Health Economics and lh
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Policy Implementation
Policy Implementation
Richard G. Frank, Ph.D.
Deputy Assistant Secretary Office of Disability, Aging, and Long‐Term Care Policy
Overview
• Health Economics and Policy Research
• Health Economics and Policy Implementation
Health Economics and Policy Implementation
• Examples
– Mental Health Parity
– The CLASS Act
• Closing Comments
Health Economics Research
Health Economics Research
• Academic and research rewards are greatest from designing new policies
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• Well thought out solutions to problems of health policy significance that are welfare
health policy significance that are welfare improving
Health Economics in Government
Health Economics in Government
• Most
Most health economics problems in health economics problems in
government do not involve starting fresh
• Health economics most often addresses Health economics most often addresses
implementation of legislation and altering existing arrangements
existing arrangements
• This poses a unique set of problems that our tools are well suited to address but generally puts us into unfamiliar (and often uncomfortable) territory
Example 1: Mental Health Parity
Example 1: Mental Health Parity
The Mental Health Parity and Addictions The
Mental Health Parity and Addictions
Equity Act (MHPAEA) requires group insurers t
to ensure that the “financial requirements” th t th “fi
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and “treatment limitations” that are applicable to mental health and substance use li bl t
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benefits are no more restrictive than the predominant financial requirements and d i
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treatment limitations for medical and surgical b
benefits covered by the plan
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Defining Parity
Defining Parity
• MHPAEA defines financial requirements as deductibles, copayments, coinsurance and out , p y
,
of pocket expenses
• MHPAEA defines treatment limitations as MHPAEA defines treatment limitations as
including “limits on the frequency of treatment, number of visits, days of coverage f
f
or other similar limits on the scope or duration of treatment”
Economics of Parity in the Managed Care Era
Economics of Parity in the Managed Care Era
• FFrank and McGuire show
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• Managed care arrangements can attain efficient mixes of mental health and other medical care i
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without imposing special restrictions on coverage against financial risks of treating mental disorders
against financial risks of treating mental disorders
• Because managed care arrangements may be non‐
contractible incentives to attain favorable selection
contractible, incentives to attain favorable selection of enrollees may limit the efficiency gains that parity might realize
might realize Efficient Allocation in Managed Care
Efficient Allocation in Managed Care
General Medical
General Medical
Mental Health
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p = as if price
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Parity in Practice
Parity in Practice
• Research
Research and experience suggest that application of managed and experience suggest that application of managed
care tools in context of selections incentives are likely to distort MH/SUD services
• Existing research does not offer guidance on what a regulator should do to implement the parity statute
• Statute and Congressional intent acknowledges that S
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mechanisms other than “nominal benefit” matter
– Recall
Recall statute defines treatment limitations as: statute defines treatment limitations as: “limits
limits on the on the
frequency of treatment, number of visits, days of coverage or other similar limits on the scope or duration of treatment”
– So what does a regulator do to address the selection incentives on the So what does a regulator do to address the selection incentives on the
“non‐contractible” part of the benefit?
Answer
• Create and define the term “Non‐quantitative treatment limits (NQTL)”
treatment limits (NQTL)
• Set out principles for the characteristics of application of NQTLs that are (in)consistent with
application of NQTLs that are (in)consistent with MHPAEA
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• These principles are meant to recognize the frequent necessity to manage specific diseases and service circumstances differently
• Requirement that health plans use the same R
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processes, evidentiary standards, and expert opinion to establish NQTLs
to establish NQTLs
– Requires comparable processes not results Example 2: The CLASS Act Enrollment
Example 2: The CLASS Act Enrollment
• The
The ACA describes the CLASS Act, a voluntary ACA describes the CLASS Act a voluntary
government run, privately funded long‐term care p g
insurance program
• Under‐writing as used in private plans is not p
permitted only: age and employment affect y g
p y
premium and ability to enroll
• A key concern is adverse selection
y
• The Act requires employers choosing to participate p g
p y
in the program to default employees into the CLASS program with an opt‐out
Default
• Behavioral economics has frequently smiled
on the creative use of defaults
• The classic case is policy towards 401K plans
• Behavioral economics is at its core about h i l
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decision making contexts
• Is the application of the default in the CLASS Act welfare improving?
Act welfare improving?
How good is the analogy?
How good is the analogy?
• Some
Some facts
facts
• 401K defaults aim to “nudge” people so that they do not leave money on the table
• 401K defaults aim to move enrollment rates from 70% to 95%
401K defaults aim to move enrollment rates from 70% to 95%
• CLASS is an insurance program that requires premiums to be paid for benefits that might not occur for 20‐30 years
• People under save for older age; tend to under estimate risks and People under save for older age; tend to under estimate risks and
financial consequences of needing LTC insurance; thereby under value coverage
• Typical LTCi take up rates are 5%
Typical LTCi take up rates are 5%‐8%;
8%; existing understanding suggests that existing understanding suggests that
maybe a 30% enrollment rate would be socially efficient
• What are the social and political costs of defaulting large segments of the p p
population into choices that may be costly and may not be in their y
y
y
interest?
Regulators Challenge
Regulators Challenge
• Selection and program solvency is improved by driving up the take‐up rate
y
g p
p
• Should regulations and administrative actions aim to boost employer participation or should
aim to boost employer participation or should other strategies be used to include employers in the enrollment process?
Choices
• If
If yes to default, then aggressively promote CLASS to yes to default then aggressively promote CLASS to
employers
Concern: program requirements (premium
• Concern: program requirements (premium withholding) are cumbersome and possibly costly thus employers may still not participate
• If no, then use ACA employer notification provisions to mandate an offer of CLASS
– Make
Make the offer in the form of an active choice
the offer in the form of an active choice
– For those choosing yes offer a simple method to connect to CLASS enrollment or a simple instruction sheet on signing up if employer benefit system is not electronic
Keys to the Answer
Keys to the Answer
•
•
•
•
Understanding likely employer participation
Information technology
Information technology
Precision on socially efficient take‐up level
Political and economic costs of imposing errors through default
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Concluding Remarks
Concluding Remarks
• Economics can be very useful for policy y
p y
implementation
• It almost always means navigating a course between y
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well intended legislation that is either incomplete or flawed and ambiguities in the statute that will improve its social impact BUT may not be exactly what the drafters had in mind
• The regulator is always affected by public reaction and Congressional comment
• It is important to cultivate your lawyers
Richard G. Frank, Ph.D.
Deputy Assistant Secretary Deputy
Assistant Secretary
Office of Disability, Aging, and Long‐Term Care Policy
Richard.Frank@hhs.gov
202‐690‐6443
www.aspe.hhs.gov