Analysis of Washington State's Universal Health Care Work Group Final Report
I. Introduction
On January 15, 2021, the Washington State Health Care Authority issued a final report[1] from the Universal Health Care Work Group to the legislature, as required by House bill 19-1109.[2] The legislature convened the Work Group to study and provide recommendations regarding how to create, implement, maintain, and fund a universal health care system in the state. The Work Group included a variety of stakeholders with expertise in health care financing and delivery.
This memorandum briefly summarizes the key components and impact analyses of the three models. As Washington State continues to implement its public option program, Cascade Care, it is not yet clear what steps the legislature will take to advance the recommendations provided in this report.
II. Model A: State-Administered Program
Model A, a state-administered universal coverage plan, would cover all Washington residents, regardless of immigration status, and cover the essential health benefits and vision for all enrollees plus dental and long-term care for Medicaid-eligible individuals. Enrollees would have zero cost-sharing liability for covered services and premiums would be exempt from state premium tax. Private insurers would not participate in the model, so the state would full assume responsibility for plan administration including the establishment of benefit structure, provider networks and reimbursement, claims payments, utilization management, and care coordination.
Provider reimbursement under the model will utilize a single fee schedule for all services to all enrollees. This will result in a rate increase for previously Medicare- and Medicaid-insured services, which is offset by the rate decrease for previously commercially-insured services. Model A assumes that program financing would include a combination of increased state and federal funding as well as individual and employer contributions.
With the elimination of employer and individual commercial coverage in the market, the Work Group states that a mechanism for capturing these contributions would need to be developed and implemented by the legislature. Additionally, the Work Group stated that it is unclear whether the Centers for Medicare and Medicaid Services (CMS) would authorize waivers that would allow prior funding for Medicare- and Medicaid-covered lives to pass through to the state, which would be necessary to achieve the program savings projected in the financial model.
The report projects that if Model A secures federal funding, the program would cost $58.9 billion to implement in the first year, a statewide aggregate cost decrease of $2.5 billion from the status quo spending of $61.4 billion. Savings would be achieved through multiple efficiencies including the elimination of private insurer administrative costs, the reduction of administrative costs for health care providers, improved access to care, and greater purchasing power.
The Work Group asserts that Model A will result in improved access for the Medicaid-eligible population and improve access and increase utilization for the uninsured and undocumented immigrant populations. However, the Work Group concedes that additional analysis is needed to fully understand the impact of lost insurer premium tax revenue, and the broader economic impact on the state due to industry job loss, tax implications for employers, and greater labor mobility.
II. Model B: State-Governed and Privately Administered Program
The Work Group also considered a state-governed model through which private health plans would contract with the state to administer coverage for all state residents. Work Group members noted that this approach, known as Model B, resembled the federal Medicare Advantage program in its use of private plans to deliver publicly financed coverage. Model B would parallel Model A’s availability to anyone in the state, including Medicaid, CHIP, Medicare, privately insured through employers and Exchanges, undocumented people, and uninsured individuals.
As with Model A, this model’s feasibility would hinge on securing multiple federal waivers to enable such enrollment of disparate populations into a universal coverage program, allow payment of a standardized fee schedule, and maintain federal financing – especially from Medicaid’s federal match, Medicare, and Exchange subsidies – for use in the envisioned program. For either Model A or Model B, the program likely requires an Affordable Care Act 1332 waiver, an 1115 Medicaid waiver, and Center for Medicare and Medicaid Innovation (CMMI) waiver to integrate all funding streams necessary for program sustainability. Vermont had envisioned pursing such a trifecta of waivers for a proposed universal coverage program a decade ago, although was unable to achieve political consensus for the tax increases ultimately determined necessary to fully finance the program.
Under the Washington Work Group’s Model B, private carriers would provide Affordable Care Act (ACA)-specified essential health benefits as well as vision coverage for all enrollees. No cost-sharing would apply under the program, an aspirational goal that could change under the weight of budget realities. For instance, some workgroup members had raised the prospect of incorporating at least some cost-sharing for low-value services. Only Medicaid beneficiaries would continue to have dental and long-term care coverage. Private plans would be responsible for maintaining provider networks and conducting at least some of their usual administrative functions, such as claims payment, member services, and utilization management.
The report estimates that the privately-administered model would save $738 million the first year of implementation, which was modeled as calendar year 2022. The estimated savings reflect the net of increased expenditures for Medicare and Medicaid – where the standardized fee schedule would boost reimbursement levels if authorized by waiver – and reduced spending for privately insured enrollees where standardization would yield considerable savings. The report cites additional savings drivers as scalable administrative costs; reduced fraud, waste, and abuse; establishment of maximum prices; and ability to foster transparency.
As with Model A, the revenue modeling for Model B assumes that the state secures waiver authority for ongoing Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) financing for use in its universal coverage program. It also assumes that individual and employer contributions to private coverage would be recaptured somehow by the state and used to fund the new coverage initiative. While acknowledging this will require legislative action, the report defers to a future workgroup on the potential mechanisms for sustaining current employer and individual contributions to their coverage.
III. Model C: Program Focused on Covering Immigrants Without Adequate Documentation
Model C extends coverage, similar to Cascade Care, to uninsured immigrants who are currently ineligible to purchase coverage through the Washington Health Benefit Exchange due to their documentation status. Specifically, this model covers essential health benefits as defined by the ACA (which does not include adult dental and vision coverage), applies cost sharing rates based on standard plans offered by current commercial insurers, and reimburses providers at Cascade Care rates. In addition, Model C assumes that enrollee utilization and administrative costs will mirror those elements in the commercial market.
Model C is expected to increase state spending by $617 million in 2022, based on an estimated 124,428 undocumented immigrants. The “status quo expenditures” for undocumented immigrants is unavailable, but current spending for Medicaid for undocumented immigrant (limited to short-term emergency coverage) is approximately $50 million.
Model C did not fare particularly well in terms of achieving universal health care, and therefore, was ranked by the Work Group as their least preferred model. Several members of the Work Group agreed that Model C would be the least likely to facilitate access, due in large part to the relatively narrow segment of the population that would gain coverage. The Work Group also noted that Model C is the least likely to increase affordability since it would essentially offer Cascade Care coverage “without changing the system’s cost structure,” therefore preserving existing affordability issues. Still, implementation of Model C would be relatively feasible to implement.
Notably, the Work Group discussed positioning Model C as a “step” toward achieve universal health care rather than “an end state.” They suggested exploration of such a stepwise approach, such as implementing Model C to help reduce the uninsured population in the interim while Washington State develops a more comprehensive system.
[1] Available at https://www.hca.wa.gov/assets/program/final-universal-health-care-work-group-legislative-report.pdf
[2] Available at http://lawfilesext.leg.wa.gov/biennium/2019-20/Pdf/Bills/Session%20Laws/House/1109-S.SL.pdf?q=20210126075348