Complex Eligibility Requirements, Much-Beloved of Liberal Democrats, Are Lethal When They Take the Form of Medicare Co-Pays and Deductibles

By Lambert Strether of Corrente

Readers will recalll I regularly lambaste liberal Democrats for their love of complex eligibility requirements (which function (a) as a Jobs Gaurantee for credentialed gatekeepers, and (b) as an opportunity for endless moralizing about who is worthy of government assistance, and how much). Well, today I get to do a happy dance, because an interesting paper — sadly, a year old — from the National Bureau of Economic Research crossed my Twitter timeline (via; source): from Amitabh Chandra, Evan Flack, and Ziad Obermeyer, “The Health Costs of Cost-Sharing,” Working Paper 28439. Turns out that complex eligibility requirements are even worse than I imagined they would be (and liberal Democrats more culpable).

This will be a very short and simple post. I will first present a portion of the methodology of the paper (it involves a natural experiment), and then summary results as the authors worked them out. (Since the statistics involved are w-a-a-a-y above my paygrade, the presented methodology is, alas, more a “proof of seriousness” than anything else. Also, the paper is written in the idiom of mainstream economics. That is not my idiom, so please forgive and correct any errors). Then I’ll make a few remarks on the relevance of the paper to contemporary politics.


The authors develop their “main sample” with a natural experiment, and then refine it with machine learning. From pages 3-4:

Direct harms to health resulting from cost-sharing, though, have been difficult to detect. This is not for lack of study. A central challenge is that the prices patients face are not random, and typically depend on prior utilization, creating spurious correlations between prices and health….. So it is perhaps unsurprising that studies have largely found null effects (Choudhry et al., 2011), or effects only on proxies for health outcomes, largely utilization of hospital or emergency care, or self-reported health (Chandra et al., 2010; Finkelstein et al., 2012; Geruso et al., 2020).

Here we explore the impact of cost-sharing on mortality, using data from Medicare’s prescription drug program. To simulate random assignment of drug prices, we use a strategy introduced by Aron-Dine et al. (2015) and Kaplan and Zhang (2017): variation in drug prices as a function of a beneficiary’s month of birth. This variation flows from a quirk in Medicare’s drug benefit structure, and specifically the annual spending thresholds that shift the price of drugs. Every January, beneficiaries start the year paying 25% out-of-pocket for drugs; but when they reach approximately $2500 of total drug consumption, they pay 100% out-of-pocket for the next drug. By themselves of course, these price changes are not exogenous: they depend on prior utilization. But critically, plan thresholds are not pro-rated in beneficiaries’ first calendar year of enrollment, and eligibility for enrollment begins in the month beneficiaries turn 65. So those born in later months of the year enroll in later months of the year, and in turn have less time to reach thresholds, meaning they face lower prices on average. Thus birth month creates exogenous variation in prices, by influencing enrollment month in the program. We focus on end-of-year prices and outcomes, specifically the month of December following Einav et al. (2015) and Einav et al. (2018). This strengthens our instrumental variables strategy: the later in the year, the more differences in measured spot price across enrollment months correspond to differences in full future price of a drug, before prices reset for all enrollment months on January 1.

So far we have relied heavily on the existing literature for our identification strategy, but have not addressed a major unsolved problem: used alone, the enrollment month instrument lacks the precision needed to detect health effects. This is because while enrollment month shifts December prices, it is a blunt tool. Within a given month, there is still wide variation in year-end prices, as a function of a beneficiary’s particular spending trajectory. For example, consider two February enrollees. One spends $500 per year, meaning despite her early-year enrollment, she remains far from spending thresholds, and pays only 25% of her drug costs at year-end. Another spends $5,000 per year, meaning she enters the ‘donut-hole’ coverage gap, and pays the full 100% of her drug costs at year-end. Instrumenting for price with enrollment month alone will assign both the same (average) year-end price, over-estimating the price for the first, and under-estimating it for the second. The resulting imprecision in the first stage creates problems for detecting rare health outcomes in the second. This could be avoided if we could condition on spending trajectories: ideally, we would like to compare beneficiaries on similar trajectories, who face different prices solely because they enroll in different months, instead of comparing large groups with heterogeneous prices. But naturally, we cannot use realized year-end spending, which is endogenous to enrollment month-driven variation in cost-sharing.

Our strategy is to estimate, for each beneficiary, what their total 12-month spending would be in the absence of cost-sharing, and control for this prediction in our analysis. To do so, we draw on data from a separate sample of Medicare beneficiaries to generate predictions on spending. The sample is similar to the one we study, but unaffected by enrollment month or cost-sharing: ‘dualeligible’ 65-year old Medicare enrollees, on Medicaid or other low income subsidies, who have the same enrollment criteria for Medicare Part D but face minimal cost-sharing. With these data in place, the task of predicting 12-month spending in the absence of cost-sharing is a straightforward ‘prediction problem’ (Kleinberg et al., 2015). We use machine learning tools to fit a function in the dual-eligible sample, and apply it to generate ‘counterfactual’ predictions in our main sample: how much would they have spent in 12 months, without cost-sharing?

There’s a lot more, all of which, as I said, is severely above my paygrade. Perhaps some statisticians/economists would care to weigh in. (When you think about it, it’s more than a little problematic that highly skilled economists have to go through enormous gyrations like this to determine the mortality effects of health care policy implementation (ffs)).

The Results

From the Conclusion (page 36):

We find that small increases in cost cause patients to cut back on drugs with large benefits, ultimately causing their death. Cutbacks are widespread, but most striking are those seen in patients with the greatest treatable health risks, in whom they are likely to be particularly destructive. It is difficult to affirmatively establish that we have identified behavioral hazard, in the precise sense of a systematic failure to balance the cost with the benefit of care. But we emphasize that the size of the mortality increase cannot be reconciled with any current understanding of the value patients place on life.

We emphasize that our results do not capture the total impact of cost-sharing on health. We estimate only mortality, not morbidity, and only how December price changes affect 65-year-olds’ December mortality: a very specific setting, and a very short time period. But patients face costsharing throughout the year, and the life-span. If they respond with cutbacks similar to the ones we observe here, they would experience similar increases in mortality in many other settings and over longer time periods. While these effects are as-yet undetected, there is no reason to think that they are not present and equally large. Indeed, because our estimates are formed on largely healthy 65-year olds, effects in the larger (older) Medicare population may be quite different, and potentially larger, if the benefit of drugs is increasing in the underlying mortality hazard (e.g., older patients, nursing home patients, dementia patients), and if drug benefits cumulate over time horizons longer than one month. Understanding the range of health consequences of cost-sharing, and developing new policies to limit harms, is an urgent need.

And from the Abstract:

We use the design of Medicare’s prescription drug benefit program to demonstrate three facts about the health consequences of cost-sharing. First, we show that an as-if-random increase of 33.6% in out-of-pocket price (11.0 percentage points (p.p.) change in coinsurance, or $10.40 per drug) causes a 22.6% drop in total drug consumption ($61.20), and a 32.7% increase in monthly mortality (0.048 p.p.). Second, we trace this mortality effect to cutbacks in life-saving medicines like statins and antihypertensives, for which clinical trials show large mortality benefits. We find no indication that these reductions in demand affect only ‘low-value’ drugs; on the contrary, those at the highest risk of heart attack and stroke, who would benefit the most from statins and antihypertensives, cut back more on these drugs than lower risk patients. Similar patterns exist for other drug–disease pairs, and irrespective of socioeconomic circumstance. Finally, we document that when faced with complex, high-dimensional choice problems, patients respond in simple, perverse ways. Specifically, price increases cause 18.0% more patients (2.8 p.p.) to fill no drugs, regardless of how many drugs they had been on previously, or their health risks. This decision mechanically results in larger absolute reductions in utilization for those on many drugs.

So I think “lethal” in the headline is more than fair. (It would be interesting to do a similar study on the “tax on time” Medicare’s neoliberal infestation has produced; I would imagine the effects are similar, if smaller.)


The authors, as one might expect, propose making eligibility requirements even more complex, rather in the manner of a Ptolemaic philosopher adding yet another epicycle:

One way to do so would be via value-based insurance design (VBID), where proven treatments (e.g. anti-hypertensives) are given zero (or even negative) copayments, while treatment with ambiguous benefit (e.g. proton pump inhibitors) are given high copayments

The obvious solution is, of course, to blow the entire system to smithereens with a single payer system, eliminating the lethal co-pays entirely. (One will, of course, have to pry complex eligibility requirements from the cold, dead hands of liberal Democrats, but a man can dream.) Trump showed the power of just writing checks with the CARES Act. Trump also set up a vaccination system that was free at the point of care. Get the credentialed gatekeepers ouf of the way.

I recently ran across a new acronym from the right: RAGE. From Vanity Fair’s recent article on Peter Thiel’s blood bags new right wing ecosystem:

And the way conservatives can actually win in America, [Curtis Yarvin] has argued, is for a Caesar-like figure to take power back from this devolved oligarchy and replace it with a monarchical regime run like a start-up. As early as 2012, he proposed the acronym RAGE—Retire All Government Employees—as a shorthand for a first step in the overthrow of the American “regime.” What we needed, Yarvin thought, was a “national CEO, [or] what’s called a dictator.” Yarvin now shies away from the word dictator and seems to be trying to promote a friendlier face of authoritarianism as the solution to our political warfare: “If you’re going to have a monarchy, it has to be a monarchy of everyone,” he said.

Now, the concept of “a monarchical regime run like a start-up” makes me want to scream and run; it used to be conservatives who warned that it’s always possibile to make things worse. I am in no sense a fellow traveler with Yarvin. But whacking every part of the health care system that implements complex eligibility requirements is most definitely RAGE-adjacent. And I would bet there are millions of voters whose level of irritation is similar to mine (especially when we’ve seem vaccines free at the point of care. Why not everything?). Democrats — faced with an existential crisis as they are — might do well to consider that if they don’t RAGE, others will; the sclerosis and dysfunction is that obvious. And if Theil and his merry men do the RAGEing, there’s won’t even be any government employees left to cut checks. Why would there be? The peasants can wait for coaches to pass, and pray for some gold coins. So we can do this the easy way, or the hard way….

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. Susan the other

    This stuff is so wrong-headed it makes my eyes glaze over. I start thinking, Why are they this stupid? One of my perennial answers is that since 1980 our “capitalist” system has been collapsing. For lack of easy things to exploit – the result of progress and technology, and depletion of resources. So how does a staggering giant economy steady itself? It creates a socialized medical industrial complex. Open to exploitation by big corporate monopolies; and private funds of funds of financialized capitalist investors, which inevitably wind up investing in the medical/pharma industry. Because in order to keep it all going it is necessary to socialize the MIC in favor of private money and investors. It’s a for-profit socialist scheme. Otherwise they’d all go bankrupt in short order. And they put the extra costs caused by profiteering on the backs of those seeking medical care. A perfect no-brainer. A little here, a little there. A few surprise bills out of the blue. Etc. And an occasional pandemic just for an extra good year. Why isn’t there a discussion on any of this? Why do we trust them at all?

    1. timbers

      Just got an invoice of about $400 for routine blood lab work related to my annual doctor visit. Previously it was always covered by insurance as was considered preventive but learned starting this year they dropped it as such. Seems everywhere you turn they want more from you. More and more I consider living until I get an expensive illness while figuring out the best way to pass on whatever I have that remains when the time comes. Regarding this particular invoice I intend dispute 1 of 8 tests I was billed by claiming it was a mistake, didn’t order it, and not pay. It’s too small to chase so they likely will just write it off and honestly I don’t need that test.

      1. Yves Smith

        Have your doctor re-code it as for particular conditions and resubmit.

        My ancient health care plan does not cover any preventive save one annual physical and eye exam. So the labs for the physical, which provide the most useful information, are not included. So my MD codes the labs as for medical issues and they all get paid (save Vit D which nobody pays and I take Vit D supplements, so I had her drop that test).

      2. Janie

        Tests can be coded as “rule out” such-and-such. With normal results, no follow-up is needed

      3. timbers

        So…today my insurance reversed themselves, telling me they will pay for the tests. They basically said they are recoding as you mentioned. When I called to check about recoding, they volunteered this info before I could say anything. Good news.

    2. britzklieg

      corporate/military keynesianism for the rich, rapacious post-modern capitalism for the rest of us.

  2. JBird4049

    With the Democrats giving us deaths by a thousand cuts and the Republicans want us to rot and die on the streets what is the ultimate difference between them? The collapse of society via dysfunction or via no function leads to the same end.

    What every single civilization, empire, kingdom, society, nation down to the tribal or family band has needed to survive was the leaders who ensured the delivery of the essential services need for its people to survive. It is goodbye ruling class when they fail with the people taking over the ones with the weapons or, if the society is very lucky, the social connections, not the people with the money; Theil would likely end up as a thrall somewhere to his former head goon.

    No degree in history is needed to know this. Just some book reading, which makes me wonder just how well read our leaders our. Or just how good those degrees from Harvard, Yale, and Stanford are. Do they think some farmers with pickups can keep California’s massive waters works working as it? It needs regularly work via the evil government. The state does supply most of the winter vegetables to the whole country. Then there are all the roads, dams, canals, railroads, municipal, and state water systems. Not to mention the ports and airports. It’s a big, big, big country that only functions because of the infrastructure built up over three, even four, hundred years.

    With this rant over, I have to ask just how do we get past the rent seeking clique and the RAGErs? Too many people believe in their BS and both groups are far too short sighted, foolish, and suicidally egotistical enough to take us all down.

    1. Swamp Yankee

      Re: infrastructure. Agreed. Not just 3 or 400 years old, but many thousands. Huge numbers of our paved roads follow Native paths. New England shells show up in Baja California, and Great Lakes copper in Louisiana. It has taken millennia.

    2. LilD

      I think the core republican strategy is to let delivery of essential services be provided by rent extracting private entities, not to make them go away.
      Not sure what
      Democrats want

      1. anon y'mouse

        Democrats appear to want to divide the Worthy from the Unworthy, so that they can’t be blamed for helping the Unworthy.

        crumbs but only for those who prove that they probably already have some they’ve managed to scrounge up with ingenuity. like Biden’s recent plan to only help those student debtors on Income Based Repayment who’ve managed to make payments.

        because not making payments (being too poor to do so) means you are a failure that should go away and drop dead. the “market” has weighed your heart and decided that you should be cast into the concrete wilderness.

        this maintains the Dems street cred as trying to “help” people, while making sure that so few actually get help that it it is almost of zero material difference. oh, and while employing bureaucrats to help them write more reports about who they are “helping”.

  3. Stephen V.

    We found a new doc who is an oncologist / refugee from El Systema because of (voluntary !) Vaxx mandates at the VA.
    He is what I now know to be a “direct primary care” (DPC) physician. This may be the way to go for those of us who opt not to have the robotic surgery & chemo.
    Turns out the systema Dr. has no choice: if he doesn’t prescribe according to protocol–no insurance reimbursement!
    DPC model starts with this no insurance reimbursement premise and is funded by monthly subscription instead.

  4. skk

    Data Science is my biz, so I really really should examine their paper thoroughly. But I spend quite some time in finding optimal pricing, and that’s got to be a class , knowing how to go about it. For example, because of the drug plan I chose , 6 of the 7 medications are 0 copay. Otoh one is brilinta,Generic is ticagrelor. The generic is Still not authorized in the USA, the usual drug company scam. On Medicare, with the drug plan,, it’s 600 per 180 days with donut hole by fall.. Over time, I’ve found ways to order the generic. Now I get it direct from India, at 90 bucks. Canada would be 330. Which avoids the cos and the donut hole.

    And by taking the medication regularly I’ve got to be reducing
    My mortalityrisk.
    This sort of wherewithal to analyze, execute with appreciation of the risks, in a highly technical field like pharma, by having expert contacts and by self study is undoubtedly a class issue.

    1. JBird4049

      >>>This sort of wherewithal to analyze, execute with appreciation of the risks, in a highly technical field like pharma, by having expert contacts and by self study is undoubtedly a class issue.

      Yes, it is. It is something that a college grad would be able to do. One who has access to the internet and at least a very good phone or a laptop. This only rules out something like fifty plus percent of Americans.

      Maybe this is like a back end or covert form of I.Q. testing, which were originally developed for eugenics studies. Not having the paperwork skills (or connections) needed to get help is some Social Darwinist test to winnow out the supposed defectives and undeserving poor.

  5. Janie

    Tests can be coded as “rule out” such-and-such. With normal results, no follow-up is needed (reply to timbers, Yves upthread)

  6. ambrit

    Reply to ‘skk’ at 3:22 pm
    You describe a form of “Asymmetric Information.” As such, then, would the posessors of “inside information” be a seprate class, or merely a sub-class? I can see situations where one posessed “inside information” yet was not able to capitalize on it. Other forms of ‘class’ would come into play there.
    Anecdotally, the “rules” by which Medicare works can cut both ways. My GP likes to check my cholesterol levels regularly. This last time, Medicare rejected her latest charge for blood work. So, she has had to ‘modify’ her routine. At a second step removed, her ‘bosses’ at the clinic must be wondering about how best to milk all the “change cows” they have in their “financial dairy.” I get left wondering about the pros and cons of regular bloodwork. Hopefully, I will experience a kalpa’s worth of cataclysms leading to kensho, and blessed non-being.
    As the old proverb says; “When Godzilla battles Mothra, Tokyo burns.”

  7. Felix_47

    Somehow there has to be some way to contril utilization though. The system with the greatest experience is the British NHS. It has been weakened considerably by government funding limitations but England simply is not as rich as the US and the per capital health care spending is far less. But the system itself is pretty sensible. Medications and treatments that are not particularly effective are screened out of the system and there are no real avenues of appeal. The biggest factor is that doctors are on salary with no bonuses for increased prduction. So basically the doctors, who happened to go to medical school, decide what to treat and what not to treat. The NHS is well loved by Britishers although the recent governments have done their best to destroy it. With US style funding it could be a good starting model for the US. At least they have had 70 years to make a lot of mistakes that don’t have to be repeated. The US system cannot continue this way forever. The percentage of the GNP goes up and up every year. Thank you Yves fr persenting this paper.

    1. PlutoniumKun

      I think the best model for the US to study is Taiwan. Taiwan quite deliberately adopted Medicare in the 1990s and made it universal. The Taiwan system has its faults – its run on a bare boned budget and doctors are quite poorly treated – but it is comprehensive, generally very good for most people, and by US standards astonishingly cheap (less than 6% GNP, perhaps one third of US expenditure, half of Germany/France).

      The huge problem for reforming a system like in the US is that its not just insurance and pharm companies that like it, plenty of doctors and other internal players are reaping profits from it. Doctors led the opposition to the formation of the NHS and had to be paid off (‘their mouths were stuffed with gold’) to agree to it. Here in Ireland the attempts to simplify and make the system fairer are being slowly ground into the dust by the medical establishment, who quite like a bit of complexity if they can make money from it.

      1. Jack

        Also true for the US. The AMA (doctors) killed universal health care for Americans in 1945. They spent hug amounts of money lobbying and taking out ads to kill Truman’s attempt for Universal health care. All because it would have lowered how much money they made.

    2. larry

      Felix, you are mistaken in your comparison of what the US and the UK can afford in this context. Both countries run sovereign fiat currency systems with flexible exchange rates and can, thus, afford anything they can purchase in their own currency. Therefore, there is no difference between the US and the UK as to whether a national health system can be paid for; thus, the fact that the US is richer overall than the UK is irrelevant. The primary limitation in both cases are the resources available. The US may have more of these than the UK. Even so, certain political choices, not financial constraints, have been made in the UK in recent years about the NHS for ideological reasons. These political choices have no financial justification, other than those that may relate to personal gain.

      1. PlutoniumKun

        If you think of it in resource allocation terms rather than money, the US system is grotesquely costly. A vast apparatus of people are employed to just work out bills and create/navigate an unnecessary bureaucracy designed to aid rentiers. In simple terms, millions of people working at made up jobs instead of jobs that might actually make the world a better place.

        1. anon y'mouse

          i tend to call what you are describing here “sports for the sedentary classes”.

          the two sides–medical office billing and insurance (denial) square off with paper instead of round projectiles.

          i sometimes wonder if the point of some of this is to keep these people “gainfully” employed. there must be millions of them!

  8. thoughtful person

    Yes, something universal like Taiwans system sounds great. Instead we are getting “REACH”. This is Biden’s new improved privatetization plan. 40% of medicare payments will go to private contractors who will run the new system!

    Makes those protestors of Obamacare back in the day, with the “hands off my medicare” posters look pretty smart.

    1. Ellery O'Farrell

      Physicians for a National Health Program (PNHP at is fighting REACH. Reach out to them! They propose a publicly financed, non-profit single-payer national health program that would fully cover medical care for all Americans.”

      Haven’t done any research, but they sound legit.

  9. Juneau

    So glad to see someone studying this. For the past few years, every January, there have been big surprises for my people solely dependent on SSI and social security retirement (people who get very little money in the big apple) who suddenly find out they have a 150-200 dollar annual pharmacy deductible under medicare. None knew about it, and understandably blamed the pharmacists, and understandably became angry, panic stricken, overwhelmed and desperate. I hate January. This is cruel, especially with elderly and severely ill, isolated, cognitively impaired people on tiny incomes who simply don’t have the means to cope. It is a brutal form of cost cutting.

  10. orlbucfan

    I haven’t had any REACH notifications yet, and I’m on the email lists for both Medicare Watch and the PNHP. Yves points out a persistent problem with billing: incorrect coding. It stems from incompetence. I wouldn’t doubt a lot of it is deliberate. It can turn into a nightmare like so many other items in the U.S. Deathcare System.

    1. Ellery O'Farrell

      PNHP sends me regular emails; not sure why you aren’t hearing about REACH. They’re having a a roundtable discussion about Direct Contracting/REACH, the dangers of privatization and so-called “value-based care,” and how to achieve true equity in our health system. Panelists include Dr. Linda Rae Murray, Dr. Abdul El-Sayed, and Dr. Claire Cohen.

      It’s at 7:30 pm EDT on Monday, May 9. You have to register ahead of time.

  11. John

    The VA is already a pretty good model for universal health care. It is better than Medicare. It is pretty pure socialism for those who receive treatment. It needs some things fixed but that would be true for anything.
    Of course the uniparty wants to privatize and kill it.

Comments are closed.