Sunday, December 08, 2019

Ross Douthat and the "expert-fashioned architecture" of the ACA

Subscribe to xpostfactoid via box at top right (requires only an email address; you'll get 2-3 emails per week on average)

Credit where due: Ross Douthat is a creative thinker, capable of carving new conceptual boundaries across familiar landscapes.  Today, claiming that Democratic voters have tired of Clinton- and Obama-style technocracy, he identifies the competing approaches to policy as moral (Bernie Sanders) and transactional (Joe Biden).

On the healthcare front, citing ""widespread left-wing disappointment with what the Obama-era politics of expertise produced," Douthat asserts:
This disappointment has been strongest on health care, where Obamacare’s most popular provision was the simple socialism of the Medicaid expansion rather than the complicated, expert-fashioned architecture of the exchanges.
He's right on the merits.  The Medicaid expansion accounts for probably 75% or more of the net coverage gains achieved by the ACA.  Enrollee satisfaction is far higher in Medicaid, which covers all of enrollees' costs, than in the marketplace, where satisfaction is inversely proportionate to out-of-pocket cost exposure, and at least half of enrollees are subject to high deductibles and out-of-pocket costs.*

The ACA's reforms of private insurance hurt some people, helped more people, and made the dysfunctional individual market somewhat less dysfunctional than previously.  But it's severely undersubsidized and failed to control costs, as insurers were left free to negotiate their own payment rates with providers.

Still, while Douthat's assessment makes sense on a policy level, it doesn't fully track with public opinion. The sustained assault on the ACA's core programs by the Trump administration and Republican Congress tipped public opinion on the ACA as a whole into permanently positive territory after years underwater. But the political battle over healthcare in the 2018 election, which clearly helped Democrats, largely screened protecting Medicaid benefits behind protecting access to insurance for people with pre-existing conditions, the hallmark of the ACA's reform of the individual market (though Medicaid enrollment and benefits also are provided without regard to an enrollee's health status).

In states where the Medicaid expansion by itself sliced the uninsured population by half or more, even Democratic candidates and incumbents dared not speak its name.  While the ACA's pre-ex protections directly benefit only the 13 million-odd enrollees in the individual market, anyone can potentially find themselves in that market at some point, and half of us have preexisting conditions that could affect or preclude coverage.

The ACA's genesis also complicates Douthat's taxonomy of Democratic candidates: Obama-ist technocrat, moral crusador, practical dealmaker. The ACA's marketplace design -- a regulated, government-subsidized private market -- was a consensus position among Democratic presidential candidates in 2008. Its basis was transactional, not technocratic: a solution designed by Republicans, adopted to entice Republican support (and a total failure on that front).

Subsidized private marketplaces are the eternal preferred Republican alternative to government-provided insurance -- Republicans proposed a private marketplace during Medicare's genesis, worked constantly to bolster private Medicare alternatives in ensuing decades (including now, as CMS feverishly hawks MA plans and downplays their limitations), created the ridiculous private Medicare drug plan marketplace, and presaged the ACA marketplace in Massachusetts under Romney's leadership (and collaboration with a Democratic legislature).  Conservative Democrats. the only approximation to a center-right party in American politics, killed the public option that would have created a hybrid public-private market.

It's true that progressive policy wonks adopted free market ideology in the ACA's design, including the premise that competition among insurers would keep premiums down, and the by-now discredited premise that high out-of-pocket costs would help control overutilization.  That's symptomatic of Democratic policy since Reagan: cede management of public benefits to private companies, with the government role reduced to subsidization and oversight. In fact that ideology is transforming Medicaid, with private managed care plans now administering the bulk of benefits, and Medicare, where federal policy continues to tip the scales toward Medicare Advantage.

It's also arguable, though, that the ACA's main weakness stems from transactional politics. Democrats were scared to spend enough to subsidize the marketplace adequately. Obama imposed an arbitrary price tag of $900 billion over ten years, avoiding the dreaded "trillion-dollar" tag. Millions of uninsured do not consider the ACA offering affordable, and millions who are enrolled are underinsured, enrolled in plans with prohibitive deductibles (see note at bottom). Expand subsidy eligibility to more people for whom employer offers are unaffordable, reduce the percentage of income paid for a benchmark plan, and increase benchmark coverage, and the ACA would doubtless become very popular, though it would still leave the wellsprings of U.S. healthcare dysfunction largely unaffected.

It would be silly to design a private marketplace without trying to foster competition. But promotion of that goal was carried to an extreme via the ACA's floating benchmark -- that is, the pegging of an income-adjusted subsidy to the premium for the second-cheapest silver plan in each marketplace. That often leads to wild swings in the cost of a given plan for subsidized enrollees, necessitating a constant imperative to consider switching plans on a yearly basis -- a destabilizing volatility, especially given the narrowness of provider networks in ACA marketplace plans. In Medicare Advantage, the benchmark is set by the federal government and pegged to the cost of traditional Medicare services in each market.  That structure fosters more stability for enrollees.

Douthat's classification of Dem candidates does provide some insight. But the line between technocrats and transactionalists is blurry -- as is the line between moralist and technocrat.  But that's the nature of such beasts.

Postscript: some further thoughts on this. It's almost perverse to argue from the ACA's flaws to the premise that Biden is the man for the moment. The ACA was the ultimate in Democrats negotiating with themselves in the absence of any good-faith Republican effort. Obama's default m.o., as Garry Wills put it, was "omnidirectional placation," and Biden embodied that impulse at its worst when he was deputed to negotiate with Republican leadership, e.g. at the fiscal cliff, where he got his clock cleaned: less new revenue than Obama had earlier dismissed as a threshold, and no end to the sequester. Now Biden is calling for negotiation with Republicans even as they collectively almost literally call for his head because that's what their leader does to any perceived rivals.  Perhaps Douthat's taxonomy is less to the point that a simpler division among Democrats: who's willing (or not) to steamroll stonewalling Republicans by any rule changes or parliamentary maneuver that can legally be implemented.

---
* The ACA marketplace's chief defense against underinsurance is Cost Sharing Reduction (CSR), which is available in strong form to enrollees with incomes up to 200% of the Federal Poverty Level, and in very weak form to those in the 200-250% FPL income range. About 45% of marketplace enrollees obtain strong CSR, which is available only with silver plans. CSR raises the actuarial value of a silver plan (the percentage of the average user's costs the plan is designed to pay) from a baseline of 70% to 94% at incomes up to 150% FPL, to 87% at 150-200% FPL, and to 73% at 200-250% FPL.  Another 8% of marketplace enrollees are in gold plans, with an AV of 80%. Another 1% are in catastrophic or platinum plans.  The rest -- slightly less than half of marketplace enrollees -- obtain silver and bronze plans with AV ranging from 60-73%, which translates to deductibles usually in the $3500-7900 range. In addition, a bit more than a quarter of enrollees in ACA-compliant plans buy them off-exchange (where no subsidy is available),  and the vast majority of these enrollees are in bronze (AV 60%) or silver (AV 70%) plans. The average AV in employer sponsored insurance is in the 80-85% range -- and out-of-pocket costs are becoming unaffordable for tens of millions of enrollees in such plans as well.  

2 comments:

  1. Lots of good thoughts in this post, thanks.

    Let me point out one problem in the last paragraph. The ordinary public hears the term "70% AV" and assumes that the plan pays 70% of every expense. If you have a $1,000 MRI, the plan would pay $700.

    I thought this myself for a long time, and I have a serious interest in this stuff.

    Anyways, a 70% AV plan will pay about 70% of a large $20,000 claim. It may pay nothing for that $1,000 claim.

    This helps embitter the public toward the ACA.

    ReplyDelete
  2. Thanks for your comment on the moral vs. the transactional model.

    Here is a somewhat similar contrast that I prepared an upcoming article of mine.....

    It helps our understanding to describe two overarching models for financing health care in America,
    One is the Bernie Sanders model:
    • Based on ‘Solidarity’
    • Paternalistic
    • Collecdtively Bargained, – payment is essentially forced on employers
    • Everyone is covered
    • No pre-existing conditions clauses
    • Fiancned mainly by taxes
    • No risks to the insured
    • Cost control through price controls and rationing

    The other is the Newt Gingrish model:

    • Based on Individual choice
    • No mandates on employers to provide quality coverage
    • No mandates on individuals to buy qualify coverage; if they want to risk having no coverage in order to save money, that is their call
    • Financed by insurance premiums and private savings
    • Corporations and insurers want the best deal for themselves, and will not cover the sick unless forced to do so
    • Cost control through competition

    The Gingrich model is frankly Darwinistic when you get close to it. Persons with no money get much less care, and will die sooner. Those who do not buy insurance when they are healthy are left out later.
    Therefore the Gingrich model allows a smattering of private charity, Demoratic legislators established Medicare and Medicaid as well, to smooth out the rough edges.



    ReplyDelete

Share