Tuesday, October 22, 2013

With Utter Conviction

The hard Right believes this stuff - the Shutdown/near Default was "beautifully done". The GOP has succeeded in branding themselves "the anti-Obamacare party". And so on. It leaves me breathless and a bit shaken. The bubble seems impenetrable. Even contrary facts are made to fit in. Wow!

Why would the GOP want to brand itself as the resolutely Anti-Obamacare Party? There is only one reason I can think of: they are totally convinced that it will fail. Why? Just because of the bad website? Surely they know that this can and will be fixed. No - it's the bad website combined with their absolute certainty that the young, under 35s' will not sign up. Here are some very recent comments from two smart conservative analysts:

First, Megan McArdle at Bloomberg - "Is Obamacare in a Death Spiral":

The exchanges were also broadly understood to be needed to get young, healthy people into the system. Somewhat naturally, almost every story you’ve seen about a new enrollee -- including those told by the president this morning -- has focused on someone who couldn’t buy insurance before, or who had very expensive insurance. But it’s not surprising that those people are fighting through the system to get coverage; they would pull themselves to the top of Mount Rushmore using only their teeth if that’s what it took to get a cheap insurance policy. What we need to know is what is happening among the people who didn’t need Obamacare to help them buy insurance, because insurers would be perfectly happy to sell them a policy without it. Those are the folks whose premiums will cover treatment for the rest...

Judging from President Obama’s speech, the administration has decided to triple down on the “burn the boats” strategy pioneered by Hernan Cortes in his conquest of Mexico: Make a total commitment in the hopes that this will somehow enable you to overcome impossible odds. There was no sign of a Plan B (other than call centers), no hint that they might consider a full or partial delay if they couldn’t get the systems working on time. Presumably they think (correctly) that the longer this goes on, the harder it will be to implement a delay, because so many people will have lost their existing insurance and/or bought new policies through the exchanges. But as I pointed out last week, while the “burn the boats” strategy sometimes ends with an improbable victory, the problem is that the other way it ends is in . . . well, a death spiral.

The healthy young man who sees an ad for his state exchange during a baseball game and loads up the site to get coverage -- the dream consumer so essential to the design of the exchange system -- will not keep trying 25 times over a week if the site is not working. The person with high health costs and no insurance will.  One might add that he’s probably not going to call into the call center, wait three weeks to get his PDF application mailed to him, review it and send it in, wait another week or two for notification about his subsidy eligibility, and then (finally!) call back yet again to check out his policy options. Some will, of course. But at every tedious step, you will lose people.

Uninsured young people, those under 35 and not on a parent's policy - these folks, who everyone agrees are essential for Obamacare to work, simply will not sign up, the Conservative argument goes. Why should they? Why should they pay $200 a month or more for way more insurance than they need, when the penalty for not signing up is just $95 in the first year? The sophisticated analysts look at the subsidy tables by market to tell their readers at what income level an applicant would need to be at to have opting out and paying the penalty be a "better deal". Turns out the number is pretty low, but that's because the calculation assigns little or no value to the insurance itself. True, you can always get it when you're sick, but only during the 6 month open enrollment period. What's the value to you of having full year coverage?

I'm convinced that Conservatives simply do not know who these young uninsured are - the prize insurance companies are looking for to keep the risk pool well balanced. Let's look at some data.
Here's an overview of the Uninsured from the National Health Interview Survey:

And here's a breakdown by income level:

And a breakdown of why people say they are uninsured:

And finally, here's the data on the significant percentage of young people who have a preexisting condition:

So what do we learn? Before answering that, let's remember what McArdle thinks is the key:

What we need to know is what is happening among the people who didn’t need Obamacare to help them buy insurance, because insurers would be perfectly happy to sell them a policy without it. Those are the folks whose premiums will cover treatment for the rest...

Looking at the data, it's clear that not many of the uninsured fit McArdle's definition of the key group that will ensure Obamacare's success. Only 11.7% of the uninsured have incomes more than 200% of the Federal Poverty Level, or $22,980. My guess is that the percentage of folks in the uninsured pool, who are young and earning a $30,000 plus salary (where subsidies start to get thin, disappearing totally at $45,980, or 400% of the FPL) is vanishingly small. Even this small percentage needs to be reduced by the almost 25% who have a preexisting condition that could make getting insurance difficult.

Most of the uninsured are poor or near poor (78% earn less than $23,000). They want insurance but can't afford it. Even though they are poor, 75-80% of them are healthy, and the Obamacare insurance pool needs them. And because of the subsidies, Obamacare will get them.

And Obamacare will succeed, because the product is good and is much needed by the uninsured.

1 comment:

  1. Thanks, Jim! As more people are covered, there will be plenty of opportunities to fix glitches, but also to enhance coverage for those on the margins. It is in the public interest to allow the process to unfold and operate while permitting incremental improvements..