Wednesday, October 30, 2013

The Absurd Dynamics of Obamacare

Ezra Klein of the Washington Post's Wonk blog has been furiously trying to find a pony in the load of errors that is Obamacare at this point.   He did a post yesterday which argued that the ACA's policy was actually pretty good - despite the news of the computer screw ups.   He presented a diagram and called it the Obama Trilemma - which argues that the ACA is trying to balance three different issues in health insurance.

When you think about the diagram at the right it which comes from his article, it looks simple - but the simplicity makes all three legs inaccurate.  That is true in part because it oversimplifies the problems associated with trying to advance health care coverage.

Take each of the three legs of the triangle.   Affordability is a concept that is, in this instance, in the eyes of the beholder.   What is the right percentage of income that a person should bear to be covered?   That answer is different for the poor and the rest of us.  Accessibility is a bit clearer - although in this case because of the mandate - accessibility is not voluntary.   Is a comprehensive policy one which meets the current needs of a policy holder or one which covers all eventualities?   If you decide to define it as the latter, then the costs for many consumers will be significantly in excess of what they would pay under a less regulated market.

There are actually four markets that the ACA is trying to cover - the group policy (where individuals are covered for health costs by a policy issued by an employer), the individual (where individuals buy coverage on their own), Medicare and Medicaid.   Medicare is relatively straight forward - individuals are covered for a basic policy and have the option to purchase at additional expense a broader set of coverages.  Although it is financially unsound, we at least understand how it works.   The case that was made to expand Medicaid was that it was not accessible to a broad enough range of individuals (that depends a lot on how flexible the individual and group markets are) and on your definition of equity - in this case the Congress chose to define the standard quite liberally (400% of the poverty rate calculated by the Federal Government).

The real problem comes on accessibility for the individual and group markets.   If comprehensiveness is too broad then insurance companies are likely to reduce their spread of risk or raise their prices to cover those new costs.   Remember that the President repeatedly told us that "If you like your current policy, nothing will change."   That turns out not to have been true.  Comprehensiveness for the supporters of the ACA is defined by someone else - In 1993 Hillary Clinton commented "We just think people will be too focused on saving money and they won't get the care for their children and themselves that they need"   So much for consumer choice.   Here is the situation for one such policy holder who had her choices reduced by the ACA -

I'm one of those 7 to 12 "millions" who has had an individual "policy"- in Texas, no less- for 10+ years. Premiums with my current Ins.Co.- BCBS- are going up 25% for an individual "Silver level" policy. What am I gaining/losing ? Mental health coverage (thankfully, don't need); better Rx coverage (I think- but maybe not); no lifetime policy maximum ( mine was $1MM); maternity care (Umm, at 60, don't need it); had 80% major med/ co-insurance-BUT- no maximum out of pocket. With a Silver plan, I'm down to 70% "co-insurance" but a "cap" on out of pocket at $6250. Is it a "good deal" for me, assuming no catastrophic health crisis ? No. But neither was/has been my private, individual policy of 10+ years- Over $7,000 a year before co-pays & deductibles for "benefits" that have averaged out to less than $500 a year. 
I "get" shared sacrifice; I get getting the under served/poor into a system that treats before a crisis (and out of the ER- which as a Taxpayer, I am paying for directly- via my property taxes here in Dallas); I get convincing the young invincibles that nothing is free forever. 

Evidence is coming in fast and furious that a lot of people covered in the individual market are being dropped or are facing huge increases in costs.   The numbers at this point are in the millions.  Sara Kliff - who writes on healthcare for the WP, commented that between half and three quarters of the buyers in the individual market are going to be dropped.  She says that is because the plans do not meet the standards of the ACA.   In reality the numbers look to be a lot larger, in part because some of the group market is also being affected and many group policy holders are facing significant cost increases.  One administration person called the 5% (probably a low number) insignificant.

There is one other twist in the program which has long term implications.   There was an implicit tradeoff in the ACA  - we could afford to expand the coverage in the Medicaid part of the system IF we got people who were currently uncovered to buy coverage.   Evidence from the successful sites like Oregon is that the vast majority of "purchasers" are signing up for Medicaid.   That makes the economics of the program even less favorable.

The ACA, at least in California Covered, which I investigated for a friend, has lots of choices - from bronze, to silver, to gold plans - offered by a number of providers.  That seeming choice is not realized when you add in all of the mandated services.   Costs even for a minimum policy may not be reasonable except for a person who is getting a government subsidy.

If we can ever get to trying to fix this mess (after the incompetent computer code is adjusted) we might begin to think about a system which offers a shopping basket rather than a package for consumers.

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