Analyzing Kaiser’s Analysis

You might want to take a look at this meta-analysis of a much-cited study from Kaiser on the likelihood of a “death spiral” in the healthcare exchanges. This is as good a summary of the post as any:

The more I engage in this analysis, the more I realize how difficult it is. There are data issues and, more fundamentally, behavioral issues that we do not yet have a good handle on. Neither my model nor Kaiser’s model can really explain, for example, why, as has recently been noted, enrollment rates are so much higher in states that support the ACA by having their own Exchange and with Medicaid expansion than in states that more greatly oppose the ACA. As I have suggested before, there is a social aspect and political aspect to the ACA that is difficult for simple models to capture. Moreover, as I noted above, this is an area where getting a number “close to right” may not be good enough. Premium increases of, say, 9% might not trigger a death spiral; premium increases of 10% might be enough. And neither my nor anyone else’s social science, I dare say, is precise enough to distinguish between 9% and 10% with much confidence.

So, longer though it makes sentences, and less dramatic as it makes analyses and headlines, the humbling truth is that we can and probably should engage in informed rough estimates as to the future course of the Affordable Care Act, but it is hard to do much more as to many of its features. I wish everyone engaged in this discussion would periodically concede that point.

Basically, the exchanges may prove sustainable. Or they may not. And there is simply no way to determine which outcome will transpire until it’s already happened.

For my money that’s what make the PPACA a bad law. Not only can’t you determine what’s in it until it’s been enacted, you can’t have any confidence in what its impact will be until the hammer has already fallen.

11 comments… add one
  • steve Link

    The assumption all along has been that people want health care insurance. With the ACA , it is available and it should be fairly affordable for most folks, assuming that once you make insurance companies compete with each other in a transparent manner it will lower prices. The ACA fails if these assumptions are wrong. If lots of people really dont care if they have insurance, it was probably a bad idea. If making insurance companies compete by offering true apples-to-apples products doesnt work to cuts costs, then it was a mistake. The guy is right that cultural factors are hard to predict. People are willing to do or not do lots of things that hurt themselves or others to enforce those beliefs.

    Steve

  • PD Shaw Link

    Might be best to think about it as 50 different healthcare exchanges, in which case almost certainly some will fail, others succeed.

    Ezra Klein has a good interview with Robert Laszewski, who is hearing that insurance companies have received payments for 50% of the premiums so far, and claims that the real number to be enrolled for the exchanges to work is 20 million in three years.

  • Here’s the kernel of that interview as I read it:

    The problem with Obamacare is it’s product driven and not market driven. They didn’t ask the customer what they wanted. And I think that’s the fundamental problem with Obamacare. It meets the needs of very poor people because you’re giving them health insurance for free.

    I think that’s sugar-coating it. The problem is that the administration needs to fight tooth and nail to defend a weak law and no groundwork is being laid for making the struggles to come any easier.

    Healthcare insurance is not care. Nobody wants insurance. They want care. That’s a fundamental error and it’s an error made by people who assume that care will automatically follow insurance. That’s simply not the case.

  • PD Shaw Link

    Hmmm, i sort of liked that line; it suggests where the ACA needs to go in order to survive: give insurance companies more discretion to create attractive policies that people want to buy.

    The line I didn’t agree with: “There’s a big misconception that this is about young people. That’s baloney. It’s about healthy people. A healthy 20-year-old might only pay a $100 premium. You want healthy 40 and 50-year-olds.”

    Insurance companies price their product on risk. At the end of year one, if the insurers look at their customers (and at the pool in general) and find that its highly-weighted toward people in their 50s and early 60s, they are going to jack up rates, even if their revenues exceeded their expenses. That’s because a fifty-five year old is still at a higher risk of having a large health bill next year than the twenty year old; heck the risk is higher than when he/she was fifty-four. And the twenty-year old paying $100 per month is still subsidizing the older.

  • jan Link

    Basically, the exchanges may prove sustainable. Or they may not. And there is simply no way to determine which outcome will transpire until it’s already happened.

    The big question is what will happen if, once the law is fully implemented and entrenched, the actual care and cost savings turns out to be lousy? Will the dems admit that the PPACA didn’t fulfill it’s mission? Or will they obfuscate more, give excuses, including allowing it more time to improve (into infinity), or simply blame the R’s for not cooperating with the law?

    You see, that’s one of the biggest problems I have is, whether the outcome is good or bad, the law will stubbornly remain, and continue to be supported by the social progressives as better than no HC for the poor at all.

  • TastyBits Link

    @PD Shaw

    Hmmm, i sort of liked that line; it suggests where the ACA needs to go in order to survive: give insurance companies more discretion to create attractive policies that people want to buy.

    The insurance companies do not need to craft attractive policies. They have a captive customer base. You can chose to purchase what they offer or you can chose to be fined.

    Conservatives have it backwards. The insurance companies did not make a deal with the devil. Obamacare made a deal with the devil.

    I can see the insurance executives pleading, “Please don’ t’ro’ us into dat Obamacare patch, Brer Reed. Oh Lawd, Sisa Pelosi please saves us from da death spiral.”

  • Something that would make a revealing exercise would be to go state-by-state and determine whether there’s actually any competition remaining in the individual insurance market. My intuition is that competition has actually been reduced, that there are fewer insurers in each market than was the case a year ago, and that the remaining insurers more or less constitute a cartel.

  • PD Shaw Link

    @Dave, I think Table 2 answers your question. The number of insurers offering insurance on the individual market dropped 29% nationwide. Illinois went from 12 to 5, and New York went from 10 to 16. Varies in different parts of each state.

    The patterns are interesting:

    Pattern #1: Overwhelming participation by Blue Cross and Blue Shield carriers
    Pattern #2: Virtually no participation by individual market–focused carriers.
    Pattern #3: Significant participation by employer group market–focused carriers.
    Pattern #4: Relatively little participation by carriers focused on providing administrative services to self-insured employer plans.
    Pattern #5: Notable participation by carriers focused on Medicaid managed care.

  • ... Link

    Schuler, I don’t understand why you remain silent on the biggest story of the millennium so far: The closure of a few lanes of traffic in New Jersey. This is the biggest story since Pearl Harbor, and you remain silent. I just don’t get your priorities some times.

  • Simple. I don’t live in New Jersey. I see the entire story as battlespace preparation.

  • ... Link

    I thought that yesterday we were all New Jerseyians.

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