By Lambert Strether of Corrente.
The political class seems to have collectively agreed that the key metric for ObamaCare’s success or failure is the enrollment numbers; perhaps because they love a horse-race; perhaps because enrollment numbers are the only numbers we have, and so we face The Streetlight Effect. So I’ll take a quick look at the enrollment numbers, then look at some other potential metrics, and finally ask what is (in my mind) the key question: Can shopping in the ObamaCare “marketplace” enable citizens to match insurance to their health care needs? Spoiler alert: No, because the ObamaCare marketplace is a lemon market.
ObamaCare’s Enrollment Numbers
The administration — hold onto your hats, folks, this is a shocker — has been gaming and lowballing the numbers:
The U.S. administration on Monday dramatically cut expectations for 2015 Obamacare enrollment, saying it aims to have a total of 9.1 million people enrolled in government-backed federal and state health insurance marketplaces next year.
The stated goal, 30 percent lower than a Congressional Budget Office forecast of 13 million enrollees, reflects the government’s latest thinking about new enrollees and returning customers, according to officials who expect the actual number to fall between 9 million and 9.9 million
The ACA sign-ups site — surprise! — supports the 9 million figure:
With the holidays out of the way, things should be ramping up again; the only question is by how much? I’m gonna be cautious and go with about a 35% bump over last week, to around 140,000 on the federal exchange, bringing total plan selections to around 6.73 million QHP selections for Healthcare.Gov through tonight (January 9th). As always, I’ll be happy to have underestimated a bit.
Add in the other 14 states, and the national QHP total should be at around 9.05 million through today.
It would take quite an enrollment surge to make 13 million:
The Congressional Budget Office has estimated that 13 million people should be paying for plans sold under the law in 2015, a figure that would require “an enormous surge” of enrollment in the next six weeks, [Larry Levitt of Kaier] said.
Nevertheless, deadlines do generate enrollment surges, so we’ll see whether we succeed — by which I mean, whether the administration will have successfully lowballed expectations — on February 15, when ObamaCare’s open enrollment ends.
Anyhow, for “progressives” whose metric is enrollment, there’s a considerable degree of triumphalism. Kevin Drum is typical:
Chart of the Day: Obamacare Just Keeps Working, and Working, and Working….
Today, Gallup released new results for the final quarter of 2014, which marked the start of Obamacare’s second year of enrollment, and guess what? The ranks of the uninsured are dropping yet again. The percentage of adults without health insurance dropped from 13.4 percent to 12.9 percent.
Which is a pretty curious definition of “working,” isn’t it? Since when is the mere purchase of a product regarded as a sign the product works? I mean, unless you’re an insurance salesperson, which, granted, many career “progessives” (like Drum) have become. Then, whatever sells, “works,” which is another problem with career “progressives,” come to think about it. (See Joe Firestone for an alternative perspective.) So let me propose some alternative metrics.
Other Potential Metrics for ObamaCare
We might ask whether ObamaCare has decreased costs. To which the answer would be “no”:
“It definitely looks like it’s going to work,” [there’s that word again!] Caroline Pearson, vice president of the health care reform practice at the consulting firm Avalere Health, said before the HHS announcement. “All signs are that the markets are working really effectively. You’ve got an increased insurer participation and very stable premiums,” she said. The average nationwide price increase for next year is 5.4 percent, but there’s a lot of variation and some premiums even went down, according to PricewaterhouseCoopers.
So, with real wages flat for a generation and the forseeable future, why aren’t Democrats screaming about a 5.4% increase? Why isn’t Obama jawboning them down? Questions that answer themselves, once asked.
Or we might ask whether ObamaCare has improved health outcomes. To which the answers would range from “maybe” all the way to “too soon to tell.” The Los Angeles Times:
The new study, published in the Journal of the American Medical Assn., suggests the coverage expansion also measurably increased the number of young adults who reported that they are in excellent physical and mental health.
Hmm. Self-reported. This study of RomneyCare is a bit more definitive:
A Harvard team compared the mortality rates in Massachusetts before and after then-Gov. Mitt Romney (R) signed the health care reform bill into law in 2006 with the mortality rates in similar counties in other states during the same time periods. Based on their calculations, the mortality rate declined 2.9 percent overall among adults 20 to 64 years old after the law went into effect — which translates into 8.2 fewer deaths per 100,000 people.
Hmm. Since ObamaCare’s coverage varies randomly by jurisdiction (down to the county level), income, employment status, marital status, and other factors, it’s difficult to see how ObamaCare could claim that entire 2.9% decline, even if ObamaCare’s
crapified system architecture variations in coverage could be controlled for.
Finally, it could be too soon to tell what ObamaCare’s health outcomes are:
Experts say that the real health benefits of the ACA may not be seen until millions of previously uninsured Americans have been able to take advantage of the law’s massive expansion of Medicaid.
Hmm. So it’s all down to Medicaid expansion, and not to the marketplaces? Just to pre-empt, here: I’m not saying that health care doesn’t improve health; it can and does. I merely propose the truism that health insurance and health care are not the same, and that if improving health care in the general population is the metric for success, ObamaCare has not been shown to achieve it.
Finally, we might lower the bar, and simply ask if ObamaCare has achieved satisfactory
citizen customer satisfaction levels. Sadly, we can’t know this, at least on a national scale, because HHS hasn’t been measuring it:
The Department of Health and Human Services (HHS) is looking for vendors to run its “National Data Warehouse,” a database for “capturing, aggregating, and analyzing information” related to beneficiary and customer experiences with Medicare and the federal Obamacare marketplaces.
So, the neoliberals running the show in the administration and HHS propose a shopping model for health insurance purchase, where people are not citizens but consumers or customers, and then propose to measure customer satisfaction only as an afterthought…. Shaking my head.
The ObamaCare Marketplace is a Lemon Market
Let’s take the 30,000 foot view and ask ourselves whether any metric for ObamaCare’s success is possible in the first place. Surely the most basic question of all is this:
Can shopping in the ObamaCare marketplace enable citizens to match insurance to their health care needs?
My answer is no, because the ObamaCare marketplace — like health insurance marketplaces generally — is a lemon market. George Akerlof, in his famous paper, “The Market for “Lemons”: Quality Uncertainty and the Market Mechanism” [PDF], defines a lemon market as follows, using the market for used cars as an example:
After owning a specific car, however, for a length of time, the car owner can form a good idea of the quality of this machine; i.e., the owner assigns a new probability to the event that his car is a lemon. This estimate is more accurate than the original estimate. An asymmetry in available information has developed: for the sellers [of insurance, too] now have more knowledge about the quality of a car than the buyers [of insurance, too]. But good can and bad cars must still sell at the same price-since it is impossible for a buyer to tell the difference between a good car and a bad car. … Gresham’s law has made a modified reappearance. For most cars traded will be the “lemons,” and good cars may not be traded at all. The “bad” cars tend to drive out the good… [T]he bad cars sell at the same price as good cars since it is impossible for a buyer to tell the difference between a good and a bad car; only the seller knows.
So the key point is the information asymmetry between buyer and seller. Does such an information asymmetry exist in the ObamaCare “marketplace”? You bet. Let’s turn to an actual navigator:
There are so many variables that I can’t speak to, even if I were allowed to. I can define terms for people, but I can’t predict. There are now 143 plans in the Marketplace in my area, each with details to consider on things like deductibles, premiums and so on. These figures are probably set by actuaries figuring out what exactly the numbers should be to make money, but still have people buy the plans.
Individuals don’t have an actuary to help figure this out. So sometimes I try to make actuarial tables with them on the fly, and bring up spreadsheets to show them, “OK, this is you using your insurance in a really bad year. This is you using your insurance in a year where you’ll be healthy.”
It’s a complete farce. On the surface, individuals have all these choices, but I can’t really predict what will be best, and the patient can’t either. That’s one of the problems with the fact that all this is privatized. The people who actually have the useful information aren’t in the room.
“The people who actually have the useful information aren’t in the room.” That’s the information asymmetry.
Of course, that’s just one navigator. But we have well-conducted studies as well, which also bear out the information asymmetry:
The Kaiser Family Foundation recently conducted a nationally representative survey of 1292 adults, asking them 10 questions to gauge their knowledge of how health insurance works.
The general public did reasonably well, with 68% answering more than half of the questions correctly (though only 4% got a perfect score of 10). For example, 79% knew that a health insurance premium has to be paid every month even if you don’t use any health care services, and 72% could identify the correct definition of a deductible.
Questions involving arithmetic proved more challenging: Only 51% could correctly calculate the out-of-pocket cost for a hospital stay involving a deductible and copay, and only 16% could determine the cost of an out-of-network lab test where the insurer caps the allowable charge. ….
Not surprisingly, uninsured individuals who took part in the survey—who, by definition have less experience with health insurance—had more difficulty. For example, only 64% of uninsured adults knew that a premium has to be paid every month, only 53% could correctly identify the definition of a deductible, and only 57% knew what a provider network is.
This lack of health insurance literacy (and numeracy) has important implications for how effectively people use health care services and their insurance. Using an out-of-network physician or hospital could cost a patient thousands of dollars in higher out-of-pocket costs. Those who don’t know what a provider network is and that cost-sharing differs substantially between in-network and out-of-network clinicians and medical institutions might unwittingly run up those charges.
Similarly, how many people would think to confirm that the surgeon and anesthesiologist are in their plan’s network when having surgery at an in-network hospital? Just 41% of the general public and 29% of the uninsured knew this was not guaranteed.
The authors’ conclusion is that “insurance literacy” should be fostered. Of course, that presumes good faith on the part of insurance companies, which, to say the least, assumes facts not in evidence. The article goes on to give an example of how ObamaCare’s lemon market — though they don’t call it that — er, works:
Consider a single woman aged 40 years in Miami making $30 000 accessing healthcare.gov to shop for insurance for 2015. She would be presented with 90 different plans, described using all the terms that confused many people on the Kaiser survey.
The plan listed first has a monthly premium of $156 after applying an income-related tax credit of $68. (Even people who have received tax credits don’t always know it, which is another potential source of confusion, especially because those tax credits will be reconciled based on actual income when the recipient files her income tax return for the year.)
That lowest-premium plan has a deductible of $6500 that applies to all services except for generic drugs and pays 100% of all services after the deductible is met.
For $7 more per month in premium, our hypothetical consumer could get a plan from the same insurer with a $5000 deductible and 40% coinsurance for most services after the deductible is met.
For $50 more per month in premium, she could get a plan—also from the same insurer—with a $5000 deductible, but with physician visits and generic and preferred brand-name drugs covered with copays before the deductible is met.
Even if this hypothetical woman were a well-informed consumer with perfect knowledge of how much health care she expects to use over the coming year, she would have difficulty deciding which of these 3 plans makes the most sense.
So, amazingly, not only does ObamaCare require people with unpredictable incomes to predict their incomes, it requires people with unpredictable health care needs to predict their health care needs. (“If only I’d known about my case of Dengue Fever beforehand, I would have bought a different policy!”)
I suppose, however, that’s what happens when you deny the very concept of social insurance, and shift all the risk onto individuals. In fact, we might view ObamaCare’s lemon market as part of the neoliberal playbook our whacky elites are going to keep running until the stadium blows up or the fans start ripping the seats out of the stands and throwing them on the field. Counterpunch:
Here Wall Street and Obamacare start to come together. The issue of the complexification of health care, forcing people to know and to competently navigate every aspect of insurance contracts, medical consultation and health care provision or suffer adverse consequences, is related to Wall Street strategies of issuing mortgages that only those with a Ph.D. in math and a lot of time to waste on contractual minutiae can understand …. The most complicated mortgages were issued to the least sophisticated borrowers.
The second-order fantasy at work is that individuals can control health care costs by selecting health insurers that in turn select competent low cost health care providers. The amount of information needed to make the informed choice between policies that might actually accomplish this is beyond the ability of everyone likely to be touched by Obamacare. (Quick: what is the probability that an in network anesthesiologist will be available on any given day? Congratulations, you are one ten-thousandth of your way to making a decision).
Information asymmetries everywhere. Only they know, if anyone does, but they are asking you.
I started the discussion of ObamaCare’s lemon market with a navigator; I’ll end with a
citizen consumer. From Kaiser Health News:
With the deadline looming to re-enroll in California’s insurance exchange, Kuei Lin Liu faced a tough question: Do I want to go through this all over again?
After a year of bureaucratic snags, data glitches and inexplicably dropped coverage, Liu wondered whether Covered California was worth the effort.
“I’m so frustrated right now,” she said. “I spent the last year trying to work out this mess.”
The 37-year-old Richmond resident first enrolled in the exchange last fall, when she left a senior accounting position at a big corporation and the benefits that came with it.
Note that “senior accountant.” That seems to be the skill level required to fight your way through the information asymmetries to a policy that meets your health care needs. I’ll leave out the dropped coverage, the coverage date hassles, the visit Liu’s insurance agent paid to Blue Cross, the complaint filed with the state, the disappearing computer records, and the billing issues, and all the other professional skills and privileges most subsidized ObamaCare
citizens consumers won’t have, and cut to the chase:
For months, Liu went back and forth about whether to re-enroll.
She found herself thinking, “It’s just too much work. I don’t have time for that.”
In other words, Liu wasn’t sure she wanted to pay ObamaCare’s “tax on time.”
If she took no action, she and her family would be automatically re-enrolled in their Blue Shield platinum policy….
Days before the Dec. 21 deadline for coverage beginning in the New Year, Liu cautiously decided to give Covered California another try. Instead of a platinum plan, she picked a slightly less rich gold one because she doesn’t expect to need as much care as this year when she had the baby.
So there you have it. Liu — a highly motivated professional accountant, assisted by an insurance agent (not a navigator) — was able to come away with some surety that she had “matched insurance” to her “health care needs” because she knew in advance what her health care needs would be. That’s what it takes to make lemonade out of the ObamaCare lemon market. For how many other ObamaCare
citizens consumers will that be true? The Times:
Selecting the best insurance plan requires not only significant knowledge about every component of insurance, but also the ability to accurately predict the likelihood of future medical needs.
I’ll close with a quote from Krugman, the 2009 model:
There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.
ObamaCare is a lemon market. It’s immoral to force people to purchase a defective product. And so we should not celebrate, with the enrollment numbers, that we have done so. Instead, we should take off the ideological blinders and move to the simple, rugged, and proven single payer system:
since the mid-70s, when Canada adopted its single payer system, we’ve conducted the largest controlled experiment in the history of the world. We’ve had two political systems spanning the same continent, both nations of immigrants and once part of the British empire, both mainly English-speaking but multicultural, both with Federal systems, and both with a free market system backed by social insurance. And the results of the experiment? The “evidence”? Canadian-style single payer wins hands-down.
Liz? Bernie? Hillary? Martin? Bueller?… Bueller?… Bueller?