Wednesday, December 21, 2016

ACA afflicted by a deductible cliff

The Atlantic's Olga Khazan recently went to Trump country in central Pennsylvania, near Harrisburg, and asked people what they thought of the Affordable Care Act.  A lot of the not-poor were resentful about the Medicaid expansion. Here's the owner of a hair salon who earns too much to qualify for a marketplace subsidy and is old enough to pay near-peak premiums:
Things got even worse for her this year, when several insurers pulled out of Pennsylvania’s Obamacare exchange, leaving her with just a few options, she said. Now, she pays $655 a month, and her deductible is $10,000. “Welcome to my shoes,” she said...

The financial pinch she’s feeling is compounded by her sense that other people are getting health care for free. “If I close my doors, being single, I could make more money than working here, with all the stuff they’ll give me” she said. “They have their health care, their food stamps, their iPhones ... They got it made!”

She, too, said she doesn’t mind if high earners are made to spend more on health care— “but everybody's gotta get out there and get a job to help pay for it.”

Her client, the mom getting her hair cut, nodded along, adding that she thinks there’s not enough incentive to work in society.

I heard this gripe from several people. Their health-care costs are skyrocketing, and meanwhile, there are people on Medicaid, which has its own issues, but looks like the lap of luxury when you have a five-digit deductible.
Leaving aside the iPhone craziness...Khazan's last comment is key. Out-of-pocket costs for Medicaid beneficiaries are small-to-nonexistent. Lower-income ACA marketplace enrollees -- those with incomes up to twice the Federal Poverty Level (FPL) -- are partially protected from high deductibles and out-of-pocket costs by Cost Sharing Reduction (CSR) subsidies, which raise the actuarial value of a silver plan from a baseline of 70% to 94% for those with incomes up to 150% FPL and to 87% for those in the 150-200% FPL range (CSR is available with silver plans only).  Those above 200% FPL* are exposed to deductibles generally in the $2000-4000 range for silver plans and $5000-7000 for bronze. Older enrollees who don't qualify for premium subsidies, such as the woman speaking above, may often feel priced out of silver plans, especially this year as premiums shot up.

While over 80% of marketplace enrollees receive premium subsidies, and over 60% have incomes under 200% FPL, qualifying them for strong CSR if they buy silver plans, about half the people buying ACA-compliant plans in the individual market (most of them off-marketplace) are unsubsidized.

The unsubsidized are likely to be dissatisfied -- though a new Kaiser Family Foundation analysis finds that over a quarter of them would likely have been shut out of the individual market entirely by pre-existing conditions prior to ACA enactment. In the pre-ACA market, a third of those who did obtain insurance paid above market rates because of their medical history, according to an AHIP study, and some could only get coverage that excluded treatment for whatever pre-existing condition they had.

Nonetheless, the ACA was supposed to make insurance in the individual market affordable for all -- and broadly speaking, it's done so mainly for people under 200% FPL, though some in the 200-400% FPL get considerable help, particularly if they're older, in which case the subsidy covers a higher share of their premiums (insurers can charge up to three times as much for a 64 year-old as for a 21 year-old, and in the pre-ACA market they generally charged about five times as much).

This year's Kaiser survey of individual market enrollees made it pretty clear that rising deductibles are driving down satisfaction. The percentage of those with ACA-compliant plans who rate their coverage good or excellent dropped from  74% in 2015 to 66% in 2016, and will probably drop further in 2017.  The percentage of those with high deductible plans -- defined by Kaiser as $1500 for an individual and $3000 for a family -- rose from 36% in 2015 to 49% in 2016.  And those with high deductible plans are less satisfied:

While Kaiser doesn't break out satisfaction by income, a large majority of enrollees with a deductible under $1500 indiv/$3000 family have incomes under 200% FPL, enabling them to choose plans enhanced by the strong CSR available up to that threshold.  Over 80% of enrollees with incomes under 200% FPL obtain CSR and so are mainly shielded from those high deductibles.

The Medicaid envy picked up by Khazan was presaged in the wake of Democrats' losses in the 2014 election by Kevin Drum, who asked:
...who does the WWC [white working class] take out its anger on? Largely, the answer is the poor. In particular, the undeserving poor. Liberals may hate this distinction, but it doesn't matter if we hate it. Lots of ordinary people make this distinction as a matter of simple common sense, and the WWC makes it more than any. That's because they're closer to it. For them, the poor aren't merely a set of statistics or a cause to be championed. They're the folks next door who don't do a lick of work but somehow keep getting government checks paid for by their tax dollars. For a lot of members of the WWC, this is personal in a way it just isn't for the kind of people who read this blog.

And who is it that's responsible for this infuriating flow of government money to the shiftless? Democrats. We fight to save food stamps. We fight for WIC. We fight for Medicaid expansion. We fight for Obamacare. We fight to move poor families into nearby housing.
As I noted in response, the boundary between the poor and near-poor and the working class is quite porous, and the ACA has filled a huge hole for low-wage workers.  But the subsidies are too skimpy to work well for many people with incomes over 200% FPL in particular, and that has affected takeup ,and so the size and quality of the risk pool, and so prices.

The law has done tremendous good for the poor and near-poor. It would be more politically successful, and more successful overall, if it did as well for people near the middle of the income distribution. A functional political system would simply boost the subsidies to accomplish that end.

Update, 1/5/17: Medicaid envy, discussed below, was  a strong theme in focus groups of Trump voters conducted by the Kaiser Family Foundation, as described today by KFF president Drew Altman.


* CSR is also available to enrollees in the 200-250% FPL range, but it's almost negligible, raising the actuarial value of a silver plan just three percentage points to 73%. In California, which standardizes plan benefits at each metal level, that translates to a reduction in the silver plan medical deductible from $2500 to $2200. No CSR is available to enrollees with incomes over 250% FPL.


  1. Thanks for another excellent piece. It is music to my ears, not in that it makes me happy but that I have been expressing the same concern for many months. 200 per cent of poverty is just $23,000 annual income for a single person. The ACA was indeed intended to help the entire middle class.

    Harold Pollack has a nice new piece on the achievements of the ACA.
    At one point he lists the beneficiaries of Medicaid expansion, and one group he highlights are gunshot victims.

    He is not wrong and means well, but he has found the least attractive beneficiaries possible to discuss. The white suburban or rural voter would read that and have zero, or less than zero, sympathy for Medicaid spending.

    There must be a more politically appetizing way to defend Medicaid.

  2. Thanks! This is a very clear summary of the situation, and I don't get why more Democratic politicians on the state and national level haven't made their way to developing these wonkish points of yours (product of a lot of time and analysis!) into accessible, crisp talking points! This is what both Clinton and Sanders should have been doing, instead of rehashing a intra-party debate about pragmatism and about "single-payer." Just tell the voting public: "we get it! The ACA has done a bunch of good (better than where we would be if left up to the GOP), but now we build on it and correct some things by boosting the subsidies/benefits, especially for the working and middle class, so you won't be dealing with such high premiums and deductibles." That's a clear takeaway about benefits for the average non-ideologically sophisticated voter, and it's not about more abstract questions of how constructed markets can work best or what should be "private" vs "public." I dig that stuff, but those are wonkish and ideological wormholes.