Tuesday, January 28, 2014

Letter to a Thoughtful Conservative on Healthcare

A very thoughtful, economically conservative, socially moderate friend of mine asked me to put down some thoughts about how I would improve Healthcare, with attention paid to the problem of young, middle-class, upwardly-moving folks; who are out on their own; who probably had their individual policies cancelled; who are above $40,000 in income and therefore don't get subsidy support; and who find the new ACA policies asking them to pay for more insurance than they want or can afford. He asked me to try and suspend my desire to support Obama and his policies. Here is what I wrote:

In September, CDC will publish Early Release data from its National Health Interview Survey. It will cover Jan-Mar 2014. This will be the best data on how many are uninsured/insured and trends in those numbers. They don't appear to have a question that would show stats for people who were insured but now are not (the 6MM cancellation group), and data is collected all through the quarter; but we should get a good indication of how the level of uninsured is dropping.

Kaiser and others will do insurance company surveys that will show coverage trends in the individual market: What's happened to total market? ACA vs. non-ACA compliant policies, on or off-Exchange. By September, we should know how many in the non-group market are opting out for 2014. 

Hypothetically, let's say Kaiser estimates that 1MM individuals have chosen to opt out. Presumably they will have done so because the ACA-compliant policies were too expensive for what they felt they needed or could afford. As I understand your thoughtful comments, these are the folks you are most concerned about: the up-and-coming, young middle class who are trying to build a personal economic base and can't afford to put 10% or more of their income into health insurance they don't think they need.

It's just that I'm not sure they've been hurt that much: Inconvenienced, frustrated, pissed off...yes, for sure. But they can pay the penalty and be way ahead economically. Then if they get sick, they quickly buy coverage and not too much will have been lost. This is the argument used by a host of conservative analysts arguing that because of this, the young and healthy won't sign up, and the system won't work. No harm, no foul, I might say. Since the penalties are so low, they can free-ride until sick, then signup with little lost. Pretty good deal, if you don't need the mental reassurance that you are already/always covered.

So if no one is really hurt economically (they surely have been inconvenienced, and may well express their frustrations in how they vote), then the ACA needs to be judged on whether it works, measured by enrollment, reduction in the numbers of uninsured, pool balance, premium trends, insurance company state-by-state participation and degree of financial success in Exchange markets, levels of reinsurance activity, and customer satisfaction with the often narrow networks. By October, we'll know a lot of this; and we'll be able to project pretty well for 2015.

I think the program will work well. And because I think this will be reasonably clear before the mid-terms, I'm predicting a modest election uptick for Dems (+3-5 in the House; hold the Senate). I am confident about ACA's coming scorecard; I'm much less confident this will be seen and rewarded by voters. Specifically: I give 80% odds to my ACA forecast (6-7MM Exchange signups, 10-12MM Medicaid enrollment, 14-16MM reduction in unemployed by end of 2014 (not sure about the Jan-Mar NHIS data), reasonable pool balance, only small premium increases for 2015, increased insurance company involvement in 2015, and continued healthcare cost slowdown despite a growing 2014 economy). I only give 50-50 odds, however, to my political forecast (Dems holding Senate; small pickup in House).

I don't say this because I'm an Obama fan. These conclusions don't come from a desire to beat up on Repubs. This is what I see happening. And because these conclusions have been well researched over time, the new system I might design would not vary much from what we have. Tort reform would make sense; but letting the young/healthy carve themselves out of the central risk pool with narrower policies does not, in my opinion. Possibly the subsidies should be beefed up in the 250-400% FPL levels. We should consider raising the top end to 500% of poverty for a family of four (approx. $115M). Otherwise, assuming I'm right that it will work as defined above, there's not much to change.

Two more points:

First, the cost curve has been bent downwards. Healthcare providers are moving away from fee-for-service towards just emerging new service and payment forms that will reward quality, coordination of care, and new delivery methods that reduce system utilization. They are moving to EHR aggressively, which will enable this productivity improving, cost-curve bending, system-wide change. In fact, I believe this highly complex system (medical care delivery) is beginning to self-organize around a new productivity improvement identity;that the cost curve bending is taking on a life of its own, and that the "half-life" of this system change will be long. This is the complete opposite of top-down, command-and-control org change. This is almost the only kind of big org change that works. I predict that the CBO wonks will have figured this out by  the time they issue their 2016 Long Range Budget Outlook in June, 2016. At this point they will drop the tried-and-true excess cost growth out of their forward calculations, and their forecast will show stable debt/GDP levels looking out, which means Medicare is sustainable and the US is on solid economic footing for the long haul.

Second, the trend to consolidation in the hospital/doctor space will accelerate. If coordinated care works best in Mayo or Cleveland Clinic formats, and those are the low-cost/high productivity models that work, the industry will move away from fragmentation towards "smokestack/silo function" coordination. It's already happening, as you know. But this will be a full sea change.

That's my forecast. And I'm excited about gathering the data as it comes in.

No comments:

Post a Comment