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Why Did the Health Reform Individual Mandate Fail?

By January 17, 2017Commentary

“Fake” news is all the rage.  So is fake research as far as I can tell.  Fake research is that done to serve a political purpose, in which supposed facts and analysis are slanted to reach a certain end.  It is widespread in health care policy, as well as in climate science and other environmental areas.  If you don’t understand statistics and experimental design and if you aren’t willing to really dig into data quality, you don’t have a prayer of assessing the credibility of much of what passes for research these days.  The Urban Institute issues a report which is a likely example of this kind of work.  (Urban Institute Report)

According to this report, high premiums and declining coverage availability in many, if not most, exchange markets is due to three primary factors–adverse selection against the ACA marketplace, too much concentration in health plan or provider markets and adverse selection against certain health plans in a market, uncorrected by sufficient risk-adjustment mechanisms.  The authors think all of these can be fixed, demonstrating that there was nothing seriously wrong with the reform law to begin with.  Of course, they might think that, since they were among those advocating for the design and passage of the law.

Not sure I understand the logic of saying there is adverse selection against the individual insurance marketplace.  Everyone has to have coverage.  Some get it from an employer.  Some have to get individual coverage on the exchanges.  Some people can buy individual policies outside the exchanges.  These policies are usually cheaper.  So one solution the authors is propose is not letting people by coverage outside the exchanges.  So again, lets raise some people’s costs a lot so others’ cost goes down a lot. And remember that on the exchanges a ton of the cost is being subsidized by taxpayers, so let’s load some more spending on them.  The fundamental problem of the exchanges is we are making a lot of people who have little or no health expense buy insurance they truly don’t need and don’t want.  And so many of them don’t buy it, which does raise the average cost of those who do.

And the argument about concentrated markets makes me laugh.  For eight years this administration did nothing about consolidation in either provider or plan markets.  They finally decided to challenge two plan mega-mergers.  Consolidation, especially in provider markets, probably has raised prices and spending.  But it is not why the exchange marketplaces have been disproportionately dysfunctional.  As I said above, that is a result of the poor design and bad mandates.

And finally, apparently the warped risk adjustment mechanisms on the exchanges must not have been warped enough.  Different insurers may end up with patients with different risk profiles.  This can be random.  Not likely on the exchanges that it is due to benefit design, since that is standardized.  Also not likely to be due to different provider panels.  But let’s have a very complex mechanism to have the government provide stop-loss for expensive patients or make insurers with lower-risk enrollees, subsidize those with higher ones.  And let’s be surprised when that all doesn’t seem to work so well.

There was a functioning individual market in many states before the reform law was passed, if the state had reasonable regulations.  (For an example of a state which didn’t and which the rest of the country is ending up like, see New York.)  In these states, most individuals could find affordable coverage.  The market didn’t work well for the seriously ill with high costs, as they often were denied coverage or at least coverage for pre-existing conditions.  So what did the geniuses in the Administration and Congress do–lets ruin the market for everyone in the name of ensuring coverage for a few very expensive patients.  Think there might have been a better way to solve that problem?


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