Category: ACE Research

Background

Obesity is a severe health concern across the world, and can contribute to other health problems including cardiovascular risk factors, high blood pressure, and social and psychological problems. Currently, more than 30% of U.S adults are obese and obesity rates are high among U.S children. According to the Division of Health and Nutrition Examination Surveys, obesity rates in U.S children and teenagers has more than tripled since the 1970s. The most recent Centers for Disease Control and Prevention (CDC) data shows that about 20% of U.S children are obese. Adolescents have a higher prevalence of obesity (22.2%) than children aged 2-5 years (12.7%). The childhood obesity rate is disproportional among race groups. Hispanic children are more likely to be obese (26.2%) than non-Hispanic Black children (24.8%), non-Hispanic White children (16.6%), and non-Hispanic Asian children (9.0%). 

The obesity rate among U.S children aged 2-19 years old, 1963-1965 through 2017-2018. (Source: National Center for Health Statistics) 

Childhood obesity is a serious public health issue because it affects the physical and mental health of children, and it can have major ramifications for their adulthood health. Obesity can lead to high blood pressure, diabetes, and other illnesses later in life. Childhood obesity could also cause mental problems such as depression and poor self-esteem. Simmonds et. al.’s study suggested that a person with a history of childhood obesity is five times more likely to develop obesity in adulthood than those without a history of childhood obesity. 

Causes of Childhood Obesity

Children are more susceptible to external environmental influences because they are immature and not financially independent. The causes of childhood obesity can be categorized as lifestyle issues, family influences, and socioeconomic factors. 

• Lifestyle issues: The leading causes of childhood obesity are the same as common obesity. Having unbalanced or unhealthy diets—for example, consuming high-calorie foods, candies, and sugar-sweetened beverages—cause excess weight gain. Physically inactive children are at risk of developing childhood obesity. 
• Family influences: Highly controlled parental feeding styles—including pressuring or forcing children to eat and rewarding them with food—increase the prevalence of childhood obesity. The study also found that parents preferred to buy high-calorie, low-nutrient food for their kids because they believed their kids would like such kinds of food.
• Socioeconomic factors: The Centers for Disease Control and Prevention (CDC) states that a lack of access to public facilities increases the childhood obesity rate. About 40% of U.S households do not have full-service grocery stores within their communities. In this case, children are more likely to consume fast food and frozen food rather than fresh fruits and vegetables. More than half of U.S families do not have access to public infrastructures such as parks and playgrounds. Hence, children spend more time on sedentary activities (watching TV and playing video games), which negatively influences their health. 

Healthy, Hunger-Free Kids Act of 2010 (HHFKA)

Healthy, Hunger-Free Kids Act of 2010 (HHFKA) promotes low-income children’s access to nutritious food by authorizing financing for federal school lunch and child nutrition programs. The US Department of Agriculture (USDA) reports from 2012-2013 show that 21.5 million U.S students received free or reduced-price meals at school under the influence of the HHFKA. The main terms of the Healthy, Hunger-Free Kids Act of 2010 are as follows:

1. Implementing nutritional standards: The HHFKA enables the USDA to establish nutritional guidelines for any meals that are offered at schools, including products provided in vending machines and school stores. Schools receive funding to improve nutrient content in school lunch programs and the accessibility of drinking water. 
2. Expanding the beneficiary group: More than 115,000 students who satisfy income standards using Medicaid data are enrolled in the school lunch program. HHFKA increases meal plan access to students in low-income communities by simplifying eligibility criteria. At-risk students who are enrolled in after-school programs are also eligible for meal support. 
3. Increasing program professionalism: HHFKA requires a three-year cycle for school audits to monitor adherence to nutritional standards. Schools are required to provide transparent nutritional information on school meals to parents. HHFKA also provides school food service providers with instruction and technical support. 

According to Kenney et al.’s study, HHFKA impacted many students in poverty. The prevalence of childhood obesity among impoverished students began to decrease after implementing HHFKA at 9 percent each year. The obesity rate among non-impoverished students was no different during the study period. The study revealed that with the regulation of HHFKA, overall childhood obesity is rising more slowly than expected. 

Supplemental Nutrition Assistance Program (SNAP) and Other Childhood Obesity Federal Programs and Policies 

Supplemental Nutrition Assistance Program (SNAP), the largest nutrition program in the country, offers short-term financial assistance to people who are struggling to pay for food. More than 43 million individuals received help from SNAP in getting access to food and drinks to maintain a healthy and balanced diet. Additional federal policies and programs that help children in the U.S get access to nutritious food and reduce the food insecurity rate and obesity rates among them are listed below. 

• Child Nutrition Policies: Child nutrition policies vary from state to state, but their common goal is to reduce the food insecurity rate and provide children with nutritious food. Evidence shows that children’s food insecurity decreased by 33% half a year after their families received SNAP benefits. 
• The Child and Adult Care Food Program (CACFP): Childcare facilities and other programs that provide nutritious food for children and adults receive federal funding from CACFP for compensation. In one day, over 4.2 million children have access to nutritious meals and snacks each day through CACFP. 
• Dietary Guidelines: The first edition of the Dietary Guidelines for Americans (DGA) 2020-2025 provides nutritional recommendations for people at different life stages. The DGA recommends that children under two do not consume food and beverages with added sugar. The DGA also provides nutrition standards for federal nutrition programs and health policies. 
• Women, Infants, and Children (WIC) Program: WIC provides the same benefits as SNAP to a different population. WIC promotes breastfeeding and provides healthy foods and nutrition education to eligible pregnant, postpartum, and breastfeeding women, infants, and children under five years old with healthcare and social services to help them maintain a healthy weight. The obesity rate for children ages 2 to 4 years that receive WIC benefits reduced by 1.5% from 2010 to 2018. 

Challenges of SNAP 

Under a new USDA policy, only people who benefited from the Temporary Assistance for Needy Families (TANF) program are able to receive SNAP benefits. Because of that, more than 3 million people lost SNAP eligibility. SNAP is funded through block grants, which means the level of funding is set across a designated time period. This could pose a challenge if the SNAP-eligible population grew quickly, like during a recession. Eligibility standards vary state to state, so two SNAP participants who live in different states may receive different benefits even if they have the same circumstances. 

Benefits of SNAP 

SNAP reduces poverty and food insecurity, and improves children’s health, indirectly reducing the childhood obesity rate. Children in SNAP-eligible households gain access to nutritious food and drink, which helps them develop healthy eating habits. Children who participated in SNAP also have a decreased risk of developing high blood pressure, heart diseases, diabetes, and other health diseases across their lifetime

On March 23rd of 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act, a landmark U.S. statute that entails the largest regulatory overhaul and coverage expansion since the enactment of Medicare and Medicaid in the 1960s. Introduced at a time when over 45 million Americans were uninsured, the ACA constituted provisions that required most individuals to have health insurance at the cost of a penalty fee, combat abusive insurance practices, make coverage more easily accessible, and attempted to mitigate increasing healthcare costs. At the vantage point of over a decade since its passage, it’s worth taking a look back on its implications across Medicaid, private, and other sources of healthcare coverage.

Medicaid Expansion

In pre-ACA times, Medicaid was generally inaccessible to non-disabled adults under age 65 unless they had minor children. Henceforth, with the intention of attaining coverage for low-income Americans, the ACA called for all states to expand Medicaid coverage for adults up to age 64 with incomes at or below 138% of the federal poverty level (FPL). The federal government would cover 100% of the increased costs until 2016 and incrementally taper to 90% by 2020. 

Under the ACA, if states were to not participate in the Medicaid expansion, Congress was to invoke the Spending Clause to revoke all of their Medicaid funding. However, the Medicaid expansion was rendered optional after the 2012 Supreme Court ruling of NFIB vs. Sebelius, which deemed termination of all Medicaid funding to noncompliant states as unconstitutionally coercive. As of 2022, 38 states and the District of Columbia have implemented the Medicaid expansion. In the 12 states that have not enacted the initiative, there currently exists a coverage gap where 2.2 million people are eligible for neither premium subsidies in the Marketplace due to below-FPL income nor Medicaid. 

Marketplace Insurance Subsidies

Furthermore, for individuals without employer or government-funded insurance, the ACA provides subsidies in the private insurance marketplace. Before 2014, insurance companies practiced medical underwriting where they would evaluate whether to accept an applicant for coverage and at what premium rates if they do. Since individual insurance typically bares greater administrative costs than group policies, securing coverage used to be either too inaccessible or costly especially for patients with pre-existing conditions. 

Intending to remedy this phenomenon, the ACA provided premium subsidies for individuals with incomes at or below 400% of the FPL, where buyers would spend no more than a predetermined percentage of their income, ranging from 2.06% to 9.78% correlating to their income, on insurance. The cost of a plan that covered approximately 70% of the expected expenses for an insuree in a local insurance marketplace establishes the amount of the provided subsidy. Additionally, the ACA also mandated insurers to reduce copayment of deductible in the form of cost-sharing assistance for individuals making less than 250% of the FPL. Under this provision, a “moderately generous” plan can cover 94% of an insuree’s expected costs. 

Marketplace Reforms

Additionally, the ACA transformed the insurance market via a series of reforms targeted at specific existing problems. In establishing “guaranteed issue” and “guaranteed renewal”, the ACA ensured that insurers must accept all applicants at equal premiums regardless of a patient’s pre-existing conditions. Now, the only factors impacting a person’s premium are age, family size, geographical location, and smoking habits. In addition, the law required health plans in the individual and small group markets to cover ten essential health benefits (EHB) that include ambulatory services, emergency services, maternity, and newborn care, hospitalization, and more. 

Moreover, in foreseeing the potential of sicker individuals entering the insurance Marketplace due to installment of the guaranteed issue and driving up premiums, the ACA sought to incentivize the healthy population of purchasing insurance to balance out the risk pools. For that reason, the ACA imposed the controversial and now-repealed individual mandate, requiring all Americans to have purchased health insurance by 2014 or pay a financial penalty.

In perhaps its most popular provision known as the dependent-coverage policy, the ACA required all 

private insurers to offer coverage to dependent children to up 26 years of age on their parents’ plans. Effectuation of this provision concurred with the beginning of a steep decrease in the uninsured rate among the 19-25 years old demographic. At the highest uninsured rate of any group, 33.9% of adults younger than 26 years of age lacked coverage in 2010. By 2013, this percentage had fallen to 26.5% and eventually to a sub-15% in 2016 in the aftermath of the Medicaid expansion and Marketplace creation.

Basic Health Program (BHP)

Section 1331 of the ACA enables states to create a Basic Health Program (BHP), a health benefits coverage program that serves as an alternative to the Health Insurance Marketplace for low-income residents whose income fluctuates above and below Medicaid and Children’s Health Insurance (CHIP) levels. Since then, the program has been implemented in New York and Minnesota. Under this plan which will include at least the ten essential health benefits mandated by the ACA, monthly premium and cost-sharing charged to enrollees will not be greater than a qualified health plan (QHP) Marketplace alternative. 

Effects on Coverage Expansion

In the metric of expanding coverage in the US, the ACA was largely successful. According to a 2019 US Department of Health and Human Services (HHS) report, enrollment data from late 2020 and early 2021 indicates that approximately 31 million persons gained coverage related to ACA provisions. 

The breakdown is as follows:

• 11.3 million Marketplace plan enrollees as of February 2021
• 14.8 million new Medicaid enrollees due to eligibility expansion as of December 2020
• 1 million persons enrolled in ACA’s Basic Health Program
• Close to 4 million persons, known as the “woodwork group”, who had been eligible but previously weren’t covered, are now incentivized to take up Medicaid due to heightened awareness of ACA’s coverage options, reduced administrative barriers to applying, and the individual mandate.

Acting in tandem with cost-sharing reductions, premium subsidies have substantially decreased premiums and deductibles for those in the lower-income range. In 2019, 87% of the 10.6 million Marketplace plan enrollees benefited from such premium subsidies. Furthermore, in a 2017 study published in the Journal of Health Economics, researchers accredited 40% of the coverage gains to these exchange premium subsidies. However, enrollments, on an annualized basis, since 2015 have been consistently hovering around 10 million persons, which is 60% below previous Congressional Budget Office (CBO) projections. Moreover, in guaranteeing lower- and middle-income employees access to individual market plans with premium tax credits, the ACA had inadvertently prompted 2 million workers to be dropped from their existing employer-sponsored insurance by 2017.

Deviations from ACA’s Design

However, the full effects of the Medicaid expansion couldn’t be realized partially due to the coverage gap previously discussed, but also due to Section 1115 waivers issued by President Trump’s administration. Section 1115 of the Social Security Act allows states to impose premiums and increase cost-sharing among new requirements on Medicaid expansion enrollees. In 2018, based on benefiting state governments “in their efforts to improve Medicaid enrollee health and well-being through incentivizing work and community engagement”, the Trump administration approved work requirements of between 80 and 120 hours a month in 13 states. Limited data is available on the coverage loss of these Section 1115 waivers. However, in the case of Arkansas where the waiver was active from June 2018 to March 2019, over 18,000 people, or roughly 25% of those subjected to the work requirement, many of whom were working but were unaware of how to report to Medicaid authorities, were disenrolled from Medicaid after failing to comply. Henceforth, though not a direct intention by the ACA’s crafters, opponents of the ACA have criticized it for being subject to turbulences of the “big government”. 

Additionally, the repeal of the individual mandate in December of 2017 is expected to disincentivize healthier people from acquiring coverage in the Marketplace and drive up premium prices. In a comparison of pre- and post-repeal insurance levels, research has found a 24% increase in the likelihood of becoming newly uninsured in states with no federal or state mandate.

What’s Next?

Under the American Rescue Plan of 2021 (ARP), households above the 400 percent FBL received premium tax credits to improve affordability in the Marketplace. The ARP had increased access to zero-premium plans on the federal healthcare marketplace from 43 percent to 62 percent of uninsured non-elderly adults, as well as access to low-cost plans (under $50 monthly premium) from 57 percent to 73 percent. By the end of the 2022 Open Enrollment Period, Marketplace enrollment had reached an all-time high of 14.5 million people. However, if not extended, the expansion provision is set to expire in 2023. A recent HHS report projects that 3 million current insurees, 15% of the individual market population, will become uninsured in that scenario. 

Introduction

When the Medicare program was first implemented in 1965 to provide subsidized health coverage for the elderly and disabled, it encompassed inpatient hospital stays and outpatient physician office visits via Medicare’s Part A and Part B, respectively. However, the program didn’t cover self-administered retail prescription drugs, which have long consisted of the largest share of prescription drug use. The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, signed into law in 2003 and effectuating in 2006, created an optional outpatient prescription drug benefit program called Medicare Part D or Medicare Rx to help pay for drugs at retail, mail order, home infusion, and long-term care pharmacies. By 2021, 48 million out of the over 62 million Medicare beneficiaries are enrolled in Part D plans.

In 2018, Part D’s program expenditures reached $95.4 billion, or nearly 13% of total Medicare spending. Part D constitutes more than one-third of retail prescription drug spending in the US. It’s financed primarily by general revenues (71%), beneficiary premiums (17%), and state payments for beneficiaries eligible for both Medicare and Medicaid (12%). 

Types of Medicare Part D Plans

Differing from Parts A and B, which are publicly administered by Medicare, Part D is provided by authorized Medicare-contracted private insurers. These companies are subject to Medicare regulations and subsidization, pursuant to one-year, annually renewed terms. There are two main types of plans beneficiaries can enroll in for Part D benefits. 

1. Prescription Drug Plan (PDP): a standalone plan that covers solely prescription drugs. 
2. Medicare Advantage Prescription Drug Plan (MA-PD): combines a beneficiary’s doctor, hospital, and prescription drug coverages under one policy. Additionally, employers and unions can extend the Part D coverage from their own MA-PD plans to Medicare-eligible employees and retirees in what’s known as Employer or Union Sponsored Part D Retiree Plans.

Generally, an individual must have either Part A OR Part B coverage to enroll in a PDP, while he/she would need both Part A AND Part B to enroll in an MA-PD. PDPs tend to be nationwide plans, while MA-PDs have more restricted regions, whether by state or by counties within states. Therefore, MA-PDs aren’t recommended for those who travel extensively or reside in various areas of the country throughout the year. 

PDP plans also differ from MA-PDs because with PDP plans, beneficiaries’ costs are directly related to the anticipated prescription drug spending of the population. Additionally, PDPs are dictated by costs within the retail drug sector, therefore fluctuations in healthcare costs in other respects such as hospitalization don’t impact PDPs. 

Costs of Medicare Part D

Part D operates on an insurance model where enrollees are charged costs typically associated with standard insurance plans, such as monthly premiums, annual deductibles, and copays. In 2022, Medicare Part D coverage costs on average $33 per month, while Medicare Advantage plans will cost $19 per month. 

Covered Drugs

Part D plans aren’t required to cover all Part D drugs. Instead they establish their own formularies, with varying tiers associated with accordingly set copay amounts across the categories of drugs. Lower tiers tend to have lower copays. A formulary must follow the model formulary in the US Pharmacopeia, include at least 2 drugs in each of the 148 drug categories, and covers all or “substantially all” drugs under the categories of anti-cancer; antipsychotic; anti-convulsant, antidepressants, immuno-suppressant, and antiretroviral drugs.

The Standard Benefit

The law mandates companies to offer a “standard benefit” package at the minimum, including an annual deductible and a coverage gap, known as the “Donut Hole”. While some plans may deviate from the standard benefit in terms of structure, they must be actuarially equivalent. Occasionally, “enhanced” plans may provide more benefits than the baseline set by the “standard benefit”, including more coverage during the Donut Hole period. The section below outlines the Part D standard benefit phases for 2022.

1. Deductible Phase: Enrollees pay for the full cost of his/her prescription drug until he/she reaches the initial Annual Deductible of $480.
2. Initial Coverage: The beneficiary would go on to pay 25% of a covered Part D prescription drug, either a copayment (a set amount) or coinsurance (a percentage of the drug’s cost). This amount will depend on the drug’s designated tier. This stage ends when a beneficiary and his/her insurer reach the initial coverage limit of $4,430, or when the beneficiary has paid $1107.50.
3. Coverage Gap: Prior to 2019, upon the plan and enrollee collectively reaching the initial coverage limit, the enrollee enters the “Donut Hole” phase, where the enrollee would be required to pay a higher percentage of the drug’s full cost than the 25% of the previous phase. The Health Care and Education Reconciliation Act of 2010 (HCERA) established a gradual phase-out of the coverage gap by 2020. With the Bipartisan Budget Act of 2018 (BBA), the Donut Hole for brand-name drugs closed one year ahead. In 2022, enrollees on the standard drug plan will pay 25% coinsurance for both brand name and generic drugs until their true out-of-pocket cost (TrOOP) reaches the catastrophic coverage minimum. The 75% discount on brand-name drugs is 70% paid by the drug manufacturer and 5% by the Part D plan. The TrOOP is calculated by adding together the yearly deductible, coinsurance, and copayments from the entire plan year, and beneficiary contributions during the coverage gap including the 70% Donut Hole manufacturer discount.
4. Catastrophic Coverage: Once a beneficiary’s TrOOP amounts to $7,050, he/she will pay the greater amount between either 5% of drug costs or $3.70 for generics and $9.20 for brand names. For the remaining costs, roughly 95% of the total, 80% will be covered by Medicare and 15% by the plan. The enrollee will remain in this phase until the end of the plan year before it resets in the new year. 

Pros of Medicare Part D

By design, different coverage costs for according “tiers” of drugs are meant to protect consumers from high-cost prescription drugs. At low premiums and a plethora of options, consumers have a wide range of choices depending on their needs and how Part D works alongside their other concurrent coverage plans. 

Studies have observed the percentage of Medicare beneficiaries forgoing medications due to cost dropped from 15.2% in 2004 to 11.5% in 2006 post-enactment of Part D. A 2020 study also found that Part D led to a sharp reduction in the number of full-time workers older than 65.

Cons of Medicare Part D

Medicare enables Part D coverage enrollment around the time of a person’s 65th birthday. However, if a Medicare enrollee goes without Part D or other creditable prescription drug coverage for any continuous interlude of 63 days or more after the end of their Part D Initial Enrollment Period, they are subjected to a late enrollment penalty. The penalty is typically added to the person’s monthly premium amount and its amount increases with how long he/she has gone uninsured. For each full, uncovered month that the enrollee didn’t have Medicare drug coverage or other creditable coverage, 1% of the “national base beneficiary premium” (or the base beneficiary premium) will be added to his/her monthly premium. 

Given Part D’s formulary structure, a potential enrollee would need to anticipate his/her drug needs for the upcoming plan year and have to shop between various plans on the market. Further, due to plans differing from insurer to insurer other than a Medicare-mandated minimum amount of coverage, this gives enrollees another reason to ensure a particular plan satisfies all drug needs.

Another key criticism regarding Part D is the “Noninterference Clause”, which prevents Medicare from negotiating Part D prices with drug companies in hopes that private insurers are incentivized to negotiate the lowest possible drug prices. However, since not even the largest insurers have enough enrollee base as leverage, Part D drug prices are largely not negotiated, leading to spending $50 billion a year in the “most conservative high-cost scenario” that otherwise could have been saved between 2006 and 2013. 

Medicare Part D in the News

At a time when reining in drug prices has overwhelming public support in the US, the current Senate’s Democratic majority recently reached a deal allowing Medicare to negotiate and place caps on drug price inflation. The crux of the legislation is the negotiation provisions. If passed, Medicare could start the Drug Price Negotiation Program (DPNP) in 2023, with the secretary of the Department of Health and Human Services selecting up to 10 drugs to negotiate prices on, with the negotiated prices effectuating in 2026. In 2029, the number of drugs subjected to bargaining will increase to 20. Furthermore, the legislation will create a $2,000 out-of-pocket spending cap for Part D beneficiaries, prohibiting brand-name manufacturers from hindering competition from generic-drug producing counterparts and requiring companies to pay a rebate for hiking drug prices beyond the rate of inflation. Over the next decade, this plan is projected to save $288 billion.