Friday, November 8, 2013

There's a Fairer Way to Do Universal Coverage

I've spent most of the morning wandering through the endless wasteland that is health care insurance analysis.  First observation:  it's so difficult to find a centralized source of data to answer simple questions that only a modicum of paranoia is required before you wonder if obfuscation isn't in a few people's best interests.  Of course, the less paranoid explanation is simply that this thing is so friggin' complex that nobody really knows what's going on.

But I did find some stuff, mostly courtesy of the Kaiser Family Foundation and the CBO.  I know the source of insurance for the US population in 2011:

It's good to know these stats in actual number of people, too:

Employer  149,350,600
Individual  15,416,100
Medicaid  50,670,200
Medicare  39,996,700
Other Public  3,846,400
Uninsured  48,611,600
Total  307,891,600.0

(Note that these are 2011 numbers.  The number of uninsured went down in 2012--see below.)

And, of the uninsured, I know the 2012 income distribution:

I know some other handy facts:

  • There were 47.3 million uninsured in the US in 2011.
  • The average individual health care policy cost $2580/year in 2010.
  • The average group plan policy for a single employee cost $5615/year in 2012 (total of both employer and employee contributions).
  • The average group plan policy for a family cost $15,745/year in 2012 (total of both employer and employee contributions.
  • CBO projected cost of exchange subsidies is $2B for 2012, $4B for 2013, and $25B for 2014.  Let's assume $2B a year for administrative stuff and move the other $2B in 2013 to 2014 to account for the giant ongoing exchange clusterfuck, and we'll use $25B for subsidies in 2014.
  • CBO also projects that one third of the people newly eligible for Medicaid will reside in states that will extend coverage in 2014, another one third will be covered by 2015, and the last third will not be covered ever, or at least until after 2015.  In 2014, CBO estimates that 7 million additional people will be covered by Medicaid.
I think we're ready to do some computation now.  So we have 47M uninsured minus 7M going to Medicaid, for 40 million people to insure in 2014.  Let's suppose we get half of them, taking it down to 20M.

Let's goose the $2580/year for the average individual plan premium in 2010 by, say, 16.7% over the last 3 years making the yearly premium $3010.  At roughly 15 million people in the individual market, we're looking at $45.2B in premiums.  Now we're going to add 20M people to the market who will be, on average, older, sicker, and more pregnant than the current market.  Let's say their unadjusted premiums would be $4000/year.  That's $80 billion more in individual premiums.

  • Total getting individual insurance in 2014:  15M (current) + 20M (new) = 35M.
  • Total amount owed in premiums by those 35M:  $43B (current) + $80B (new) - $25B (subsidies) = $98 billion.  Or, to put it another way, 35M people will pay $55B extra in insurance premiums.
  • That's an average of $1570 to be paid by 11% of the population.
Mind you, we're talking about 11% of the population that is much poorer and much more insecure than the US average.  And we're forcing them to pay an extra $1570.

Let's give these people median household income of $42,000, (US median is $51,000) and the average household size of 2.55.  So $1570 * 2.55 / 42,000 = a 9.5% tax levied on a class of people that are pretty much living hand-to-mouth at best.

In what universe is this fair, to say nothing of compassionate?

Now let's perform a little experiment:  We've got 149 million people who have group insurance worth an average of $15,700 a year per family or, using the same household size (which isn't quite right, because the characteristics of employed households are different from those than are unemployed, but we're going back-of-napkin anyway), $6150 per person.

If, instead of 35M people, we have 149M + 35M = 184M people paying the extra $55B, that amounts to a tax of $299 per person, instead of $1570.  Using the US household median income of $51,000 and 2.55 people per household, you're looking at $299 * 2.55 / 51,000 = a 1.5% tax paid by 60% of the population.

Want to make ACA fair?  Here's what you do:
  1. Get rid of group insurance.
  2. Remove the caps on health savings accounts.
  3. Force employers to contribute the amount that they previously spent on employee to their HSAs.
  4. Everybody buys individual plans.
  5. Keep community rating as-is.
  6. Get rid of these stupid minimum health benefits and bronze/silver/gold/platinum classifications and let people buy the plans they want.
Want to do something even better?  Dump Medicare and Medicaid into the pool at the same time.

This is obviously going to impact more people than the current law.  And the people it's going to impact are a lot more powerful than the lower-middle-class voters you're hitting with ACA right now.  But either something close to universal coverage is a national imperative, or it's not.  This kind of reform wouldn't make ACA a good law.

But at least it wouldn't be an obscenity.

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