Late Night Open Thread: Brexit? I Hardly Even Touched It!


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KY and a dry screw

Kentucky submitted their Medicaid Expansion waiver today. and it is a doozy.  There are a couple of interesting and potentially useful nuggets ( I liked the wrap-around policies so that a family that qualifies for multiple categories of aid stay on one plan for simplicity’s sake), a couple of things that I could live with but don’t like and then work requirements tied to health insurance which CMS has always shot down.

Below is a pair of screen shots from the cost justification section of the waiver that I found utterly fascinating.  The top shot is what the state projects will be the enrollment and cost per person per month (PMPM) growth without the waiver.  The  bottom is what the state projects would happen to enrollment and costs with the waiver.  The 1115 waiver is supposed to be at least budget neutral and coverage neutral.

TLDR: Fewer people enrolled at higher costs.

Let’s look at the data below the fold:

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Opportunities for system improvement

Just a pair of tweets that if we look at them with an appropriately skewed glance, we could see a lot of hope for cost control while providing better quality in healthcare.

We all fuck up.

Well designed systems of learning and error minimization acknowledge that we fuck up and create a culture and systems to minimizing common fuck-ups. Aviation has that culture while medicine may have it in isolated pockets but it is not widespread.
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Peter Thiel Makes The Case For Confiscatory Taxation On Billionaires

This broke over at Forbes and is bouncing around the ‘nets today:

Peter Thiel, a PayPal cofounder and one of the earliest backers of Facebook FB +0.49%, has been secretly covering the expenses for Hulk Hogan’s lawsuits against online news organization Gawker Media. According to people familiar with the situation who agreed to speak on condition of anonymity, Thiel, a cofounder and partner at Founders Fund, has played a lead role in bankrolling the cases Terry Bollea, a.k.a. Hogan, brought against New York-based Gawker. Hogan is being represented by Charles Harder, a prominent Los Angeles-based lawyer.

Whatever you think of Gawker, Hulk Hogan, or Thiel himself, this is yet one more way in which extreme income inequality destroys civic life. It’s actually worse than many, given the clandestine way it deepens the corruption of the system that could (in theory) provide a check on the damage that purchased legislative and executive branches can do.

Lazarus_in_Heaven_and_the_Rich_Man_in_Hell_LACMA_M.88.91.91

Here’s a take on the poison here revealed from Caterina Fake:

Champerty, as third-party litigation funding used to be called (and should probably be called again!) was formerly a crime, but the commercial litigation finance industry has been growing in recent years.

Fake notes that much of such litigation is actually a form of speculation, in which rich folks gamble on the possibility of significant payout.  One can imagine the “free market” argument that such funding levels the playing field, allows those who’ve suffered real harm to recoup, and thus makes the legal system a more efficient and effective dispute-settling and behavior-changing engine. But Thiel’s pursuit of Gawker illuminates what this leads to in the real world:

Generally, people avoid frivolous lawsuits because it often exposes them to as much scrutiny as those they sue, so what is significant about this case is that by funding Hogan behind the scenes, Thiel could get his revenge, escape exposure, and influence the outcome of the case.

For the very rich, this is a win however it goes, and damn the collateral damage.

Hogan’s lawyers made decisions against Hogan’s best interests, withdrawing a claim that would have required Gawker’s insurance company to pay damages rather than the company itself–a move that made Nick Denton, Gawker Media’s founder and CEO, suspect that a Silicon Valley millionaire was behind the suit.

I leave it to the actual lawyers to weigh in on the ethics (and consequences, if any) for such a litigation approach. For myself, I’ll note that what you have here is an insanely rich guy gaming the legal system to destroy a media outfit that pissed him off.

And with that, one more thought:  Franklin Roosevelt created the social welfare state in the US as an alternative to revolution.  Today’s plutocrats might want to think about that.  In plainer terms: to remain democracies, modern democractic states need to tax polity-buying wealth out of individual hands; income taxes and a levy on inheritances.  A 90% rate that kicks in well below an estate value of a billion bucks seems a good place to start.

A blogger can dream…

Image: Cornelius Bos, Lazarus in Heaven and the Rich Man in Hell, 1547.



Yet another distributional analysis

The Hill has “details” on the latest “plan”-like scribblings of the Republican policy “wonks” on healthcare. There is one thing I want to look at before I start my morning coffee:

The core of the plan is a $2,500 tax credit that any citizen would be eligible for and use to purchase health insurance. The lawmakers say this gives flexibility to people, whether they get employer-based insurance or not, to more directly control their healthcare spending, for example by using a health savings account.

I’m looking at one of the sponsor’s web pages and I get very few more “details”

every American citizen is eligible to claim a $2,500 tax benefit as well as a $1,500 tax benefit per dependent minor. This benefit can be assigned to an employer, transferred to a Roth Health Savings Account, or advanced for annual distribution. With this benefit, individuals and families now have the freedom to use pretax dollars to plan and save for their health care futures.

Let’s look at the distributional consequences of this type of policy.

For people who make under 200% of FPL, pre-tax dollars aren’t too valuable as most of their dollars are minimally taxed.  For people making six figures and only have a kid or two at most, pre-tax dollars are fairly valuable as they are facing a much higher explicit marginal rate.  Worrying about pre-tax dollars is overwhelmingly an upper middle class to affluent problem.

More importantly it is the flat subsidy.

$208 a month is a decent subsidy.  In some regions that will buy the equivalent of a Silver plan with absolutely no out of pocket monthly premium.  That is fine for a healthy and young individual (as underwriting is back with a vengeance).  There are Silver plans for 40 year old non-smokers that cost under $200.  However, that same $200 a month Silver plan with a $3,500 deductible will cost a 63 year old $450 a month.  And odds are that 63 year old will need to use their policy a lot more than the 40 year old.

Furthermore, a flat subsidy is great for people who don’t need help.  I get my insurance through my employer and the visible premium payment is roughly two hours of pay per month for a Platinum like coverage for my family.  I don’t need help.  My family does not need help.  We already have access to good, high actuarial value, affordable coverage.

Families and individuals that are not mid-career professionals and are making under median income will see a far higher percentage of their income go to post-subsidy premiums.  The poorer you are, the higher the premium percentage is for a given level of individual risk.  And that is a major problem as the people who should bear the least risk are the one’s with the fewest available resources to mobilize in an oh-shit scenario.

TLDR: Comfort the comfortable



Relief, of Sorts, For the Middle Class

In reality, it’s just enforcing a bit of fairness:

The Department of Labor on Wednesday will finalize a rule extending overtime protections to 4.2 million more Americans currently not eligible under federal law, boosting wages by $12 billion over the next 10 years, the White House said Tuesday evening.

The updated rule, which takes effect Dec. 1 and doubles the salary threshold below which workers automatically qualify for time-and-a-half wages to $47,476 from $23,660 a year, or from $455 to $913 a week. Hourly workers are generally guaranteed overtime pay regardless of what they make.

“We’re strengthening our overtime pay rules to make sure millions of Americans’ hard work is rewarded,” President Obama said in a statement. “If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones.”

One of those Americans, Obama said, is Elizabeth Paredes, a single mom from Tucson, Arizona, who works as an assistant manager at a sandwich shop. “Elizabeth sometimes worked as many as 70 hours a week,without a dime of overtime pay,” Obama said. “So Elizabeth wrote to me to say how hard it is to build a bright future for her son. And she’s not alone.”

$12 billion over ten years is real money, and could be a game changer for a lot of people.



Good lord that is a lot of money

Wellmark in Iowa has a great example of the benefit changes of the ACA and their costs:

Wellmark Blue Cross & Blue Shield is sending letters this week telling about 30,000 customers it plans to raise their premiums by 38 percent to 43 percent next year….
She said about 10 percentage points of the increase stem from the costs of a single, extremely complicated patient who is receiving $1 million per month worth of care for a severe genetic disorder.

Pre-PPACA or with current grandfathered/grandmothered plans that are not ACA compliant, Wellspan would have had a pair of outs. The first one would be that they could have underwritten individuals with severe genetic risks out. They might not be able to say that they are writing out based on genetics but they could write them out on the basis of past service history. The second out would be the lifetime limit. Most individual policies would have stopped paying after $1 million or $5 million in claims.

So what would that have meant in a pre-PPACA world for the patient?  Most likely the patient would quickly run through their private insurance.  At that point, s/he would most likely either qualify for Medicaid, put on charity care or left to die.

From a policy perspective, it is completely unreasonable to expect a 30,000 person risk pool to absorb one of the top ten claims in the nation.  I am slightly surprised that Wellmark does not have reinsurance or stop loss policies on their plans unless they figure that they can self-insure because they are big enough as a corporation to eat the loss of one unlucky division.  Risk adjustment does not help as risk adjustment does a decent job of calculating average costs of conditions.  A $12 million dollar a year claim episode is an extreme outlier so a risk adjustment transfer might only move a small fraction of the total claim cost to Wellmark.

National re-insurance could be a viable solution.  We had talked about a life panel approach where Medicare would act as a claims repricer for a certain set of conditions before.

we identified a set of big chronic conditions that are impossible to game or upcode, this could be an interesting proposal that reduces private medical premiums, and total net medical spend.

Let us  take cystic fibrosis and  hemophilia as examples.  These are conditions that can’t be faked on a chart and can be easily verified.  They are also very expensive conditions.  Insurers with small risk pools in a particular region/product can be destroyed by having an unnatural cluster of CF or hemophilia members that they cover.    Each condition can cost $300,000 or more per personper year to treat.  Fifty or more very low utilizers in an exchange or commercial plan are needed to generate sufficient surplus to cover one CF person.

Moving these very high cost individuals to Medicare immediately lowers the medical expenses of the privately insured groups as some of their highest cost members have been removed.  This means lower premiums (and for those who think insurers are inherently evil, lower potential profits as the MLR requirements kick in).  Medicare tends to pay a lower rate for services than commercial and Exchange plans.  The rate for Exchange plans is usually Medicare plus a bit, while large employer groups tend to pay at Medicare plus a lot.

A plan like this could be financed by a covered life set-aside.  Every month, every person covered by a fully insured product would see $5 of their premiums go to the national super catastrophic risk re-pricer pool to cover the people who have $8 million/year claims.  This would create a defacto national super high cost risk pool that is adequately funded while removing some of the expensive cases from insurers’ books by paying those claims at Medicare rates instead of higher Exchange or commercial rates.

And yes, this type of plumbing work-arounds would not be needed in single payer system but we’re not in that world today nor likely to be in it next year.

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