{"id":3359,"date":"2015-03-30T07:30:23","date_gmt":"2015-03-30T11:30:23","guid":{"rendered":"http:\/\/www.dougsbriefcase.com\/blog\/?p=3359"},"modified":"2015-03-30T09:13:25","modified_gmt":"2015-03-30T13:13:25","slug":"obamacare-the-more-you-pay-the-less-you-get","status":"publish","type":"post","link":"https:\/\/www.dougsbriefcase.com\/blog\/obamacare-the-more-you-pay-the-less-you-get\/","title":{"rendered":"Obamacare: The More You Pay, The Less You Get"},"content":{"rendered":"

<\/p>

\"Obamacare<\/a>

Oba\u00admacare enroll\u00adment increased this year, but only the poor\u00adest among the unin\u00adsured have so far signed up. [Cred\u00adit: Arkansas Times]<\/p><\/div>Can gov\u00adern\u00adment get peo\u00adple to buy a prod\u00aduct that mil\u00adlions think isn\u2019t worth the price?\n

That\u2019s the ques\u00adtion that health care ana\u00adlysts are ask\u00ading as they pore over the results<\/a> of the Oba\u00admacare open sea\u00adson that con\u00adclud\u00aded on Feb\u00adru\u00adary 15.<\/p>\n

On the sur\u00adface, the data released ear\u00adli\u00ader this month by the Depart\u00adment of Health and Human Ser\u00advices are encour\u00adag\u00ading.  Near\u00adly 11.7 mil\u00adlion peo\u00adple select\u00aded a plan this year, com\u00adpared with just more than 8 mil\u00adlion<\/a> dur\u00ading the 2014 open season.<\/p>\n

There are some cau\u00adtion\u00adary signs.  Despite the influx of new sub\u00adscribers, the age pro\u00adfile con\u00adtin\u00adues to skew old\u00ader.  Near\u00adly half are 45 or old\u00ader and 26 per\u00adcent are over 55.  Inter\u00adest among the young remains large\u00adly unchanged over last year.<\/p>\n

So is inter\u00adest among mid\u00addle income peo\u00adple who lack cov\u00ader\u00adage.  Enroll\u00adment has been dom\u00adi\u00adnat\u00aded by those with the low\u00adest incomes.  HHS<\/span> reports that 83 per\u00adcent of peo\u00adple who have select\u00aded plans have incomes between 100 per\u00adcent ($11,770) and 250 per\u00adcent ($29,425) of the fed\u00ader\u00adal pover\u00adty lev\u00adel (FPL<\/span>).  Med\u00adic\u00adaid, mean\u00adwhile, has grown by near\u00adly 20 per\u00adcent since Oba\u00admacare was launched, swelling its ranks to 70 mil\u00adlion<\/a>.   Rough\u00adly 22 per\u00adcent of the U.S. pop\u00adu\u00adla\u00adtion is now on Med\u00adic\u00adaid, despite the refusal of 22 states to expand their programs.<\/p>\n

An Avalere study<\/a> released last Wednes\u00adday gave fur\u00adther evi\u00addence that Oba\u00admacare has so far large\u00adly attract\u00aded the poor and near poor and holds lit\u00adtle appeal for unin\u00adsured mid\u00addle income peo\u00adple.  The health con\u00adsul\u00adtan\u00adcy found that 76 per\u00adcent of eli\u00adgi\u00adble unin\u00adsured peo\u00adple with incomes less than 150 per\u00adcent of FPL<\/span> ($17,655) have select\u00aded a plan.<\/p>\n

Only two per\u00adcent of unin\u00adsured peo\u00adple with incomes of 400 per\u00adcent or more of FPL<\/span> ($47,080) enrolled.  Put anoth\u00ader way, 98 per\u00adcent of unin\u00adsured peo\u00adple who were most able to afford insur\u00adance and most like\u00adly to be penal\u00adized for not buy\u00ading it declined to enroll.<\/p>\n

This para\u00addox\u00adi\u00adcal behav\u00adior results in part from Oba\u00admacare\u2019s para\u00addox\u00adi\u00adcal design: as pre\u00admi\u00adums rise, the val\u00adue of insur\u00adance cov\u00ader\u00adage falls.<\/p>\n

The chart below illus\u00adtrates this para\u00addox.  It presents the Avalere find\u00adings (red bars), which show the per\u00adcent\u00adage of eli\u00adgi\u00adble peo\u00adple (by per\u00adcent of FPL<\/span>) who have enrolled in cov\u00ader\u00adage. It also shows the com\u00adbined cost of pre\u00admi\u00adums and deductibles (green scale on the right) at var\u00adi\u00adous income lev\u00adels for a 30-year-old indi\u00advid\u00adual (yel\u00adlow line) and a 40-year-old cou\u00adple (dark blue line).<\/p>\n

\"Chart<\/a><\/p>\n

As the lines slope upwards, the bars cas\u00adcade down\u00adward.  Unless the sum of pre\u00admi\u00adums and deductibles is very low, most peo\u00adple don\u2019t seem inter\u00adest\u00aded in health insurance.<\/p>\n

The Avalere study is based on an analy\u00adsis of healthcare.gov enroll\u00adment data.  I used healthcare.gov<\/a> to com\u00adpile illus\u00adtra\u00adtive infor\u00adma\u00adtion on pre\u00admi\u00adums and deductibles for a Blue Cross (PPO<\/span>) Sil\u00adver plan avail\u00adable in Mitchell Coun\u00adty (KS<\/span>).  Pre\u00admi\u00adums and deductibles vary by plan and coun\u00adty, but the gen\u00ader\u00adal tra\u00adjec\u00adto\u00adry of the yel\u00adlow and dark blue lines would be sim\u00adi\u00adlar for oth\u00ader plans in oth\u00ader coun\u00adties through\u00adout the country.<\/p>\n

Regard\u00adless of loca\u00adtion or insur\u00adance prod\u00aduct, Oba\u00admacare sub\u00adsi\u00addies assure that peo\u00adple with the low\u00adest incomes pay the small\u00adest pre\u00admi\u00adums and get the most gen\u00ader\u00adous cov\u00ader\u00adage. Those who pay more for insur\u00adance get less gen\u00ader\u00adous coverage.<\/p>\n

The law pro\u00advides two forms of sub\u00adsi\u00addies.  The first lim\u00adits pre\u00admi\u00adums and grad\u00adu\u00adal\u00adly phas\u00ades out with income.  The sec\u00adond form of sub\u00adsidy requires insur\u00aders to offer more com\u00adpre\u00adhen\u00adsive cov\u00ader\u00adage to peo\u00adple with low earn\u00adings, reduc\u00ading deductibles and cost-shar\u00ading.  Unlike pre\u00admi\u00adum sub\u00adsi\u00addies, which phase out grad\u00adu\u00adal\u00adly with income, these cost-shar\u00ading sub\u00adsi\u00addies drop in cliffs \u2013 at 151 per\u00adcent and 201 per\u00adcent of FPL<\/span> \u2013 and dis\u00adap\u00adpear entire\u00adly at 251 per\u00adcent of FPL<\/span>.<\/p>\n

The lines illus\u00adtrate how the phas\u00ading out of these two sub\u00adsi\u00addies affects two hypo\u00adthet\u00adi\u00adcal enrollees.  At 100 per\u00adcent of pover\u00adty, a 30-year old (yel\u00adlow line) would pay an annu\u00adal pre\u00admi\u00adum of just $235 for cov\u00ader\u00adage, or less than $20 per month.  Her deductible would be just $250, so she\u2019ll spend a max\u00adi\u00admum of $485 before her cov\u00ader\u00adage kicks in (green scale on the right).  At 150 per\u00adcent of pover\u00adty, her month\u00adly pre\u00admi\u00adum ris\u00ades to $58, but the sum of her annu\u00adal pre\u00admi\u00adum and deductible is still less than $1,000.  Lit\u00adtle won\u00adder that 76 per\u00adcent of eli\u00adgi\u00adble peo\u00adple with incomes between 100 and 150 per\u00adcent of FPL<\/span> have signed up for coverage.<\/p>\n

That per\u00adcent\u00adage drops to 41 per\u00adcent once we look at peo\u00adple with incomes between 151 and 200 per\u00adcent of FPL<\/span>, accord\u00ading to Avalere.  To see why, con\u00adsid\u00ader what hap\u00adpens to deductibles for our hypo\u00adthet\u00adi\u00adcal cou\u00adple should their income rise from 150 per\u00adcent of FPL<\/span> ($23,895) to 151 per\u00adcent of FPL<\/span> ($24,054).  That $3 per week pay increase results in a tripling of their health insur\u00adance deductible to $1,500.  (Our 30-year-old\u2019s deductible also triples to $750.)<\/p>\n

Though their pre\u00admi\u00adums still are heav\u00adi\u00adly sub\u00adsi\u00addized (they pay just $80 per month for cov\u00ader\u00adage, an 84% dis\u00adcount against the unsub\u00adsi\u00addized pre\u00admi\u00adum of $515),  the cou\u00adple now has to think about whether insur\u00adance that requires them to pay the first $1,500 in claims out of their own pock\u00adets is worth the cost.  The sum of pre\u00admi\u00adum and deductible \u2014 $2,462 \u2013 means that they would have to spend more than 10 per\u00adcent of their income before their pol\u00adi\u00adcy would begin pay\u00ading most med\u00adical bills.  It is rea\u00adson\u00adable for them to decide this is a bad deal, as three in five unin\u00adsured peo\u00adple in this income range so far have.<\/p>\n

Our cou\u00adple con\u00adtin\u00adues to ben\u00ade\u00adfit from the sub\u00adsi\u00addies, but at 251 per\u00adcent of FPL<\/span> ($42,215) are still required to pay near\u00adly $270 month\u00adly for cov\u00ader\u00adage with a $5,000 deductible.  The sum of that couple\u2019s annu\u00adal pre\u00admi\u00adum ($3,239) and deductible comes to $8,239, or near\u00adly 20 per\u00adcent of their income.  Our 30-year-old isn\u2019t doing much bet\u00adter.  She is now expect\u00aded to pay $200 per month for cov\u00ader\u00adage with a $2,500 deductible.  Which helps explain why 4 out of 5 unin\u00adsured peo\u00adple with incomes between 251 and 300 per\u00adcent of FPL<\/span> have not enrolled in coverage.<\/p>\n

That per\u00adcent\u00adage con\u00adtin\u00adues to decline by income group until it final\u00adly reach\u00ades just 2 per\u00adcent of peo\u00adple who earn more than four times the pover\u00adty level.<\/p>\n

There are three pos\u00adsi\u00adble expla\u00adna\u00adtions for why take-up rates are so low for peo\u00adple with incomes above 150 per\u00adcent of FPL<\/span>.  One is that the gov\u00adern\u00adment hasn\u2019t done a good enough job edu\u00adcat\u00ading peo\u00adple about the ben\u00ade\u00adfits of Oba\u00admacare.  Most aren\u2019t yet famil\u00adiar enough with the prod\u00aduct or com\u00adfort\u00adable enough with the enroll\u00adment process, the argu\u00adment goes, some\u00adthing that will improve with time.  That is cer\u00adtain\u00adly pos\u00adsi\u00adble.  No one expect\u00aded big enroll\u00adment totals dur\u00ading the first two open sea\u00adsons.  Per\u00adhaps sign\u00ading up for cov\u00ader\u00adage will become more wide\u00adspread next year.<\/p>\n

Then again, peo\u00adple are behav\u00ading as though they under\u00adstand the program\u2019s costs and ben\u00ade\u00adfits per\u00adfect\u00adly well.  Those with incomes below 150 per\u00adcent of FPL<\/span> are get\u00adting the best deal and more than \u00be of them already have signed up.  Declin\u00ading par\u00adtic\u00adi\u00adpa\u00adtion at high\u00ader income lev\u00adels reflects the dete\u00adri\u00ado\u00adra\u00adtion of that val\u00adue propo\u00adsi\u00adtion: the high\u00ader your pre\u00admi\u00adums, the greater your cost-shar\u00ading.  Remain\u00ading unin\u00adsured can be a ratio\u00adnal deci\u00adsion even for peo\u00adple eli\u00adgi\u00adble for sub\u00adsi\u00addies, as our hypo\u00adthet\u00adi\u00adcal con\u00adsumers illustrate.<\/p>\n

A sec\u00adond expla\u00adna\u00adtion implic\u00adit\u00adly con\u00adcedes that most peo\u00adple will con\u00adtin\u00adue to refuse cov\u00ader\u00adage despite out\u00adreach and edu\u00adca\u00adtion efforts.  Car\u00ado\u00adline Pear\u00adson, senior vice pres\u00adi\u00addent of Avalere, argues that gov\u00adern\u00adment should more aggres\u00adsive\u00adly enforce tax penal\u00adties on the uninsured.<\/p>\n

\u201c<\/span>So far, tax cred\u00adits do not appear to be enough to entice par\u00adtic\u00adi\u00adpa\u00adtion,\u201d she said, \u201cso greater empha\u00adsis on indi\u00advid\u00adual man\u00addate penal\u00adties may be need\u00aded to help increase enroll\u00adment among low- and mid\u00addle-income individuals.\u201d<\/p>\n

We\u2019ll soon have a bet\u00adter idea of how effec\u00adtive coer\u00adcion will be in induc\u00ading peo\u00adple to buy insur\u00adance.  An esti\u00admat\u00aded six mil\u00adlion<\/a> peo\u00adple are being forced to pay the new tax on the unin\u00adsured as they file their 2014 tax returns.  This tax, which is capped at one per\u00adcent of income this year, will dou\u00adble next year.  HHS<\/span> has announced<\/a> a spe\u00adcial enroll\u00adment peri\u00adod for those who are now being hit with the tax.  If they sign up for cov\u00ader\u00adage by April 30, they won\u2019t have to pay the tax penal\u00adty again next year.  If a sub\u00adstan\u00adtial por\u00adtion of those six mil\u00adlion sign up for cov\u00ader\u00adage, per\u00adhaps Ms. Pear\u00adson will be proven right.  Stiffer penal\u00adties might prod peo\u00adple into buy\u00ading insur\u00adance, even though they don\u2019t think it\u2019s worth the price.<\/p>\n

Health pol\u00adi\u00adcy ana\u00adlyst Robert Laszews\u00adki doubts the poten\u00adtial effects of edu\u00adca\u00adtion and coer\u00adcion.  \u201cThe answer,\u201d he writes<\/a>,<\/span> \u201cis not a greater empha\u00adsis on the indi\u00advid\u00adual man\u00addate penal\u00adties when peo\u00adple choose not to pay more than they can afford for a lousy prod\u00aduct.\u201d That prod\u00aduct is lousy, Laszews\u00adki argues, because gov\u00adern\u00adment has been so pre\u00adscrip\u00adtive in dic\u00adtat\u00ading what insur\u00adance must cov\u00ader and what it may not.  The law restricts insur\u00aders from offer\u00ading an inno\u00adv\u00ada\u00adtive vari\u00adety of prod\u00aducts, allow\u00ading them to dif\u00adfer\u00aden\u00adti\u00adate them\u00adselves from their com\u00adpeti\u00adtors only by pre\u00admi\u00adums, cost-shar\u00ading and provider networks.<\/p>\n

Instead of get\u00adting tougher on the unin\u00adsured, he pro\u00adpos\u00ades<\/a> scrap\u00adping penal\u00adties on indi\u00advid\u00adu\u00adals and busi\u00adness\u00ades, while allow\u00ading insur\u00aders to offer a broad\u00ader range of cov\u00ader\u00adage options. The law should be amend\u00aded to pro\u00advide peo\u00adple with \u201chealth insur\u00adance choic\u00ades they find worth the money.\u201d<\/p>\n

Per\u00adhaps expand\u00ading the menu of options will moti\u00advate more con\u00adsumers to choose cov\u00ader\u00adage.  But more items on the menu won\u2019t tempt peo\u00adple who aren\u2019t hun\u00adgry.  It may be that mil\u00adlions of Amer\u00adi\u00adcans pre\u00adfer to spend their mon\u00adey on things oth\u00ader than health insur\u00adance, despite gov\u00adern\u00adment efforts to edu\u00adcate them, strong-arm them with tax penal\u00adties or entice them with more choices.<\/p>\n

Pol\u00adi\u00adcy\u00admak\u00aders may con\u00adsid\u00ader such behav\u00adior irre\u00adspon\u00adsi\u00adble, but that\u2019s not entire\u00adly fair.  The poor and near-poor are get\u00adting very gen\u00ader\u00adous cov\u00ader\u00adage at steeply dis\u00adcount\u00aded prices sub\u00adsi\u00addized by tax\u00adpay\u00aders; the sick obtain insur\u00adance at rates far below the costs their care will impose on their fel\u00adlow pol\u00adi\u00adcy\u00adhold\u00aders and tax\u00adpay\u00aders.  By buy\u00ading health insur\u00adance at rates sub\u00adsi\u00addized by oth\u00aders, indi\u00advid\u00adu\u00adals in both groups are act\u00ading out of self-inter\u00adest.  If self-inter\u00adest is hon\u00ador\u00adable when it impos\u00ades costs on oth\u00aders, why is it dis\u00adhon\u00ador\u00adable when it leads a con\u00adsumer to refuse cov\u00ader\u00adage that does\u00adn\u2019t pro\u00advide much value?<\/p>\n

Oba\u00admacare has so far func\u00adtioned as an income trans\u00adfer pro\u00adgram in which mid\u00addle income peo\u00adple finance Med\u00adic\u00adaid expan\u00adsions and health insur\u00adance sub\u00adsi\u00addies for the poor and near-poor.  Most unin\u00adsured mid\u00addle class peo\u00adple have so far declined to pur\u00adchase insur\u00adance because the cov\u00ader\u00adage isn\u2019t worth the price.  Their tax\u00ades are sub\u00adsi\u00addiz\u00ading cov\u00ader\u00adage for oth\u00aders.  It seems unfair to hit them with an addi\u00adtion\u00adal tax for refus\u00ading to buy insur\u00adance for them\u00adselves, espe\u00adcial\u00adly when that cov\u00ader\u00adage is less valu\u00adable than the cov\u00ader\u00adage they are sub\u00adsi\u00addiz\u00ading for others.<\/p>\n

Oba\u00admacare\u2019s \u201cpay more, get less\u201d regime has made remain\u00ading unin\u00adsured an eco\u00adnom\u00adi\u00adcal\u00adly ratio\u00adnal deci\u00adsion even for mil\u00adlions of peo\u00adple who are eli\u00adgi\u00adble for sub\u00adsi\u00addies.  Which may explain why the gov\u00adern\u00adment is under\u00adachiev\u00ading in its efforts to per\u00adsuade mil\u00adlions of peo\u00adple to buy a prod\u00aduct they just don\u2019t think is worth the price.<\/p>\n","protected":false},"excerpt":{"rendered":"

Can gov\u00adern\u00adment get peo\u00adple to buy a prod\u00aduct that mil\u00adlions think isn\u2019t worth the price? That\u2019s the ques\u00adtion that health care ana\u00adlysts are ask\u00ading as they pore over the results of the Oba\u00admacare open sea\u00adson that con\u00adclud\u00aded on Feb\u00adru\u00adary 15.<\/p>\n","protected":false},"author":3,"featured_media":3370,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","wp_typography_post_enhancements_disabled":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_hide_featured_image":false,"_jetpack_featured_image_duplicate_dismissed":0,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"nfd_image_url":"","nfd_onboarding_generated":"","footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[17,16,60,124],"tags":[790,119,1184,855,1188,650,1128],"class_list":["post-3359","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-entitlements","category-health-care","category-medicaid","category-obamacare","tag-avalere","tag-health-insurance","tag-medicaid","tag-medicaid-expansion","tag-obamacare","tag-premium-subsidies","tag-robert-laszewski"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t