Part 3: Thoughts on Universal Coverage, Health, Equity and Value

Hon. John Kitzhaber is the former governor of Oregon and continues to be one of the most important thinkers on state health reform in the country. Since leaving public service, he has traveled across the country, working with organizations, leaders, and reformers in health care. 

This commentary is the third part of a three-part series offering Kitzhaber’s thoughts on universal coverage, equity, and value. Part one of the series, which reflects on the recently signed $1.9 trillion American Rescue Plan, is available here. Part 2, which outlines Kitzhaber’s ideas to move the national health policy agenda forward administratively through 1115 and 1332 waivers, is available here. In this part, Kitzhaber builds off of Part 2, diving into the details and using Oregon as an example. 

 

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Look at the numbers in Oregon:

  • Medicaid                     1,180,000
  • Uninsured                   300,000
  • Individual                    220,000
  • Small Group                175,000

                                          1,875,000

 

Together, Medicaid, the uninsured, the individual market and the small group market includes 1,875,000 lives or 44% of the population— and would include 95% of all Oregon employers and 39% of the workforce.

It would mean that 44% of the population would be in capitated, risk-based contracts, linked to a sustainable growth rate. Risk would be offloaded to integrated delivery systems which would manage utilization, while the health plans would manage true insurance risk (e.g. catastrophic care, etc.).

Another significant difference from other public options (e.g. Colorado and Washington) is that this public option is not set up to compete with private commercial insurers but to force private commercial insurers to compete with each other in a restructured market.

If the administration would put its weight behind giving six or seven carefully selected states facilitated 1115 and 1332 waivers to:

  • Move their Medicaid programs towards a CCO-like model operating under a true global budget
  • Move the ACA individual market from fee-for-service to capitated contracts indexed to a sustainable growth rate
  • Use that restructured market as the public option

… the main elements the President’s health care agenda could be implemented notwithstanding the paralysis and deeply partisan debate in Congress.  I know from my experience with both the original Oregon Health Plan waiver in 1993, and the CCO waiver in 2012, that the ultimate decision on bold waiver proposals is a political one driven from the White House rather than an administrative one driven by CMS.

One final note. If the state demonstration projects are successful it could set the stage not only for a different national debate but also a window to move this model into Medicare. By restructuring Medicare Advantage to look more like the delivery model in Medicaid and the new public option – and by creating incentives to move the rest of Original Medicare into restructured Medicare Advantage Plans that are linked to a sustainable growth rate—we would dramatically increase the percent of the market now in capitated risk-based (value-based) contracts.

Again, using Oregon as an example, where we have 880,000 Medicare beneficiaries:

  • Original Medicare      468,820 (53%)
  • Medicare Advantage   411,000 (47%)

With the changes in Pool 1 plus our current Medicare Advantage population, we would have 2,286,000 Oregonians in capitated risk-based care, or 53% of the population. If the rest of Original Medicare was included in this model, we would have 2,754,800 Oregonians in capitated risk-based care, or 64% of the population.

Assuming we can avoid gaming in the Medicare Advantage market through manipulation of risk score determination, etc., cost shifting from Pool 1 and Pool 2 would be dramatically reduced but the cost shift into Pool 3 would go up sharply. This would provide a powerful incentive for employers to become much more engaged purchasers, and perhaps align themselves with what’s happening in Pools 1 and 2—even creating a public/private purchasing consortium.  This powerful consolidated purchasing pool could offset the troubling consolidation that is taking place in both the hospital and commercial insurance sectors.

The Biden Administration can move this approach forward without getting caught up in the partisan politics of a deeply divided congress. Not only would it begin to address the underlying structural problems in our health care system and help offset the cost of the new health care subsidies in the American Rescue Act, it can free up resources to address long-standing racial and ethnic disparities by investing in chronically under-resourced communities—particularly in very young children, their families and neighborhoods.