial calculations you have to raise premiums by about 30% to cover that. what they do is said we're not going to have you charge 30% higher for that variant, we're going to have you charge the old price and we'll give you the extra 30% in the back door. so the obvious answer is, you can just let them charge 30% higher for that particular variant and give them the extra 30% through the front door.

in other words, and what that really means is you're giving an extra 30% to the enrollee in subsidies to buy that plan, because it's 30% higher than others. so there are ways economically to do it. >> we need to know now. >> yeah. >> this is an interesting conversation about what should happen or what would happen, but the reality to tom's point is, i don't see an administration that wants to continue to prosecute this, okay, so at some point they are going to drop this case. they don't want to continue to argue. it's bad optics for them to be defending an obamacare lawsuit, right? so i don't think there's a lot of desire to do that. they'll do these delays as long as they can. there's a lot of, i think, good language about -- from the hill, about, yes, we should appropriate this. but i don't see any way that they can do that. and the window's closing. the reality is, we're facing what peter's talking about,

which is, you know, adjusted. >> what i think you do is tweak it and you tweak the law to simply say -- >> pass a law to do that. >> yeah. >> this is a small -- >> i want to keep on coming back, some of the discussions we're having are great philosophical discussions, but out in the sticks we got a six-week timeline. >> we're running out of time. >> i want to note -- >> they are going to price for it. >> but if they price for it, some won't price for it, some will say this gives us that additional fact of uncertainty, we just won't play. so those decisions are play or not and price for it. if congress doesn't act within the next six weeks on this, there's going to be more counties with no health plan and a lot more counties with 30% and 40% rate increases that are going to be a problem. and the other issue, it will cost the federal government more. i need to keep on repeating

this. i understand that -- >> how many people drop out of the market? >> then it's going to cost us more in uncompensated care because they are going to show up in hospitals. >> that's actually a net profit. >> i'm going to open this up to the audience for questions, but while folks are getting organized, let me ask. most people don't wake up every day and say, oh, my god, what's going to happen with reinsurance and csr. >> they don't? >> sadly, i am. >> you guys do. >> never talk about actually treating people so they are healthier. >> i think our friends back home, probably not so much, but there are people waking up every day and saying is my insurance going to be affordable. what should people be expecting, asking, out of their elected officials in the immediate future to make their health care more affordable? >> well, i'm going to echo senator daschle, and maybe this is my pipe dream, because i live on another coast and i don't

live in washington, but it's bipartisan. funding csr and congress assert you're going to appropriate, own it. it needs to be their act to appropriate, that's number one. number two, this administration needs to enforce the penalty. i know it sticks in the craw, but to not do that, health plans will price for it. number three, follow the ahca's lead, the republican proposal, $15 billion would provide huge stability, would show that if we can't repeal and replace in six weeks, we at least aren't going to let things collapse, and that's a great opportunity for bipartisanship. >> ahca didn't include csrs for '18 and '19, as well. >> the problem with that, peter, the one-way bipartisanship. essentially, you're asking the republicans to give, so i think if it's going to be bipartisanship, the flip side is the democrats have to give on this, as well. they have to recognize this was a failure, they have to delink the other markets.

they've got to remove the restrictions. >> six weeks. >> but that's your problem, because that's not bipartisanship, that's capitulation, and i don't see that politically happening. >> we have to recess and we have to fund the government, which isn't going to sort of elicit a lot of bipartisanship feeling anyway, and so the things that are coming up now, unless somehow csr funding is put into a cr. >> which is a possibility. >> the only way -- yeah. >> i return to the better definition of bipartisanship, which is when evil party and stupid party agree on something. >> yeah, yeah. >> so we've all heard the world is divided by people who think they are right, right? >> those who think they are right. >> does anyone out there have a question? there's a question back there. i'm not going to be -- >> have we stunned the audience into numbness?

>> all right, we have about ten minutes left on the panel, so if you could keep your question brief and my friends up here on the panel, keep your answers as brief as possible, as well. >> hi, i'm sarah thomas with the center for health solutions. i have a lot of questions, but my first one is, if ahca had passed, and people could have subsidies on or off the exchange, what could an exchange like cover california have done to preserve all the work it has done to create an exchange? >> well, so, one, right now i'm living in the reality of where we are, which is i'm worried about '18. interesting theoretical question and i'm looking forward to a lot of discussion on what happens next. the reality is, in california, the market is working both on and off exchange, because consumers know what they are getting, they are getting value and premiums are being held in check because consumers are driving prices lower by picking

lower value or higher value, lower cost plan. and i think that will continue happening. the role of the exchange in that, we show value because we help consumers shop and help the market create better products. >> any follow up? any other questions? yes, the couple up front. thank you. >> hi, my name is bobby avery, we represent some design firms that focus primarily on small businesses. particularly on health reimbursement accounts we have found that it's helped a lot of small employers to be able to offer some type of health plan. fortunately in the legislation we were able to get renewed stand alone health reimbursement accounts. what is your opinion on expanding that? is it bipartisanship vehicle to

get more folks into the marketplace? >> well, we've got that in the 21st century cures act. that was going to be the 22nd century cures act, but they got it through in december. that's basically for the below-50 market, which put a hurdle in the way. the argument is, if an employer wants to provide some type of benefit to you, as much as they can afford, why restrict it? we got into the desire to try to keep people only getting certain types of group coverage and the various rules attached to that was a rather contorted argument. when the hras first came about in 2002, 2003, it was seen as possibly a way to open up the market, which is basically you could use that money to go for a lot of different types of things and be more creative. then they got hemmed in under that interpretation. i think it would be a good thing, but it runs afoul of folks who want to make sure you only have certain types of configurations of coverage,

which you're following these rules and everybody kind of stays inside the costs. >> basically, it allows employers to define contribution employees in the individually market on the taxpayer basis. which is -- which is conceptually something that i'm in favor of. the problem is, it achieved that right at the point the individual market became unattractive place to go, so that's where you are today, is that as a practical matter, do you want to do that, given what's going on in the individual market right now with the costs and the coverage? >> but the employers would say, small employers, they are cost constrained. >> i understand. >> doesn't mean anything to them anyway, they are exempt and doesn't mean anything to other employers. >> i'm saying the unfortunate timing is we gave you a solution right at the point of which it no longer became a great idea. >> all right. let's move on. we have time for one more question from the audience. i see a hand right there.

>> hi, heather foster from the association for community affiliated plans. and there was a mention earlier of pulling the self insured employer market into the risk pool and that might help to bring down some of the costs and spread the risk. i was hoping we could talk a little bit more about that, as well as potentially are there other products that are not in the risk pool that ought to be included in it, such as some of the grandfather plans or cobra or others. if we pulled more into that, might that help with prices and dropping premiums? >> let me expand, thank you, heather, let me expand on the question, because we didn't get to talking about the long-term because there was so much going on in the short term, but is the individual market, i'll just ask a provocative question. is the individual market something that should be saved? should it be expanded to create a bigger risk pool, or should it be kind of dissolved into, you know, other things like, you know, more employer coverage?

>> be careful what you wish for, you know, because you might just manage to destroy the small group market, which is a little fragile anyway, so if you take two fragile markets and merge them together, does not necessarily mean you'll get a better market. you could get an even more fragile market. >> yeah, we had that issue in states when they went to group of one laws, where you effectively did that. is it important? yes. the problem is, the individual and small group market are from a health insurance perspective fairly marginal markets, as peter pointed out. the problem economically is that they happen to cover the people who are the most dynamic part of our economy. and so you know that's why they are a value. they are a value not so much for health care, as you will have a real dampening effect on job creation and economic -- yeah. nancy pelosi's street busters, but you'll have a dampening effect if these people do not

create these kinds of businesses because one of the obstacles is, well, if i leave the big corporate, i can't get health care. >> the other thing you have to be careful in that small group market, there's two small group markets. what i would call the micro market. maybe that makes sense, but the ones whether you define the micro market under ten or under 15, don't have to decide that. >> i want to get back to you, because i was the guy who raised the issue. it's fair to answer the question. the aca effectively did that by taxing self insured -- >> belly button tax. >> right, whatever you want to call it, to fund the reinsurance program. the other way that i was suggesting is that in a back end risk transfer mechanism, what you're really trying to do is you're trying to see if any one insurer got a distribution that was significantly skewed, a risk distribution, claims distribution, significantly

skewed relative to the market as a whole. you could expand the market as a whole to encompass self insured plans. if you did that, though, you would have to do it with the same terms and conditions, which means that they would benefit, so, for example, the firm of coal miners would probably get a subsidy out of that. >> all right. >> theoretically it works. politically, i don't think it will happen. >> we do that for the h.i.t., that is -- but i think one of the things we always say, the self insured folks are benefiting, and they are benefiting a lot in the sense i know the next panel is talking about medicaid, but the incredible reduction in the uninsured is leading to huge drops in uncompensated care. we've seen $5 billion decrease in uncompensated care and we could argue the issues about do

hospitals really cost shift? boy, do we believe there's cost shift. large employers are today benefiting from having more people covered. and so it's not just a one-way deal of having the h.i.t., the belly button tax support of the individual market, which is more dynamic, which needs it. it is, there's real benefits to having everyone covered. >> can i say one thing on this? one thing that a lot of people expected, certainly on the right, was that you would see employer drop, right? and the aca -- and it didn't happen, and it didn't happen because the individual market was a mess, and i don't think any of these other populations are going to go willingly into the individual market right now, so whether it would be helpful or not, it becomes a political problem. >> i would caveat the data, and i published this, there is some employer dropping. what's happened is the fully -- what's happened is the fully insured commercial market has

dropped. the commercial fully insured group market has dropped significantly. some of that went into self insured, some of it went into the individual market. >> but the bigger message of the aca, keep a job, keep a job, get health insurance, or get poor. we're working on both right now. >> let me ask you, 30 seconds or less, in one word, what is the thing that needs to happen right now to stabilize this market? >> well, in the short term it's predictability of csr funding, predictability of the rules, from an actuarial perspective, if i have to rate these plans, i need some predictability. >> i noted my big three that are short term, which is the csr funding long term now, enforce the penalty, and risk stabilization funding. this has been all short term. one thing we haven't gotten to talk about, which tom daschle

queued up in the beginning, none of this discussion is about what's driving health care costs. none of this discussion is about why does america spend 20% more than any other country, 50% more than many, to get not as good quality, and i look forward to that next panel. >> i agree with peter on some of that, but i'll return to the words of michael ray richardson in the 1980s during a long new york nicks losing streak, the ship is sinking. how much more can it sink? he said, the sky's the limit. >> hard to top that one. >> tom should have gone last. >> tom should always go last. look, the reality is, 2018 plan year, aside from the cost sharing issue, which we all -- cost sharing reduction subsidies, which we all agree needs to be done, and which, per chris, is going to be winding up

as an item tucked into the omnibus or whatever they do to fund the government. everything else has -- is in the reg the administration published. the reality is, even if congress had addressed this on january 1 or january 3rd when they took office, nothing they can do really makes a difference in 2018. it's all about 2019 and beyond, so, you know, there's -- what can be done is being done. that's the way to put it, i guess. >> thank you. >> yeah. looking at the 2018 market, what needs to be done, insurers have to have some idea of what they are going to see in 2018, and the opportunity to give them that certainty is fast closing, so, yeah, i think congress needs to figure out a way to allocate funds in 2018 and then, yeah, everything becomes about 2019, if there's still enough insurers

participating by then. >> sarah, i have to say, i think you have the makings of a reality television show. you know, policy food fight, we gave them a broken market and one hour to fix it. >> wow. our ratings are going to be through the roof. thank you so much to all of you. >> it wasn't dull. >> no. all right, so we have a break.

cited several studies on medicaid and talked about access to health services in rural areas. the republican-failed effort to repla peel and replace the affordable care act and the role of state governments in providing quality health care to residents with proposed policy changes in play. >> all right, are we ready? we've been around for 25 years and our mission is to inform policy makers and help policy leaders on the most pressing health policy issues and get you guys the foundations of health policy, the evidence, and