Thursday, January 01, 2015

Tapped out in Kentucky, cont.

Yesterday, I took a look at what induced David Elson, a 60 year-old advanced diabetic in Louisville, Kentucky earning $28,000 "in a good year,", to sign up for an ACA health plan with a $350 monthly premium. At that income level (which was almost surely overstated), a benchmark silver plan would have cost him about $180 per month. His tale has been recounted in depth twice by Abby Goodnough in The New York Times.

Why sign up for a plan that cost twice as much as the benchmark? The short answer was that Mr. Elson was trying to keep his doctors -- most importantly, his kidney specialist. That locked him into just one provider, Anthem Blue Cross, and the high premium plan he chose was an alternative to cheaper Anthem plans with higher deductibles and copay-coinsurance combinations that may have cost him more. The problem was that it was always obvious that he could not afford that premium -- one of his providers said as much in Goodnough's March 2014 article -- and he never paid it. His kidneys failed this fall, and he ended up first in charity care and then -- as of today, Jan. 1 -- on Medicare.

As I pointed out yesterday, not only an alternative silver plan offered by another insurer but even a handful of gold and platinum plans with lower premiums and deductibles than the one he selected were available to Mr. Elson in 2014. Trying to keep his doctors came at a price he could not pay.

Today I want to look at one more factor that framed the choices faced by Mr. Elson -- prompted once again by commenter Bob Hertz. That's age-rating.

Under ACA pricing formulas, unsubsidized premiums rise with age: a 64 year-old pays three times as much as a 21 year-old. At the same time, subsidies are calculated to erase this difference. The benchmark plan in any area, which is the second-cheapest silver plan, will cost subsidy-eligible buyers a fixed percentage of their income. This year (Happy New Year!), the benchmark silver plan will cost any buyer in the country with Mr. Elson's reported $28k income $181 per month, give or take a buck or two.

But that price uniformity only exists at the benchmark. I have noted before that because premiums rise with age, subsidies rise with age, and so for many older buyers, the subsidy wipes out the premium for some high-deductible bronze plans (which can pose a dangerous temptation, since deductibles for bronze plans average over $5,000) . The converse, however, is also true: plans that cost more than the benchmark are much more expensive for older buyers. The subsidy does not rise proportionately. If Mr. Elson had been younger, his chosen plan would have been much more affordable.

With the turn of the new year, I've lost access to 2014 price quotes on Kynect, the Kentucky ACA exchange. But the nearest comparable 2015 plan will illustrate the point just as well. One silver Anthem PPO plan available now would cost a 60 year-old earning $28k $319 per month. Its base price for a 60 year-old is $588; his subsidy is $269. If he were 27 years old, that plan would cost him $227 per month. That's also its base price; his subsidy would be $0.

A couple of other features of the Louisville market illustrate the kinds of choices ACA shoppers are faced with, for better or worse. This year, there's an outlier silver plan, a CareSource HMO, that way undersells the benchmark. It would cost Mr. Elson (if he were still in the market and still 60), just $84 per month. It shows a per-person deductible $3,500, but that's the same as what Kynect quoted for the plan Mr. Elson picked last year; it does not reflect Cost Sharing Reduction subsidies, which are weak at a $28k income but did reduce Mr. Elson's deductible to $2,600 last year. Could the doctors and hospitals in that HMO meet Mr. Elson's needs? We don't know. I do know that there was not a comparable opportunity to leverage the subsidy last year -- I think the cheapest silver plan was about $136, with a higher deductible.

Finally, Mr. Elson would have one more potentially viable option this year, but it's so complex as to render it all but theoretical.  There is an Anthem silver HMO* that's HSA-qualified (though it doesn't say so in the initial price quote). That is, it can be linked with a tax sheltered Health Savings Account. Its quoted deductible is $3500 and would be lower with CSR; its premium, $210.  While it's an Anthem HMO and not a PPO, Mr. Elson's kidney specialist, Lina Makelaite, is in network, according to the directory offered on Kynect. So is his ophthalmologist, Inder Singal (both are named in Abby Goodnough's article).

Mr. Elson installs security systems; it sounds as if he's self-employed. If he could manage to put, say, $3000 in an HSA (he can't, but his out-of-pocket costs plus the extra cost of the high premium he picked last year would probably exceed that), his taxable income would be reduced. If he reported his variable income less conservatively, and probably more accurately, than he did last February, he would be eligible for stronger CSR subsidies that might reduce the deductible while leaving the plan HSA-qualified.

With an income of $23k, that same HSA-compatible Anthem PPO (would cost Mr. Elson $147 per month. The quoted deductible is $3500, but it would have to be lower with CSR.

In short, if Mr. Elson could execute on the kind of financial engineering that comes naturally to higher-income self-employniks (or is taught to them by expensive counselors), he might have been able to afford a plan that would enable him to keep his doctors. This option admittedly complex to the point of absurdity -- and requires the resources and budgeting to put away a sum that a person in this situation is unlikely to have.

It's not good for a low-income advanced diabetic to be juggling deductibles and copays -- and if he forgoes needed care, as Mr. Elson did, he ends up costing one government or another far more, via Medicaid, Medicare (as in this case) or charity care (as also in this case). To hazard a generalization, ACA subsidy formulas perhaps don't work very well for chronically ill patients with incomes between, say, 150% and 300% of the Federal Poverty Level. Subsidized private insurance leaves them on the hook for too much out-of-pocket cost.

* The plan in question is an Anthem Silver Pathway x HMO 3500 25


  1. Thanks again for your thoroughness.
    Many thoughts come to mind:

    a. up to about 1975, this person would be dead. Read biographies from mid century America, and people were dying of diabetes and heart attacks in rather great number.

    b. Compassionate systems as in France have no deductibles or coinsurance for insulin, for childbirth, and many other conditions where the patient has no choices.

    c. You are not quite correct to say that ignoring this man's illness will cost Medicare more money. He was headed for dialysis at some point, I guess he is now on Medicare sooner.

    d. How sad that he tried to work, which kept him away from Medicaid and from social security disability (i.e. Medicare.) No good deed goes unpunished.

    e. 7 or 8 states do allow some persons who work with serious health problems to get Medicaid. They may have to pay a modest premium.
    These states include MN, Ohio, Illinois, not sure who else. No southern states, natch.

    f. Making him pay 20% of his dialysis cost under Medicare is just cruelty. What, is he going to go hog wild at the care center if he has no deductible?

    g. As you say, it is hard to follow the alternatives you discussed with HSA's.

  2. Regarding C, the question is when would he have gone on Medicare for end stage renal disease and for how long? If we go to the counterfactual where good, preventative, low level maitenance care could have kept his kidneys in reasonable functioning order for several more years, then he would have cost Medicare significantly less money as the odds of him needing dialysis would have significantly decreased.

  3. Richard, I have no real knowledge of medicine, but watching two friends go on dialysis, (who both had good insurance), my impression was that dialysis becomes inevitable at a certain point. So is death after a few years.