Thursday, January 09, 2014

The ACA's pre-existing condition

Ezra Klein is that rare interviewer whose questions are determined almost as much by what his interlocutor just said as by what he's got planned.  That often includes teasing out real or apparent contradictions between two statements in the interview. So it was in this exchange between Klein and healthcare consultant/ACA critic Robert Laszewski:
K: That brings up two issues. The first is the individual mandate, which begins this year but is a much bigger penalty in year two, and then even bigger in year three. So one question here is how well that works.

RL: I have an interesting answer for that. I think the mandate is almost worthless because the word is getting around that they can’t really collect it. And by year three, it’s really a lot of money. I think there’ll be real pressure to just get rid of it. I don’t think you can force people to buy this insurance. If they don’t want it there’ll be a political groundswell to get rid of it. So in my mind the individual mandate is kind of irrelevant to this.

EK: There seems to be a bit of a contradiction there. You’re saying the mandate wont scare people because it can’t be collected, but that the penalty is so large that they’ll hate it enough to get rid of it. It seems to me that if people really think the penalty is huge, then the mandate is likely to do its work and persuade people to buy insurance. 

RL: I think it’s all about whether they have confidence in Obamacare or not. The mandate will be effective for free riders. No one has a problem penalizing people who don’t pay their fair share. But if Obamacare hasn’t been sold to the American people as something they should want then the mandate will just be rubbing salt in the wound and there’ll be enormous political pressure to get rid of it. So I think this gets back to whether the American people end up accepting obamacare or not.

That might have been worthy of further followup: it's arguably a bit circular.  But Klein moved on. And on the next question, the viability of exchange plans, it ended rather abruptly. After Laszewski criticized the high deductibles, the final exchange went like this:
EK: Do you think there’s anything the Obama administration can do about that? Or is it just a question of the marketplace at work now?

RL: I don’t think there’s anything they can do for March 31. But as we move to 2015 open enrollment, the Secretary of Health and Human Services has some power to reshape the plans. The mandated benefits are so high they’ve driven costs up and created narrower networks. The statute talks about actuarial levels so the Secretary can’t just do anything she wants. But given a combination of regulatory authority and what the Obama administration has been willing to do already in overriding statute, I think they could do some pretty significant things.

If an entrepreneur had crafted Obamacare he would’ve gone to a middle class family. A family of four make $54,000 a year has to pay $400 in premiums net of subsidy and for that the standard silver plan has an average deductible around $2,500 and a narrow network. They’re going to pay almost $5,000 for that?

So the entrepreneur would say I’ve got $5,000 in premium and all this deductible, what do they want for that? And they probably would’ve said we want office visits and lab tests because the kids need to go in occasionally and then we want catastrophic care. The problem with Obamacare is it’s product driven and not market driven. They didn’t ask the customer what they wanted. And I think that’s the fundamental problem with Obamacare. It meets the needs of very poor people because you’re giving them health insurance for free. But it doesn’t really meet the needs of healthy people and middle-class people.
Three caveats here.

First, Laszewski's neat division between "very poor people" and "middle-class people" leaves out the subsidy-eligible, who will comprise more than half of those buying on the exchanges.  It's true, as Laszewski suggests, that even some of these will be somewhat strapped - e.g, his example a family of four earning $54k and paying $400 a month "net of subsidy." That is, those at the higher end of the subsidy scale, between 250% and 400% of the Federal Poverty Level (FPL). But $400 a month is a way better than they could do right now, even if no one in the family has a preexisting condition. Moreover, in all the states I checked the premium at that income level for a family of four is closer to $300. Further, in the 26-odd states doing the Medicaid expansion, in states where eligibility for the Children's Health Insurance Program (CHIP) extends to 230% FPL --i.e., most states --  the kids in Laszewski's $54k home will be steered to CHIP and so will get free or very low-cost care (though the parents' premium costs will not be reduced). It is true, though, that the deductibles in ACA bronze and silver plans are as high as Laszewski claims, and that is troubling.

Second, Laszewski complains about the mandated benefits, then claims a "market-driven" plan would provide office visits and lab tests. But those mandated benefits include free checkups and a host of free screenings under the rubric of preventive care  -- including, for children, hearing screening . autism screening, height, weight and body mass checks, depression screening, and HIV screening; and for adults, colorectal and breast cancer screening, blood pressure screening, and depression screening, not to mention contraceptives.  Moreover, a fair amount even of high deductible plans subsidize regular doctor visits -- which is I think what Laszewski is flagging as a prime consumer want -- before the deductible, though too many don't (some also subsidize drugs, often just generic drugs, before the deductible).  And again, in states doing the Medicaid expansion, the kids in Laszewski's $54k home will be getting free care via CHIP.

Third, how much do those mandated essential health benefits drive up costs? In a conversation with Ezra Klein, ACA scourge Avik Roy estimated about 10%.  I don't know if that's accurate, but the mandated benefits are not the main drivers of the high deductibles and narrow networks in the ACA plans. The high costs of medical care in the U.S. -- the ACA's preexisting condition -- are responsible. The ACA reflects tough tradeoffs.

1 comment:

  1. Mandated benefits is an odd complaint considering that, with a few exceptions, the Obama Administration chose not to adopt Federal (uniform) standards for insurance and, instead, deferred to the insurers. That decision was a surprise to many policy wonks and a big disappointment to me. Do I have the knowledge to design an insurance plan for myself that includes all "essential health benefits"? What is "essential" for me? I'd have to know my risks in order to determine what is "essential". I was hoping that somebody besides Congress and the insurers would do it, somebody without a political ax to grind or benefits to avoid having to pay.