Silver gapping and silver loading goes to the academy

Health Services Research has selected an article by Coleman Drake and Jean Abraham that I then commented on for a visual abstract.

This all should be familiar to Balloon-Juice readers:

This is mathed up Balloon-Juice and my obsession on silver spread games that insurers can play to choose their own markets. The more competitive a market is when there are at least two insurers of the same type/price point, the more expensive the market is for subsidized enrollees in reasonably good health and the less expensive it is for non-subsidized enrollees. Monopolistic insurers have a great deal of option space to choose their own risk pools. Smart ones will maximize both revenue and enrollment by creating large spreads so that the the healthiest parts of a cohort are exposed to dirt cheap plans. Dumb ones will make insurance expensive for the healthiest groups.

Social and health spending

The big problem in US healthcare spending is that we don’t spend enough on social services and as social services can act as an upstream substitute of expensive medical services. This is a core assumption of the social determinants of health argument.

A new article in Health Affairs by Irene Papanicolas and others explodes this argument.

We found that US social spending (at 16.1 percent of gross domestic product [GDP] in 2015) is slightly below the average for Organization for Economic Cooperation and Development (OECD) countries (17.0 percent of GDP) and above that average when education spending is included (US: 19.7 percent of GDP; OECD: 17.7 percent of GDP). We found that countries that spent more on social services tended to spend more on health care. Adjusting for poverty and unemployment rates and the proportion of people older than age sixty-five did not meaningfully change these associations. In addition, when we examined changes over time, we found additional evidence for a positive relationship between social and health spending: Countries with the greatest increases in social spending also had larger increases in health care spending.

The US social spending exclusive of health care is not too unusual. US healthcare spending is the outlier. I’m dropping Exhibit 3 into the post here which plots healthcare expenditure as a function of GDP on the vertical axis and social spending exclusive of healthcare on the horizontal axis.

If we exclude the US from the analysis, social spending and healthcare spending seem to be complements instead of substitutes.

There is value in taking care of social determinants of health as things in and of themselves. If we can find ways to minimize asthma exacerbation or congestive heart failure crisis by improving local air quality or if we can find ways improve health by improving housing situations for people living without stable housing, those are good things in and of themselves. They may be cost effective solutions but they may or may not be cost saving solutions.

I want to see another confirming study, but this is moving my priors.

The unsubsidized have fled

The ACA market is really two markets in a state: the subsidized market which has seen great deals due to Silver Loading and the non-subsidized market which saw several years of junk kicking rate increases.

The unsubsidized market has shrunk dramatically as premiums skyrocketed. States have tried to send some extra money towards the over 400% Federal Poverty Level (FPL) cohorts through either direct subsidies or through reinsurance which effectively blends in some money that is not derived from premiums with federal money that otherwise would have gone to individuals earning between 100% to 400% FPL. The last option states have is to built out alternative markets that are based on underwriting and exclusions to cover insurable risk instead of health management costs. This last choice is good for the healthy and makes the unhealthy but earning over 400% FPL worse off.

Sick and >400FPL is SOL. However combining a cap on premiums as a function of income and an underwritten market could work as I argued in March 2018:

Removing the cap on ACA subsidies so every family can access the ACA Silver plan for no more than 10 percent of its family income would provide immediate relief for Senator Cassidy’s constituents and others in similar situations. At the same time, the proliferation of underwritten plans will offer less expensive options for families without health challenges.

Patients and families will be able to choose the plans that will work for them. The ACA market will mostly cover the working poor who receive high subsidies and low deductibles, as well as the very sick who need to have comprehensive benefits and broad provider networks.

The underwritten market… will consist of healthier individuals whose premiums no longer subsidize the care of the chronically ill in the individual market.

Those costs do not disappear, as the size of the federal commitment to premium subsidies for the ACA plans will increase significantly. However, everyone will have access to health insurance with a premium ceiling and lower risk consumers will be better off.

Cliff policies are bad not because of the fall but because of the landing. The 400% FPL cliff has made many families go splat.

Health care stakes for 2020

Health care and the distribution of consequences of bad luck will be a major clear differentiator between parties in the 2020 election.

The Democratic Party is running on spreading the costs and consequences of bad health luck to broader populations. There are several different ways that this can be accomplished but Medicare for All, Medicare for anyone who wants to buy it, Medicaid Buy-in, and ACA 2.0 bills would all spread risk across wider pools that span society. These plans all differ greatly in details. Those details matter and they are fascinating, but the core concept is similar.

The Republican Party’s historical healthcare proposals are designed to minimize the spreading of the costs of bad luck and make the people who get hit with bad luck pay more.

That is a fundamental difference up for decision in 2020.

Open Thread as I’m going to the mountains for the next five days.

Reprise: Attention constraints and policy objectives

I’m reprising this post from January on the importance of prioritization and policy formation:

Prioritization will be a key differntiatior of Democratic Presidential and Senate primary candidates. I believe that most Democrats will share significant elements of what is on their top-10 list of areas that need federal government attention in a government that could theoretically have a narrow Democratic trifecta. But the key will be prioritization.

In 2009-2010, the US Senate was able to do the following big things:

  • Confirm two Supreme Court Justices
  • Pass the ACA
  • Pass Dodd-Frank
  • Pass the stimulus (ARRA)

In 2017-2018, the US Senate was able to do the following big things:

  • Pass a huge ass tax cut
  • Confirm two Supreme Court Justices
  • Not pass Repeal and Replace while burning several months of attention on it

Senate floor time is a key constraint.  A very productive Senate might have slots for two big bills, three or four medium actions (such as SCOTUS nominees) and a lot of housekeeping.  A productive Senate is most likely positively correlated with the size of the effective majority.

Right now, there are numerous agenda items that could qualify as a “big” thing from the Democratic/liberal perspective.  The following will be an incomplete list:

  • Healthcare reform
    • Medicare for All?
    • ACA 3.0?
  • Global Warming Policy
  • Voting Rights Act revision
  • Civil Rights Act revision
  • 2 or more SCOTUS confirmations
  • Truth and Reconciliation
  • Constitutional Amendments to make electing a compromised buffoon harder (mandatory disclosure of 14 years of paperwork related to anything authorized by the 16th amendment etc )
  • Immigration and naturalization

Any of these things could easily eat up three months or more of floor time in the Senate.  I’ve listed well over twenty four months of potential floor time activities from an incomplete list if all of these items were considered to be “big” items for the Senate.  That is infeasible as it neglects the basic day to day functioning of the Senate as well.  The Senate still has to approve nominees, it still has to pass appropriations, it still has to make tweaks and changes to the law as circumstances dictate.

So the question will be prioritization.

Candidates are likely to share the same items on a top-10 list but the rank ordering and asset allocation will matter a lot. One candidate might want to spend six months on healthcare again at the cost of doing not much if anything on immigration and naturalization. Another candidate could want to spend a little time on a minimal “fix-it” healthcare bill while spending more time on global warming policy.  Those are all defensible choices.  But the prioritization is very valuable information.