All in a New York Minute

Perhaps you are also struck by the irony of shutting down the federal government, in part, in an effort to derail the Affordable Care Act just at the time that the cannot-be-derailed opening of the ACA's health insurance exchanges is occurring.  That said, pretending the exchange openings are derailed may be an interesting strategy. Perception is everything, or so they say.

In light of that, I take an interest in very early reports that New York's Exchange has crashed — overwhelmed by demand. Now, it is an open secret that CMS has been, sotto voce, advising advocacy groups to steer eager exchange enrollees away from all trying to access the system the minute it opens. Of course, the system was not designed for everyone to crowd in at once. Seen from one perspective, this is a failure of communication.

Seen from another, we have a little evidence that New Yorkers know a good deal when they see it and that scarcity can produce extreme reactions in the face of plenty (as scholars of obesity and public health can tell you at length).  

Why the rush of the New York crowd to enroll in a New York minute?

First, New York has done extensive public outreach and education to publicize the exchanges, although counter-detailing has also been prominent. The press has also been vocal. You can see the Daily News' "how to" enrollment guide here:  And you can see the Heritage Foundation's Manahattan counter-advertising here:–jpg-20130920,0,  Still, on the principle that all advertising is good advertising, anything that raises the profile of the ACA may serve, in part, to drive traffic to the New York exchange, though I am pretty certain whoever rationalized the cost of a billboard buy on 42nd street for counter-advertising had a different analysis.

Second, it is worth considering whether certain characteristics of the New York exchange have made it particularly attention-grabbing. To understand this, you need to know that for decades New York has had some of the highest individual market premiums.  (Indeed, to understand much of the ACA, it is useful to understand the status quo ante of health insurance in the United States.) This is because, since 1993, New York has had a mandate for guaranteed issue without an individual mandate.  A second important fact is that New York State requires full community rating, which means everyone buying the plan pays the same premium, regardless of age. This state option  is quite unusual.

So, who is crashing the system in New  York?  My guess is that refugees from the individual market — particularly older refugees from the individual market. They have much to gain from New York exchange pricing under the individual mandate.

If I am even remotely correct,  older New Yorkers under the age of 65  ( "non-elderly" to use insurance lingo where everyone over 65 is elderly) who have experienced scarcity by being priced out of the individual market are disproportionately  crowding forward today. Now, the system needs younger enrollees to balance them out.

It is, in short, significant that the system may have crashed under the weight of the long-excluded seeking to enter the system but it is the full scope of enrollment (through March of 2014) that will tell us if all New Yorkers are onboard.  This effort to achieve public buy-in is, from this perspective, a distance event and not a sprint.

Variance in Insurance Rates for Products Sold Through the Exchanges

Comparing the newly announced insurance rates between and even within states is difficult. Comparing the status quo ante with exchange rates fails to account for the richer health insurance benefits found in the ACA created health insurance exchanges. Comparing an urban state with a rural state fails to account for higher labor and overhead costs in the urban setting and the price effects of precious little health insurer competition in rural settings.

But I am intrigued by an article that examines the spread within a state or a major region, comparing the prices of higher cost (richer) health plans sold through the exchanges with more modest health plans (thinner) sold through the same exchanges. You can see a great article here:

Why does this matter?  It gives us a useful snapshot of how the structure of the exchanges has influenced beginning rates. It probably is too soon to tell if choosing to have an active purchaser exchange model is really what drives the relatively small spread between plan levels in California but time will tell, especially when we consider that (at least as of June 1, 2013) several other states had also chosen the active purchaser exchange model.

The federally facilitated exchanges (FFEs) are, of course, clearinghouse-style, offering none of the rate reduction that may flow from the state using its exchange organizing power to drive health insurance rates for products sold within it to lower levels by requiring a kind of bidding process for the privilege of selling within the exchange.

When I look at the prices of exchange purchased health insurance in the California exchange, I have to wonder if — when all is said and done — it may end up being more expensive to purchase through Missouri's FFE than to purchase through California's state-sponsored health insurance exchange.

Got Insurance?

I go around telling people that information about ACA implementation ought to be as ubiquitous as those "Got Milk?" advertisements and that I would like to see some basic information on the side of milk cartons or on shrink wrapped cars tooling about Kansas City.  I am still looking for some takers on those ideas, but in the meantime I am very taken with an ACA education pamphlet put out by some IOM members working with some Emory University students:

I like it because it includes some necessary health insurance vocabulary education in it as well.  The ACA's health insurance exchanges would be far more approachable if the average American had a grasp on health insurance fundamentals.  They do not.  George Loewenstein, et al's forthcoming paper makes this very clear:

But those of us who have spent ample time working with consumers, at almost all income and educational levels, knew this already.

Most sobering of all is the data on the limited number of Americans who understand fundamentals like  health insurance co-pays and deductibles, essential to comparing plans both inside and outside the exchanges.

Here's the big takeaway: we were always ignorant and always paid the price for our ignorance. Now, we're going to be outed in our ignorance unless some serious thought is given to educating consumers about one of the single most important purchase decisions they will need to make for themselves and their families.

ACO Growth Spurt

Leavitt Patners has produced a map showing ACO development intensity in various regions of the United States.  You may see it here:

The map tells us a few things that make sense: as Medicare ACOs increase in numbers, ACOs participating in the MSSP or Pioneer ACO program have come to dominate the ACO landscape, ACO growth lags in rural areas, there is a multiplictiy of ACO models at play: smaller physician group initiated,  large hospital centered, and  multiple provider entity models. 

Of course, with the exception of the small physician group centered model, these entities all have the advantage of size — both as to larger number of covered lives and number of providers.  This may not be a bad thing, though increased provider concentration has been anything but a nostrum for health care inflation cost control to date, but they surely highlight the challenges of establishing a rural or semi-rural ACO.

Last week at SEALS, in a roundtable on ACOs, Professor Jessica Mantel (Univ. of Houston Law Center) mentioned the rural ACO gap.  I have been thinking ever since about the realities of expecting rural would-be patients to travel some distance for health care. Would they travel or self-ration?  Health care antitrust analysis teaches us that most patients — when considered from the perspective of acceptable travel times — are reluctant to travel far for health care, both for the time and expense involved as well as the not inconsiderable fear of being hospitalized far from loved ones.  Would reasonable travel times for primary care have to be different from those for specialty care?  All specialty care? In-patient care?  

In a world where health care consumers are increasingly urged not to approach hospitalization alone, will travel for in-patient care promised as higher quality and lower cost appeal or not?

Up In Smoke

Today I want to pause and take a direct look at one small but highly significant piece of recently proposed ACA implementation: health insurance premium variance based on tobacco banding. You may recall that the ACA's much vaunted promise to end both pre-existing condition exclusions and individual underwriting of insurance risk in many health insurance markets was designed to streamline — both procedurally and financially — access to health insurance for Americans.

There are some exceptions to the take all comers approach, however.  In particular, it has always been contemplated that a certain amount of premium variance based on age and  on the use of tobacco products would be permitted.  Only recently, proposed rules on the insurance process known as banding have shown what is really meant by an acceptable amount of discrimination based on tobacco use. The ACA permits premiums to vary based on tobacco use by a factor of 1.5.  And the premium supports available to low income individuals are not available for the tobacco use premium band bump. 

What does this really mean for older low income tobacco users?

In a nutshell: quite a bit. The proposed approach on tobacco use banding allows health insurers considerable flexibility in determining how to band for tobacco use but the recently proposed rule contains one example of permissible tobacco use related banding that gave me pause.  Under the proposed rule, insurers could apply a different — and considerably lower — surcharge for tobacco use on younger smokers than on older smokers. How different? We are talking a tobacco use premium of, say, a few dollars a month for younger tobacco users and several hundred dollars a month for older tobacco users.

Several months ago, an interesting analysis by Rick Curtis and Ed Neuschler, projected that several hundred dollars of non-premium supported health insurance cost could knock a substantial number of older smokers into a very familiar kind of uninsurability known as unaffordability.   This means an older low income smoker seeking insured status might find an un-subsidized tobacco premium surcharge of perhaps $4,000 a year, unaffordable. (Of course, were you an older low income citizen intent on evading the individual mandate you could take up smoking and game yourself into the exceeds 8% of houshold income exemption for the individual mandate.)

All of this makes some actuarial sense.  Tobacco use has a long term fuse for its most expensive health effects.

All of this may not make the most public health sense, however.  If higher unsubsidized premiums are designed to discourage tobacco use, there is little doubt that shorter term tobacco users have a higher success rate at quitting.  Older smokers — say a 57 year old male — tend to be those with a pretty hard core addiction to nicotine, an addiction intensity not evenly distributed among the smoking population. There is recent evidence that some of  the damage from long term smoking is more enduring than previously thought, even after complete cessation.

And the real irony is that Medicare has no tobacco use premium banding. Smoke your way to 65, for most Americans, is a perverse incentive indeed.

 x posted at


ACA Implementation: University of Missouri Payroll Announcements

I am cleaning out my mailbox in anticipation of the New Year so I can just start junking it up again.  This sifting and sorting has its upside, however.  I just paused to read the University of Missouri's 2013 Payroll Announcement memo.  One entry, in particular, caught my eye:

Medicare Taxes

There will be two tiers of Medicare taxes starting January 1, 2013.  For wages of $200,000 and below, the Medicare tax rate will
remain at 1.45%, same as in 2012.  An additional 0.9% rate of Medicare tax on wages in
excess of $200,000 was enacted as part of the Affordable
Care Act.  There is no cap on the earnings subject to Medicare tax or
the additional Medicare tax. 

There it is.  I spy with my little eye the ACA provision that increases the Medicare tax rate by .9%. Specifically, the tax rate will increase by .9% for those with incomes over $200,000 (single) or $250,000 (filing jointly), representing an increase from 1.45% to 2.35%. It only applies to income over these threshold amounts.

You can see the IRS interpretive regulations here: Also, here's Kelly Phillips explaining it pretty well in Forbes:


 Under the current system, when you work, you pay into the Medicare system as part of your federal payroll taxes. You pay 1.45% of your pay and your employer pays in 1.45% for a total contribution of 2.9%. Unlike Social Security, there is no income cap, so all of your wages are subject to the tax; the cap on Medicare wages was removed as of January 1, 1994. Beginning in 2013, the Medicare tax imposed on high income taxpayers on the employee side will be increased by 0.9% – to 2.35% – for wages over the income thresholds (individual taxpayers reporting income over $200,000 and married taxpayers filing jointly reporting income over $250,000); amounts under the threshold will still be taxed at 1.45%. By way of example, if a single taxpayer earns $500,000, the first $200,000 is taxed at 1.45% and the next $300,000 is taxed at 2.35%. Self-employed taxpayers will have the same limitations.


This is a good explanation because it assumes no pre-existing knowledge of the status quo on the  Medicare tax and Medicare funding. Second only to questions interpreting health insurance policies and decisions, I am asked questions about understanding health care financing — particularly in relationship to payroll deduction. Across the educational and income spectrum, those who ask know suprisingly little about their own payroll taxes.

There it is.  We have to acknowledge, via an increase, that current workers contribute to Medicare funding. That is what FICA is and, though these funds are allocated to a Medicare-only trust fund, they are also supplemented by your income taxes to pay for Medicare and — ultimately — supplemented by various premiums and co-pays when you become a Medicare benificiary.

If you are still with me this late on Christmas Eve, you are what I would call a motivated student.

Here's the question for advanced students: If the ACA raises the Medicare tax, why does it do so unevenly or only on the employee side of the equation?  Do we see a bit more of an effort to means test Medicare here, by targeting this increased Medicare tax to higher wage earners alone?

And for extra credit: Where else do we see advanced the means-testing of Medicare?

Joyous Holidays to All!

Video: SCOTUS ACA Health Care Decision Panel


From left to right: John Ellwood, Jesse Choper, Steve Shortell, Brad DeLong, Ann O’Leary, and Ann Marie Marciarille:

SCOTUS Rules, Cal Responds: UC Berkeley Experts Assess Impacts of the Supreme Court’s Landmark Decision on the Affordable Care Act – UCTV – University of California Television: UC Berkeley convenes panel of experts to analyze the impacts of the Supreme Court’s decision to uphold the Affordable Care Act, or “Obamacare.” Professors of law, economics, and public health look at what the decision means for future health reform, constitutional law, medical care, health insurance, public policy and politics.

John Ellwood: 00:55
Jesse Choper: 15:00
Steve Shortell: 30:30
Brad DeLong: 45:50
Ann O’Leary: 55:30
Ann Marie Marciarille: 1:07:33
General Questions: 1:19:40