Monday, June 4, 2018

ACA dropouts

Half of the people who sign up for Obamacare (ACA) get a flurry of medical care, then drop out before a year is over. They can always sign up again if they need to. People who stay on insurance tend to be those who have ongoing chronic and expensive conditions that need continual care. The implications for the viability of such insurance are not good.

This is the interesting conclusion of a new paper, "Take-Up, Drop-Out, and Spending in ACA Marketplaces" by Rebecca Diamond, Michael Dickstein, Tim McQuade, and Petra Persson. One good summary graph:




The authors measure health spending such as copayments and premiums out of bank data. A good table:



The important numbers are in panel B, among the "middle class."

"Panel B shows that enrollees under the ACA exhibit large increases in health spending when covered by insurance. Consumers with annual income less than 20K, for example, increased their health spending by 28% when covered and then cut their spending by 40% after dropping out. (My emphasis) Those with annual income in the 20K-40K range increased spending by 54% when covered, and cut spending by 51% when dropping out. 
(Yes, the huge numbers <20 pre ACA are interesting. It's a much smaller sample though -- people with < 20k of annual income who bought private health insurance.)

So, how do insurers respond when relatively healthy people are dropping out, and only chronically sick people keep insurance? Don't jump too quickly to conclusions.

The authors compare counties with high dropout rates to counties with low drop out rates. If there is a lot of competition in health insurance, you'd expect high dropout rates to lead to bigger price increases, to cover costs. If not, however, low dropout rates are a sign of a lot of desperate people with chronic conditions who will pay no matter what the premium


Here is a regression across counties. Low dropout rate leads to higher prices.

The conclusion is pretty clear. If we're going to have health insurance with guaranteed issue -- same price no matter your health status -- dropping out must have some consequences. The paper computes the cost of the current penalty (not well enforced, I gather) and given the current ease of signing up again if you get sick, finds the penalty not effective.

Of course, we could transition to personal, portable, guaranteed-renewable, time-consistent insurance instead...Oh, stop dreaming.

A minor interesting tidbit. Their data consists of all transactions by customers of a major bank. Like this:


Et tu, banks? I didn't realize banks sold this kind of data. Though it does not have person identifiers, it would be easy enough to figure out my record. Or President Trump's.

16 comments:

  1. The banks dont sell this data. too valuable for it to get into the wrong hands. Payment processors do sell data but they do it at the category level. It is not unheard of for banks to give access to researchers in exchange for a first look at the results.

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  2. It looks like the healthier participants are trying to avoid subsidizing care for participants with chronic illness which seems natural if it is allowed. Sometimes the need for insurance is to benefit from the bargaining power of insurance companies. Even if you pay 100% of the cost of medical care due to a high deductible you may pay less with insurance coverage even considering premiums which may explain why some healthy participants only sign up when they need care. Cost transparency and elimination of price discrimination by payer (self pay or insurance plan) can further decrease the demand for health insurance from healthy people and make the insured pool more homogenous with unhealthy patients. If there is a way out of subsidizing care it will always happen. How much subsidizing we want as a society and if there should be any element of personal reponsibility in maintaining health is a necessary discussion.

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  3. The ACA was needlessly complicated by the need to appease conservatives who wanted a market based approach, but then didn't vote for it anyway. Medicare for all is the solution.

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    1. Of course, the question is which of the two large Federal government systems will we get -- Medicare for all or VA healthcare for all?

      Veterans have been complaining long before the recent scandals about the problems of the VA system.

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  4. Seeing the numbers was interesting, even though this just proves out a point no one serious/informed was contesting in the first place: the ACA penalty was far too small.

    While my memory of the specific Congressional players is fading (to be fair, it has now been a few years), Obama & Co. always knew they needed a big penalty and effective "Cadillac" excise tax for the ACA to work.* But they had to back-off to get enough "progressive" votes for initial passage. Presumably the plan was to go back and patch things up later but, you know, the "Red Tide" and the rise of populist politics in both parties and Trump and etc. etc. etc. so it never happened.

    *Of course it's dubious the ACA would have worked even with a strong penalty and effective Cadillac tax; the point is just that the experiment never had a chance to play out, due to politics.

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    1. You are right about ACA and politics. But It was the GOP who did not want any penalty, or at least as small as possible, because the mandate was one of their big issues. Progressive voters wanted Medicare for all or if penalty, then very large, because the more people on insurance the lower the individual policy cost. Its all in the public record. At least refer to historical fact.

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  5. Single payer system is coming to the USA in a decade or two or three.

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  6. "Half of the people who sign up for Obamacare (ACA) get a flurry of medical care, then drop out before a year is over. They can always sign up again if they need to. People who stay on insurance tend to be those who have ongoing chronic and expensive conditions that need continual care."

    The second sentence seems obvious. However, the first one seems puzzling.

    I have to think that most of the flurrier-dropouts are not medical personnel. And that for most healthy people, especially younger ones, most seriously-expensive medical care will have to do with random-ish accidents (e.g. car crashes), or possibly sudden medical surprises (e.g. unexpected onset of cancer.) From medical bills I've seen, "insurance discounts" run around 80%, so seriously-expensive uninsured care is often billed at five times the going rate. In a very few cases, I suppose it will prove possible, over the Web, to "buy insurance on the way to the hospital". However, with accidents and surprises, it will be hard to carry out the required tedious and lengthy sequence of taps (or keystrokes) while one is unconscious.

    Given that factor of five, then, those folks apparently know in advance when they expect to have an accident (or surprise.) If they didn't know, then the "house" would almost surely win the game on average, just like in Vegas. Indeed, with a factor of five it would win big even if some couldn't pay. Then there would have been no paper and no discussion.

    But the "house" is moaning about losing, so apparently the gamblers do know. But again, they're not medical personnel. So how on earth do they know? This is important (especially in the country with the most expensive medical care on earth) because therein must lie valuable information about how to anticipate and avoid accidents and surprises. Just discover what the gamblers are doing, and selectively replicate it. So is anyone even attempting to discover any of that buried information?

    At the very least, this line of thought also suggests that the problem - if it does exist - could be cured by, say, a ten-day waiting period before dropped-and-now-resumed insurance takes effect. That seems simple enough.

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    1. Your discussion seems to be assume that emergency care is the most expensive piece of health care, but that's false. Surprisingly enough, it's often even false in the case of accidents.

      Just by way of example: awhile back I took a bad spill while playing basketball, going face-first into the court. The ER visit, while not cheap, was certainly not the largest cost. Reason being that all the ER did was glue/stitch shut my cuts, X-ray to confirm what exactly was broken, and hold me for observation to ensure I'd not die of my head injury. The real costs occurred in the subsequent days/weeks, specifically the surgery to repair my horrendously mangled nose. I had health insurance anyway but, if I didn't, I'd have just signed up post ER.

      Just an example of course, but one that proves out the forever overlooked fact of medical costs: stabilization is cheap, while repair & rehab are expensive.

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  7. They seem to be dropping out as soon as they get their first premium bill while balancing a tight budget.

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    1. gerald forward jr.June 26, 2018 at 8:33 AM

      The ACA insurance for the <20k income group is fully subsidized, which means they're getting insurance for free. What must knock them out is the co-payments they are charged when they try to use the high-deductible insurance. I've always wondered what is the good of giving insurance to low-income folks who can't afford the co-pays ?? BTW the 20k-40k group is also significantly subsidized. The subsidy is phased-out around 50k.

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  8. A couple centuries ago when I was in college, I learned about "adverse selection" and health insurance.

    I am not sure why but the VA is embraced by the right-wing. That is federal doctors and nurses, housed in federal hospitals, provide healthcare to former federal employees, 100% financed by income tax payers. Absolutely no private-sector participation.

    Perhaps this model can just be expanded. Cut off 10% of GDP, run a public health service and call it a day.

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    1. To my knowledge, there is no meaningful U.S. political faction that does not want to provide "universal" healthcare. The question is more a matter of how much and how good, and who gets it.

      Those on the right think of the VA as providing no-nonsense, bare bones medical services to needy veterans who have earned it through their service.* The right views Obamacare as providing unlimited luxury care to free-loaders. Hence the divide.

      *To the extent non-obvious, I'm exaggerating to prove the point.

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  10. I dont know why the "conclusion" is that people buy insurance and then drop it after they get something taken care of. Like the commenter said, that doesnt make sense and is almost impossible for accidents.

    That isnt what is happening. The data footnotes are clear. The people are buying insurance and then find out that they cant afford it. The people with chronic conditions have no choice.

    Particularly with high deductibles, where you would want to stay as long as possible to get the benefits after deductible is met.

    This will get worse as the GOP continue to dismantle the Heritage Foundation and Romneycare opinion of "market" healthcare (which was labeled Obamacare by GOP to politicize it) until it gets so bad that we get medicare for all and join the rest of the industrialized world.

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