Steep price hikes under Obamacare: Taking “affordable” out of the ACA

 

obamacare-exchange-oregon-2017Health insurance prices on the Obamacare exchanges have been published on HealthCare.gov, and it’s not good news. Higher premiums, higher deductibles, and fewer choices.

Fewer plansLast year, residents in Portland, Oregon had a choice of 87 plans. This year, we get only 37 plans from which to choose.

Higher premiums: For my family of 2 adults and 4 kids, the average premium has increased by $290 a month—that’s a 25 percent increase. The cheapest plan is $939 a month, but you pay $50 just to walk into the doctor’s office. That’s $50 per person, per visit. That adds up.

Higher deductibles: To make matters worse, deductibles have increased.

  • Last year, several plans had zero deductible. This year, only one plan has zero deductible (Kaiser Permanente KP OR Gold 0/20).
  • Last year, three plans had the highest deductible of $13,700. This year, 10 plans have a deductible of $14,300. If you have to burn through $14,300 of your own money before any meaningful health coverage kicks in, what the heck are you paying for?

Cheap plans are a bad deal. Bronze plans are sold as the most “affordable” plans. But they come with some high costs. The lowest deductible is $10,000. And, as noted earlier, the cheapest of the cheapest plans have outrageous copayments for primary care visits.

Let’s compare the plans. Look at the figure above.

Gold plans have premiums averaging $1,700-$1,800 a month (that’s more than $20,000 a year).

  • The cheapest Gold plans are all Kaiser Permanente plans, which means you have to haul yourself all over town to see your doctor and you have to get a referral to see a specialist. What you’re saving in money, you’re spending in time and frustration.
  • The next best alternative is a Moda plan with a $1,000 deductible for $1,732 a month (Moda Health Plan, Inc. Beacon Be Protected)

Much of the ACA attention is focused on Silver plans. Last year, I was able to get a zero deductible Silver plan for $1,100 a month. That was pretty good, but the provider pulled out of the Obamacare exchange, so that plan’s gone.

  • For 2017, the “best” Silver plan has a $4,000 deductible and a monthly premium of $1,261 and, again, it’s a Kaiser plan.
  • For $1,285, Providence offers a plan with a $5,000 deductible (Providence Health Plan Connect 2500 Silver).

Bronze plans are such stinkers that they are not even worth considering. For almost every Bronze plan, there is a Silver plan with a similar premium and a lower deductible.

That’s what happens when regulators load up scads of things as mandated “preventive services” (i.e., no out-of-pocket) and forbid insurance underwriting to manage risk. We end up with high premiums and high deductibles, when most people would prefer lower premium with “just in case” coverage.

Welcome to 2017: Fewer choices, worse choices, and higher prices. When November 1 rolls around, it might be worth checking out the plans available off the ACA exchange.

Obamacare 2016: Where even a Ph.D. economist cannot get a good deal on health insurance

As the calendar flips to November, the Halloween decorations go back to the garage and the Thanksgiving decorations come out.

Now, there is a new special day in between that takes a piece of both holidays.

November 1 is the day that the new Obamacare health insurance plans are unwrapped. In a tribute to Halloween, the premiums are quite scary. In anticipation of Thanksgiving, most of the plans are turkeys.

The Healthcare.gov website is still clunky. When I looked this morning, I could not log on, but I could look at plans.

The website said that 87 plans were available in my state (Oregon), but the site showed only 80 plans. Go figure.

The site lets you sort by premium or deductible, but shows only 10 plans per page. That makes it difficult to see what is “best” and what is “worst.”

Of course that drives us at Econ Minute crazy. All that money, and they still can’t do a nice visualization of all the plans. Ugh!

So, in two hours, Econ Minute has accomplished something the mighty federal government could not do with three years and hundreds of millions of dollars (and Oregon couldn’t do at all).

The graph below shows the Obamacare plans available in Oregon for me and my wife together, a couple in their mid-40s.

Oregon-Obamacare-Exchange-Deductible

Some things really pop out once the data is plotted:

  • There is a wide range in premiums. From $764 a month to $1,824 a month, or $9,168 a year to $21,888 a year. By way of comparison, you can buy a new 2016 Nissan Versa for less than $12,000.
  • Lower deductibles mean higher premiums, and vice versa. On average, a $1,000 decrease in deductible is associated with a $30 increase in the monthly premium.
  • Some plans are real stinkers. PacificSource has some of the worst plans in Oregon.  PacificSource’s Standard Gold plan is a whopping $600 a month more than a Providence gold plan with the same deductible. A plan is bad if:
    • Other plans have lower premiums for the same level of deductible, and/or
    • Other plans have lower deductibles for the same premium price.
  • Even the cheapest plans are darn expensive and kinda suck. The cheapest “best” plan in the graph above costs $772 a month, has a $10,000 deductible, and it covers just about … nothing:
    • Primary doctor: $60 Copay after deductible
    • Specialist doctor: $100 Copay after deductible
    • Emergency room care: 50% Coinsurance after deductible
    • Generic drugs: $20 Copay after deductible

The marketing folks like to make a big deal out of the whole “maximum out-of-pocket” thing.

For most people that is meaningless. To the insurers its seems to be meaningless. The graph below shows that there is almost no relationship between maximum out-of-pocket and a plan’s premium.

Oregon-Obamacare-Exchange-OutofPocket

What about the penalties for no health insurance?

In 2016, the penalties for not being insured really kick in. Nevertheless, for all but the highest income Oregonians, the penalty is still substantially less than the cost of Obamacare insurance.

Podcast – Gridlock, Painkiller Abuse, Jobs, and Free Speech

This week’s podcast looks at how gridlock could be good for state budgets and economic growth.

Then we’ll check out new research suggesting that Medicare’s expansion in to prescription drug benefits has caused a boom in painkiller abuse.

On the job front, we’ll examine new evidence that referral based hiring is better for business and better for workers than the traditional methods of sifting through stacks of resumes and applications.

We’ll wrap thing up with commentary on two very different views of how free speech works in a world of free markets.

Part D pill popping: Did Medicare expansion cause a painkiller epidemic?

Opioids are painkillers like Vicodin and Oxycontin and opioid abuse has increased hugely since 1999. In this case, abuse is measured by substance abuse treatment admissions and deaths involving such painkillers.

As shown in the figure at the top of this post, these drug-related deaths spiked by 20 percent between 2005 and 2006. That happens to be the time that Medicare Part D added a prescription drug benefit making such painkillers much cheaper for seniors.

Recent research published by the National Bureau of Economic Research examines whether the introduction of the Medicare Prescription Drug Benefit Program in 2006 may have contributed to the increase in prescription drug abuse by expanding access to prescription drug benefits among the elderly.

Using data from the Drug Enforcement Agency, and shown in the figure below, they find painkiller distribution increased faster in states with a larger fraction of its population impacted by Part D.

MedicarePartD-Fig4

They also find that this relative increase in opioid distribution resulted in increases in painkiller-related substance abuse treatment admissions.

Interestingly, these states experienced significant growth in opioid abuse among both the 65+ population and the under 65 population, even though those under 65 were not directly impacted by the implementation of Medicare Part D.

The authors do not provide an explanation for this observation.

But, maybe, just maybe, the older folks are engaging in a bit of prescription pill arbitrage: Getting painkillers at a low price subsidized by Uncle Sam, then selling them at a higher price to the youngsters.

In fact, last year, the Office of the Inspector General at the Department of Health and Human Services noted “questionable” usage of HIV drugs—including painkillers and concluded:

While some of this utilization may be legitimate, all of these patterns warrant further scrutiny. These patterns may indicate that a beneficiary is receiving inappropriate drugs and diverting them for sale on the black market.

A spokesman from the Centers for Medicare and Medicaid Services has said that the agency “takes this problem seriously and is taking steps to protect Medicare beneficiaries and the Medicare Trust fund from the harm and damaging effects associated with prescription drug fraud and abuse.”

A surprising explanation why Indian children are so short

You learn something new every day. Today, we learned that the people of India are short. Really short.

As someone who went to graduate school to study economics, I’ve come to know quite a few Indians and people of Indian descent. Some have been tall, some have been short, some have been thin, and some have been fat.

But, I’ve never walked away thinking to myself, “Gee, Indians sure are short.”

That means I’ve never stayed up at night wondering, “Why are Indians so short?”

First, let’s get an idea of how short is short.

According to one easily obtainable set of data, the average American male age 20 and older is 5 feet, 9.5 inches tall. The average Mexican is 5 feet, 5.9 inches tall. And, the average Indian adult male is just under 5 feet, 4 inches tall. That’s shorter than the average North Korean male who has had to suffer through years of malnutrition.

Apparently this has been enough to keep two economists up at night asking “Why are Indians so short?” Indeed, their working paper published by the National Bureau of Economic Research has the obvious title, “Why are Indian children so short?

The authors begin by noting that Indian children are shorter than many poorer sub-Saharan African countries.

First, they account for some of the biggest differences, such as differences in healthcare such as vaccination.

Then, they note something curious. The authors find that the difference in height between Indian and African children gets worse with birth order. In other words, there’s a difference in height between Indian and African first born children and the difference gets bigger with the second child, the third child, and so on. And, the difference is bigger between Indian and African girls.

This finding leads the authors to conclude that a preference for eldest sons in India leads to a significant unequal allocation of resources within families in India. This preference includes a desire (1) to have at least one son and (2) for the eldest son to be healthy.

The researchers—who are themselves Indian—not that eldest son preference can be traced to at least two aspects of Hindu religion. First, Hinduism prescribes a system in which aging parents live with their son, typically the eldest, and bequeath their property to him. Second, Hindu religious texts emphasize post-death rituals which can only be conducted by a male heir such as lighting the funeral pyre, taking the ashes to the Ganges River, and organizing death anniversary ceremonies.

The result is a strong preference for son and a desire to for the eldest son be healthy enough to fulfill his obligations to his aging parents.

The other result is a nation with a small group of relatively tall men and a large group of much shorter men and women, leading to an overall depression in average height.

UPDATE: For a more in-depth discussion, without reading the actual working paper, the authors have written a summary at VoxEU.