I recently participated in a panel discussion following a
presentation on the impact of the Affordable Care Act (“Obamacare”) by
UC-Berkeley economist J.
Bradford DeLong. Unsurprisingly, Dr. DeLong, who worked in the federal
government as Deputy Assistant Secretary of the Treasury for Economic Policy in
the early years of the Clinton administration, during an earlier attempt to
pass comprehensive health reform, took an economic point of view. He described
the economic theories behind each of the approaches to health reform, how the
ACA was put together, how it most resembled the “RomneyCare” model implemented
in Massachusetts and endorsed by Hillary Clinton but abandoned by the
Republicans; he also showed that the Obama administration miscalculated the
near-unanimity of Republican opposition. He also looked at how the
implementation of the ACA has been more successful than many feared (or hoped)
and how the economic analysis behind it was distorted by the Supreme Court decision
to allow states to not expand Medicaid, which has resulted in an enormous
transfer of wealth from the “red” states that have not to the “blue” states
that have done so. Apparently, the ideological commitment by many states
(including my own, Kansas, and neighboring Missouri) to harm its people and
give away money is puzzling from a purely economic, as well as a human, point
of view.
One of the themes Dr. DeLong notes
coming especially from “conservative” economists and Republican politicians (and
we hear a lot) is the need for people to have “skin in the game”, by which they
mean co-pays, deductibles, and other ways of people paying out of their
pockets. As Dr. DeLong noted, the only large, well-designed, and meticulous
study of the impact of such “skin in the game”, the 1983 RAND experiment (which
I have previously discussed; see Insurance
company profits up and patient care down, May 17, 2011*) showed that even small out-of-pocket payments
discourage people from seeking care for both minor and major conditions,
ultimately cost much more to care for, and harm the health of those people.
As noted by one of the audience, current requirements in many “high-deductible”
plans for “skin in the game” cost-sharing are far greater than those studied by
RAND (and can be 45% of a person’s income!) and are thus even more likely to
have a major negative health impact.
Another common “game” meme, mentioned
by one of the other panelists, is concern with people “gaming the system”. If
this conjures up images of elegant gamblers in formal wear playing roulette
with James Bond in a posh casino on the Riviera, that is the intent. Like
Ronald Reagan’s “welfare queens” and Kansas Governor Sam Brownback’s
“able-bodied adults who refuse to work”, it is meant to divide people by
creating a “them” who are taking it easy while the hard-working “us” pay the
price. Of course, this is nonsense; most of those individuals so “gaming the
system” are merely trying their best not to break their budgets paying for
health insurance until they get so sick that they need it. Yes, this is
certainly contrary to the concept of insurance (everyone pays and only some
people benefit, but you never know when it will be you), and is a big reason
that most countries have gone to a “social insurance” system that just covers
everyone.
In fact, despite all the fooforaw
about it, there is no data suggesting that there is massive “gaming of the
system” by regular people. Michael
Hiltzik’s Los Angeles Times column of
February 27, 2016 makes this clear, focusing on “Special Enrollment
Periods” (SEPs), times when people can enroll in or change their insurance
outside of the usual ACA annual period. Huge insurance companies like Aetna and
Anthem have asserted, without much evidence, that people are using these SEPs (mostly
designed to allow changes when you get married, divorced, have a baby, move to
a different state where your current plan wouldn’t cover you) to “buy to use”,
in Anthem’s words, meaning you wait until you’re sick to get insurance. Hiltzik
presents data that shows this is not significantly the case, and that it is
absurd; he writes “Aetna must think the
entire country consists of people plotting how to get a quickie marriage or
divorce or have a baby just in case they get sick. The vast majority of SEPs
cover a relatively trivial number of cases, unless you think there are hordes
of people applying to become members of a Native American
tribe after they get sick.”
Of course, people do game the
system. But the big gaming is by the insurance companies themselves and the providers
of care. These corporations, big insurance companies, health systems, drug
makers, who have the clout to “game the system” do so all the time as part of
their core business models. It is convenient for them to divert our attention
to regular people, middle-class people, and especially poor people, as the ones
gaming the system. In fact these are of course the folks who suffer the most
harm, whose health is most affected, whose access to care is most limited, and who
are stuck with crummy health coverage because this is all they can afford.
The insurers work every legal
angle (and perhaps some not-so-legal) to figure out how to mostly insure
relatively healthy, low-cost people (after all, 5% of people account for 50% of
health costs and 1% for 20%, see my Red,
Blue, and Purple: The Math of Health Care Spending, October 20, 2009, and Kaiser Health
News report 2013), while the
high-cost patients are covered by Someone Else. Providers, especially health
systems and hospitals, figure out how they can “upcode” to get maximum
reimbursement from insurers, attract people who have high-profit-margin
conditions to themselves, and encourage high-cost, low-reimbursement poor and
poorly-insured people to find their care from Someone Else. Insurers blame
providers for charging too much, providers blame insurers for paying too
little. One of the other panelists, a hospital executive, complained about how
insurers seek transfer risk, which is part of the definition of insurance, to
the providers. Neither is blameless, and the other big players, pharmaceutical
companies (and device manufacturers) make out like bandits, with no major
candidate having a real plan to address this according to a report by Julie
Rovner of Kaiser Health, (cited here
by Medpage Today). Of course, this equates all plans to “negotiate prices” and
it is obvious that a single-payer health plan, such as that advocated by Bernie
Sanders, will have a lot more negotiating clout than the multiple-insurer mess
that other candidates support and exists today.
What did I say as a panelist?
Basically, that the goal of the system should be to maintain and improve the
health of people, and that the economic design of the system should be designed
to achieve that goal, rather than having competing economic theory be the
driver, and people the incidental victims. I said that spending money on
providing health care to people was not a bad thing, but spending huge amounts
on “health care” when more than half was going to profit was. I said that all
this spending on medical care (and profit) limited what was left to be spent on
creating the conditions that allowed people to benefit from medical care – like
housing, food, education – the social determinants of health.
I think that this resonates with
people, both at the event and in the world. Or maybe I’m one of those “hopeless
idealists”. If the alternative is being cynically corrupt, I wouldn’t want to
be anything else.
* Citations from that blog post: “RAND Health Insurance
Experiment (as cited in Freedom
abroad, health at home: experiments in preventive health care, February 13,
2011; the study was published in the New England Journal of Medicine in
1983[1]; and it is
summarized in an article by Joseph P. Newhouse, "Free for
all?: lessons from the RAND Health Insurance Experiment",
RAND 1993.”
