• Do we really need exchanges?

    Suppose the exchanges of one or more states fail to thrive, as I think is possible, if not likely.* What alternatives might we consider? James Capretta has offered one, the aspects of which I will consider in this post and at least one other.**

    First, you should know that, though I’ll be focusing on the exchange-alternative provisions, Capretta has a full ACA replacement plan, about which you can read in more detail here, here, and here. I’ve already touched on some of its elements in a prior post. Second, though Capretta’s ideas may represent the latest in right-of-center health policy reform — to my eye they appear identical to those suggested by Ramesh Ponnuru and Yuval Levin in the Wall Street Journal — I do not yet believe that Republicans are, in general, anti-exchange. (See also Adrianna’s reaction to the Ponnuru/Levin column.)

    With respect to exchanges, Capretta’s concern is that they require and invite too much government intervention in the market. He worries that the government will, in time, impose price-distorting, Medicare-like payment regulations in the name of cost control. There’s a lot one could debate on this point alone, but, for the purpose of this post, I will accept his premise that this is both likely and undesirable. What’s Capretta’s alternative?

    It has several, interlocking components. First, instead of the ACA’s competitive bidding market design, in which subsidies are tied to the premium of the second lowest plan of some actuarial value (70% or “silver” for the ACA), Capretta advocates a flat tax credit for individual-market and small-group participants. To the extent one wants to get away from exchanges, the virtue here is that there is no bidding and subsidy determination to manage. There is no need to asses which plans qualify as “silver,” and so forth. I see some offsetting limitations, but I’ll defer those to another post.

    Next, there are still some things states would or could do under Capretta’s plan. They would have to manage high-risk pools, to which insurers could refer consumers in order to protect other, less sick consumers from the high cost of covering them in the community-rated design he imagines.

    States would then need to work with insurers to establish a system to identify the truly high-risk cases among the state’s insured population. To prevent abuse, states would need to create disincentives for excessive referrals for high-risk funding, perhaps by penalizing insurers for seeking subsidization for people who are found unqualified.

    States also could (or should? or must?) help their residents manage receipt of the tax credit for which they may qualify.

    The second important role for the states would be reducing the burden that citizens eligible for the tax credit will face when they want to find and sign up for coverage. Specifically, states would need to establish a process by which individuals could make their selection of health insurance, and the state would forward those selections to the federal government so that the credits could be paid directly to the insurance plans chosen.

    Under Obamacare, this process is assigned to a bureaucracy—the state exchanges. But there is no reason a state could not handle this process without ever building a new bureaucracy. For instance, private vendors already facilitate the choice of health insurance in the private market. States could leverage that capacity to build platforms tailored to tax-credit individuals.

    Is this a distinction with or without a big difference? I can’t tell. It’s not clear to me if states would be obligated to facilitate this process in some way or if Capretta is merely suggesting that they might do so. What is clear is that he advocates more flexibility in how they do so than perhaps the ACA currently allows. But this is beginning to sound like tweaks to the current exchange regulations than wholesale replacement of them. One could reasonably debate this point.

    There’s more:

    [S]tates could approach the task of aiding consumer choice by focusing strictly on the transparency and accessibility of the information available to consumers. The states could work with all licensed insurers and brokers to require the standardization of comparison information and then require insurers as well as employers not offering insurance to participate in the broad distribution of that information to the tax-credit-eligible public.

    This really sounds very exchange-like (“transparancy,” “accessibility,” “standardization of comparison information”), though still different from the ACA’s. Moreover, Capretta is clear here that states “could” but not “should” or “must” play this role. Fair enough.

    All in all, this is a different direction than the ACA in terms of states’ roles in managing the insurance market. Is it one that would be an improvement over conditions that might exist in a few (or many?) states in a few years? That, of course, is unclear. As I said, I will return to this subject.

    * I mostly mean too few insurers participate long-term and/or premiums rise rapidly over time. The fact that the federal government is running many state exchanges is not relevant here.

    ** Not sure when, but likely soonish. I’m still gathering information.


    Comments closed
    • What i think needs pointing out is that the conservative’s plans, such as they are, are built on the primary notion that government should have little, if anything, to do with health insurance. That is, if we eliminate government spending as much as possible and make people pay with their own money for insurance/care, costs will have to go down because- voila!- people do not have that much money. You can’t spend what you don’t have.

      The suffering/death that would occur based on that plan would be immense and cruel, but that is not the conservatee’s care. To them, from everything I have read, suffering and death from injury/disease are your own problem and fault and that you are the sole person responsible. Period.

      There is a part of me that wishes we took them up on their idea and let people pay only for what they could afford. The misery that would engender and the harm to millions of people might put their ideas to rest at last.

      Austin, I know and appreciate that you try to appear fair but sometimes I just wish you would call them out for what is really behind all their ideas: hatred at the idea that people have any responsibility for anyone else but themselves; that the only way to reduce costs is to let people die/suffer- a totally immoral/amoral philosophy.

    • Don’t you think it’s a bit of a stretch to assume that the Republicans are making good-faith proposals, given how rapidly they have abandoned the proposal that was formerly their poster-child for universal health care?

      And claiming “consumer choice” in a health care market is nonsense — though I note he did not say *informed* consumer choice, so perhaps he is referring to a roulette wheel notion of choice. This is not an easy product to assess and compare.

      I remain astonished that so many people manage to ignore the apparent success of universal heatlh care in so many other countries, and will go to such astonishing and ought-to-be-embarrassing lengths to claim that our system is not as messed up as it is. And, further, even to the tiny extent that the criticisms are right, I note that there is precious little attempt by those same partisans to address the other causes of early death. Perhaps it *is* diet and exercise — so quit beatng up on Bloomberg for Citibike and Big Gulp regulations. Maybe it is the stress of inequality — so how about we do something about that Gini index? (very high top-end marginal tax rates and guaranteed minimum income might help.) Perhaps it is our food supply — so how about we slash the use of antibiotics in farming, and ban artificial trans-fasts in foods? Infant mortality sucks, so why not jump all over prenatal health care, and access to sex ed and birth control for teenagers to cut that birth rate? Violent deaths, we got those, let’s see some gun control. And car crash deaths are not small, so how about we get serious about driver training and distracted driving? I’ve seem claims that it has to do with education, well, we can cut class sizes in public schools and subsidize higher education, that would help.

      I see none of this from the Republican Party; I conclude that either they don’t really care about early death relative to the other side of these issues, or don’t really belief their own claims. If we care about cutting costs and avoiding early death, we’d do single payer AND all of these things (and I think we should).

    • “standardization of comparison information”. My main criticism of the implementation of ACA was the Obama administration decision not to adopt federal (i.e., uniform) standards for insurance. Anybody who has ever tried to pick an insurance plan in the individual market would know why uniform standards would be helpful. Most people rely on the “experts” in HR to craft a plan with an array of benefits (“essential benefits”) that would be appropriate and best for the insured. Not so in the individual market, where the only “expert” is the adversary (i.e., the insurer). Standardization would give the buyer in the individual market confidence that the plan actually has “essential benefits”. It’s ironic that Capretta (AEI) would be suggesting an innovation that the Obama administration failed to do because it was considered too politically risky (i.e., the “federalization” of insurance).

    • If these solutions are simply tweaks and are acceptable to the ‘right’ then why weren’t these tweaks used in the first place?

      • Emily, it’s rather doubtful that these “tweaks” (if they just tweaks) are really acceptable to the right. Just because Capretta writes for the AEI, does that really mean that Republicans will vote for his proposals?

        Consider that Obamacare is a pretty close copy of a plan that was previously proposed by conservatives, and even enacted by a Republican governor, who the Republicans later selected as their presidential candidate. So superficially, *that* plan should have been roughly acceptable to the right all by itself, yet somehow when the time came for votes, it got not one Republican vote. A plan that is just a few “tweaks” away from acceptable-to-the-right does not get zero Republican votes.

        Furthermore, much of the demagoguing against the ACA from the right has attacked the mandate to buy insurance — that’s not a little tweak, and reveals either a fundamental misunderstanding of health insurance economics, or a desire to sabotage the ACA. What happened to that?

    • When Capretta says States can leverage private vendor’s processes to help consumers find tax credits, as a way to avoid bureaucracy, I wonder in what county he lives. Obviously not the US. Insurance companies are huge, inefficient bureaucracies. Sure, if you want a Soviet style bureaucracy, outsource to Aetna.

      All the defects of communism, with profits for shareholders!

    • They say “fixed contribution” and I hear, “… and screw California.”

      If I were to buy insurance for my family on the exchange in the area where I live, it would cost $1600 a month for the second lowest Silver plan. If I happened to live in upstate New York, I’d pay about $1000 a month for the second lowest Silver . The fixed contribution would not be adjusted for area cost of living, just like the top poverty level for subsidies isn’t adjusted for cost of living now under the ACA, and people who lived in high cost areas would be screwed.