• The Oregon Experiment, Irrationality, and Universal Coverage

    There is an interesting detail in the results from the Oregon Medicaid Experiment (read Austin and Aaron’s many recent posts on this blog for background). Recall how the study worked: Oregonians were given the chance to enter a lottery. If you won the lottery, you could submit an application and if you qualified you received Medicaid. But to the surprise of the state government and the study authors, a lot of the people who were given the chance to apply for Medicaid never followed through with applications.

    ORForm

    From the supplementary materials posted by the authors of the Oregon study:

    29,664 households were selected by lottery. If individuals in a selected household submitted the appropriate paperwork within 45 days… and demonstrated that they met the eligibility requirements, they were enrolled… About 30% of selected individuals successfully enrolled. There were two main sources of slippage: only about 60% of those selected sent back applications… (emphasis added).

    Jim Manzi (via Megan McArdle) comments

    If your mental model of the uninsured is a poor family huddled outside of a hospital unable to find any way to pay for a doctor to give antibiotics to their coughing child, then this result doesn’t make a lot of sense.

    It doesn’t make a lot of sense because health insurance is costly and yet most people who have it are very reluctant to give it up. Nearly everyone seems to think health insurance is important: liberals passed the Affordable Care Act to extend health insurance to more people and Republicans criticized the Democrats for cutting Medicare. So it was a surprise that given the chance, 40% of Oregonians who had entered themselves in the lottery did not apply after they won.

    Why is this? Manzi believes that

    Either: (1) a rational analysis indicated that the expected gain from the coverage being offered didn’t justify the time and effort of filling out a form and submitting it; or (2) the winner acted irrationally about long-term benefits versus immediate inconvenience.

    Manzi leans toward (2) and with significant qualifications I agree with him. Some Oregonians may have found it easy to complete the forms (tens of millions of Americans are functionally illiterate). Nevertheless, it is likely that many simply failed to complete the form.

    Of course, the poor have no monopoly on irrational imprudence. Ask me about the time that I procrastinated about renewing the registration of my car. Or ask the former employees of Lehman Brothers about whether they should have looked more closely at the details of some real-estate-backed securities. But Manzi’s right: humans, including poor humans, are often negligent and irresponsible. So what follows from this?

    I think the failure of so many Oregonians to complete their applications illustrates the need for universal coverage. Here is how it works in Canada: you don’t apply for health insurance. You just get it. There may be only a few goods or services that should be supplied universally and paternalistically. However, precisely because of our irrational imprudence, if health insurance is important we shouldn’t make it hard for poor people to get it. (Whether health insurance in general or Medicaid in particular are worth having are important but separate arguments.)

    Manzi also believes that the finding that so many people failed to follow through on their Medicaid applications suggests that giving them Medicaid will not improve their health. This is because staying healthy requires

    consistent compliance over months and years with many of the therapeutic regimes necessary to achieve improvement on the physical health outcomes measured in the experiment – blood pressure, blood sugar and cholesterol.

    If you can’t get it together to submit some forms, are you really going to forgo all those cookies and Big Macs?

    Manzi is pointing at a real and daunting problem but a health insurance scheme can do only so much to get people to take better care of their health. The responsibility for health promotion for the healthy and chronic disease care for the ill falls on us, individually and collectively: health care providers, schools, employers, family, and friends. Insurance can and perhaps should be re-engineered to provide supporting incentives, but it is a very limited tool for health behaviour change.

    (Thanks to Adriana McIntyre [@onceuponA] for pointers to information about the Oregon study.)

    @Bill_Gardner

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    • This might be an opportune time to also point out that of all the industrialized countries with formal healthcare system – the U.S. is the only one without universal health insurance coverage. Medicare for all isn’t the end of free market capitalism.

    • Health care being a provincial matter in the federation, each has its own rules. B.C. – as I believe other provinces and territories do – requires enrolment:

      “If you are a resident but are not enrolled, please complete and submit this form to apply for benefits. Your application must include photocopies of documents that verify the Canadian citizenship or immigration status of each person to be enrolled.” https://www.health.gov.bc.ca/exforms/msp/enrolment.html

      • This is correct–in all Canadian provinces, you have to enrol, and children have to be enrolled by their guardians. Health coverage is not instantly assigned to people or provided with evidence of citizenship.

    • This brings up the merits of the rather lengthy and complex draft of the application for obtaining insurance on the exchanges, made somewhat less lengthy and complex in another proposed application only because it was designed for somebody without any dependents. The skeptic in me might conclude that applications for public benefits are made complex to discourage people from applying. Or because of a paternalistic attitude about the less fortunate among us. The former might include many conservatives who don’t care for public assistance. The latter might include many liberals who wish to choose those who do and don’t receive public benefits. Libertarians say, less than convincingly, they prefer to give the less fortunate a cash payment and let them decide what to do with the money. With respect to health care and health insurance, having different systems for almost every conceivable group (seniors, children, poor, nearly poor, large employers, small employers, military, government, et al.) promotes competition among the groups for finite health care spending rather than health. That’s what this controversy over the Oregon study is all about. No rational person would construct a health care system like ours.

    • Some additional info about poor up-take on Medicaid:

      There was a monthly drawing, so many people were 18 months out from when they had applied. They could have moved, or forgotten about it, and not recognized the envelope. If I was in charge I would have jazzed the thing up a bit – like Willie Wonka’s golden tickets.

      I got one, and I thought it was some random notice regarding my SNAP benefits. Since I had just completed my 6 month re-authorization application I assumed it was a “You have 10 days until benefits are stopped” letter – I almost tossed it. The letter was pink in a window envelope, and that stopped me. The warning letters don’t come in window envelopes.

      Since most people on SNAP are on benefits for less than 2 years, and Medicaid used lower income thresholds, I would expect more than 25% were no longer eligible. If they were no longer getting SNAP benefits they could assume they wouldn’t get this. You could also look up your income limits on line, to see if it was worth filling out the form. Poor people rarely apply for stuff “on spec.” Before you wade into that swamp you try to find out if you’re likely to qualify.

      I really dislike all this “The poor are doing it wrong” talk. Poor people are all over the place, why doesn’t somebody ask them what would make things work better?

      If you haven’t read Chris Hayes book, I recomend it. He talks about how since the elites figure they were smarter, and that’s why they’re in charge, they have a hard time listening to anyone ‘lower’ than them. Did you know that the Fed had several banks who worked with poor people making presentations on predatory lending for 3 years before everything fell apart? Big studies, predicting millions of foreclosures per year, well documented, but they weren’t ‘creditable’. The FBI was also reporting widespread mortgage origination fraud to them, but they weren’t taken seriously, because the Fed knew bankers wouldn’t be packaging loans without checking them.

      There are people who know what helps poor people improve their health. Better outcomes, for less money will be possible once people get past the “Why don’t the poor do things the way my friends and I do?”

    • My first question would be what follow-up did they do to find out why these people failed to apply when they won the chance to?

      Right off the top of my head… Did they find out how many had mental illness or even some kind of mild mental disability and lacked support (like family) to help them with this?

      How many applied, were chosen, but didn’t apply after all because in the interim, their situation changed, they knew their income would disqualify them by that time, or that they got a job with insurance…?
      People’s situations could change easily between the time they entered the lottery & the time they won, right? Was this taken into account in this?

      Did they find out how many of them did in fact try to apply, but were repeatedly plagued by problems of paper work being lost (on the agency’s end)… where they were asked to provide the same paper work 3 or 4 times because it wasn’t getting entered into the system & the person just figured they’d get a job with health insurance sooner than they could get through the red tape.

      This is a regular thing people complain about and in some instances, some believe it might be a deliberate bureaucratic ploy to discourage people from following through to get the benefits they qualify for…

      I’m not saying the Oregon medicaid people had a bottomless application box hovering over a waste paper bin. But you know sometimes in bureaucracies it could sure seem that way to people, and they could just give up.
      It likely is explained by an systematic attempt to filter out fraudulent claims, if you looked into it. But there it is, it’s no secret application processes for these things are difficult.

      • “Did they find out how many had mental illness or even some kind of mild mental disability and lacked support (like family) to help them with this?”

        With the caveat that I have not read the study methodology, I think this is not likely the largest problem. The population who applied is most similar to the regular moms and kids Medicaid population. In that population, people move around a lot (e.g. unstable housing situation, fell behind on rent, etc), and they might seriously have missed the mail. People also move in and out of being eligible a lot (e.g. found a job, but now you’re over the income limit). I think this and administrative problems can explain some of the slippage. But I would be surprised if this explained all the slippage, so I would like to see some research as to why the response rate was so low.

        People with severe mental illness would have either been on Medicaid anyway due to disability, or else homeless and hard to reach anyway.

    • If the application was mailed in a state government envelope, it’s very likely that many went unopened. Lots of people are fearful of government letters.

    • “…to the surprise of the state government and the study authors, a lot of the people who were given the chance to apply for Medicaid never followed through with applications.”

      Every day I find myself astonished by the social distress that invades the lives of my patients who live in poverty. It has a variegated, relentlessly cruel character. Specific things happen that no one could have predicted. Yet hindsight completely explains, given circumstances of poverty, the injuries.

      Sorry but this is too abstract.

      Your ex goes on a binge and decides to threaten to kill your children – causing you many sleepless nights – at the same moment that your mother’s landlord sells the building, effectively evicting her – with no notice. Your income is $225 a week bring home and you have gotten sick from neglecting your diabetes medications (in order to pay for clothing and food for your kids.)

      What happened to social solidarity? Where is the spirit of “There but for the grace of God go I”?

      If I were in those shoes I wouldn’t be thinking uh-oh, better check the mail to see if we can get into that Medicaid lottery.

      And there’s more. Is Medicaid such a great prize?

      As a social program the very best Medicaid would ever do for all of us – if perfectly enacted – would be to solidify a two-tier (or three-or-more tier) system, “poor care for the poor.” Such inequality of opportunity, when it comes to the opportunity to obtain necessary health care, seems frankly unworthy of any nation wanting to call itself a democracy.

      Thank you to this blog for teaching us about the devil in the Oregon details.

    • The obvious question is what fraction of those who never returned applications got insurance, or lost the need for insurance, in the interim period. The lottery list was opened up for people to add their names on January 28 2008 and closed on Feb 29. Names were selected in 8 different drawings from May to September 2008. So there was potentially up to a 7 month interim where people could have died, moved out of the state, gotten a job that provides insurance, married someone who’s job pays for spousal insurance, or otherwise have changed status so that they no longer felt they qualified or needed medicaid. Studies show that the 6-month dis-enrollment rate in Medicaid is 20% (see: However, people probably also would opt not to apply for medicaid if they felt that they were likely to get insurance, or no longer need/qualify for medicaid, in the near future, so the 12-month dis-enrollment rate of 43% might be more appropriate to use. In that context, the 40% non-response rate is not at all unusual.

      Of course, that’s not to say that the similarity to ordinary dis-enrollment rates of Medicaid precludes the possibility that people acted irrationality–it’s plausible that much of the dis-enrollment from medicaid resulted from failure to update their eligibility status (required every 6 months) rather than actually becoming ineligible.

    • There are appears to be a very wide gulf between middle class people who lose their insurance — who would sign up 100% for Medicaid in 30 minutes if they could get it — versus people who are in the culture of poverty, and live totally day to day or even hour to hour.

      When you are really poor, you tend not to open your mail, because 95% of what you get in the mail is bad news.

      The only way to cover the poor is to subsidize the clinics and hospitals that they go to. Let people stay uninsured, but fund the public or quasi public institutions that can give them cheap care.

      Bob Hertz, The Health Care Crusade

      • (1) The only fair, sustainable, health care system requires (a) a zero dollar, everyone covered for everything, federal single payer system, and (b) an end to the fee for service medical pricing system.

        (2) Natural born Americans should be automatically enrolled at birth in what I will call Freedom Care. Naturalized citizens should be automatically enrolled upon becoming citizens. There is probably no good way to automatically enroll legal aliens, but it shouldn’t be so difficult that those eligible are discouraged from enrolling.

        Now, the Oregon study. As many of the commenters have noted, there are a number of reasons why eligible lottery winners did not enroll. One that did not seem to be mentioned (perhaps it was and I just missed it) is that people who viewed themselves as temporarily down and out did not want to foul their reputations with the stigma of having received welfare. Even the poor are proud, and should be.

    • You make a good point, James.

      No one is expected to enroll with the local fire department. They just call 911 when they need to, having we assume paid their legal taxes to keep the fire department in business.

      Joseph White makes this point in his still-excellent book Competing Solutions.

      Americans make a fetish of personal choice in health care. We are expected to decide whether to buy insurance and how much to buy.
      This is ultimately extremely inefficient.