Research on "Medical Bankruptcy" is Analytically Bankrupt

The media re-broadcast an article that concluded that 62% of U.S. personal bankruptcies are "medical bankruptcies". The article was so off-base, John Goldman's Health Policy Blog nominated my dissection of it as an entry in the "Worst Study of the Year Award"!

Sebelius & Insurance Monopoly

In a real howler, US Secretary of Health & Human Services Kathleen Sebelius said that a so-called "public-option" is necessary because people in some parts of the country are subject to a health-insurance "monopoly" of one carrier.

We agree with the problem. (In fact, it's worse than she thinks, because limiting us to health benefits of our employers' choice puts almost everyone who works as an employee under a "monopoly": Most have a "choice" of one plan.) But we have better solutions. Here are two:

1. Give people the same tax break if they buy their own health insurance, instead of forcing them into health insurance that their boss chooses.
   
2. Let people buy insurance that is portable across state lines.
   

By the way, if the so-called "public option" is really voluntary, will the share of my taxes that will undoubtedly bail out its cost over-runs be voluntary, too?

New Rescission Regs Will Hurt

It's been a while since the topic of "rescission" of individual health-insurance policies hit the headlines in California. Los Angeles Times reporter Lisa Girion and colleagues took credit for a previous regulatory flurry against health plans' rescissions, which peaked in February 2008.

Both health-insurance regulators (Insurance Commissioner Steve Poizner and Cindy Ehnes of the Department of Managed Health Care), as well as Los Angeles City Attorney Rocky Delgadillo, went on a tear against health insurers who had rescinded policies previously issued to individuals, whom the insurers alleged had materially misrepresented their health status when they applied for coverage.

Because the rescissions occurred after the individuals had submitted expensive claims, the over-seers figured that the insurers had engaged in the illegal practice of "post-claims underwriting". It was really much ado about very little (if not exactly nothing), as I wrote in a series of posts from October 24, 2007 through September 12, 2008. (You can hyperlink back through the series from the latest one.)

But Commissioner Poizner is in election mode - for governor this time - so he has obliged Ms. Girion and the LaLa Times with some new proposed regulations against the health insurers' practices.

The proposed regulations are a bonanza for trial lawyers, and will reduce Californians' ability to find inexpensive health insurance in the individual market. For example, in order to reduce ambiguity, the proposed regs state that: "Whenever possible, information from a PHR (Personal Health Record).....shall be relied upon in addition to, or if sufficient, instead of health history questionnaires."

Hang on: Are Personal Health Records now tools that relieve applicants from truthfully answering applications? Is "PHR" even a regulated term? In court, will a PHR, of whatever quality, over-ride an applicant's hand-written application? This is a Pandora's box.
Furthermore, if the applicant does not answer questions clearly, which are important for underwriting, the new regs oblige the insurer to "pursue alternative methods of obtaining such information, including but not limited to telephone interviews, medical records, or other sources of information."

Whoa again: Does this mean that if I caught some infection from a yak during my time in the Peace Corps in Mongolia, and fail to disclose it on my application, then the regulator will prevent the insurer from rescinding my policy because it failed to make inquiries to the Mongolian Ministry of Health?

It looks like all the burden of proof lies on the health insurer (which has no previous information about the applicant) and none lies on the individual (who has all the information). This makes responsible underwriting impossible.

Industry sources have told me that last year's regulatory rampage has already made them gun-shy about issuing individual policies in California, and they are rejecting many more applications. These proposed regulations will likely make the situation worse.

Why No Health-Tax Reform? A Conservative's Inside View

I'd say that almost no serious health-policy believes that employers alone should get the huge tax-break they do for offering health benefits as a part of compensation. And yet, it persists, despite scholars from both left and right having attacke it for years. Over at KQED's Healthy Ideas blog, I try to explain why conservative analysts have not yet convinced conservative politicians to fully embrace this reform.

Audio-Visual of Arizona Legislative Testimony

As previously reported, I spoke to the Arizona House of Representatives Health & Human Services Committee on May 26. The written testimony is posted here, and the audio-visual archive is here. I follow Christie R. Herrera at 1'36' and finish at 1'49.

Patients' Choice Act: "Exchanges"

Yesterday, I wrote critically about the "auto-enrollment" feature that the federal government would require states to institute if it passed the Patients' Choice Act, a proposal by four outstanding Congressional Republicans. I concluded that the requirement would not be effective.

Another feature of the PCA is the requirement that states establish "exchanges", from which residents could buy health insurance. Once again, I believe that the proposal would be ineffective. Worse, it reflects a fundamental misunderstanding of the risk-pooling function of health insurance. (Unfortunately, it's the same misunderstanding that most people have.)
Congressman Ryan carefully distinguishes an "exchange" from a Massachusetts-style "connector" by the fact that participation in an exchange would be voluntary, whereas a "connector" requires every one to buy health insurance. Well, fair enough, but his Q&A's also show that the "exchanges" would not work as advertised, unfortunately.

First, let's note one of the reasons for the exchange: The Q&A states that "a single patient venturing into the individual market does not have the benefit of spreading risk (and costs) in a broader risk pool." This is almost completely untrue, as demonstrated by Professor Mark Pauly and colleagues (which I discussed in a recent briefing paper, especially pp. 30-31). And it would be even less true if the government reformed the tax code so that we could buy guaranteed renewable, health-status insurance, that lasted our whole lives (as described by Professor Cochrane.)

Second, the PCA promotes states' instituting "voluntary" exchanges, but health plans within the exchange will guarantee issue policies. I.e., people who are already sick will enter the exchanges to buy insurance and those who are healthy will avoid the exchanges. Obviously, this will result in death spirals within the exchanges.

The PCA anticipates that insurers within the exchanges will re-insure each other, as occurs in Switzerland and the Netherlands. However, participation in those countries is mandatory. There's no point re-insuring risk in the exchanges if only sick people buy policies via the exchanges!

The Patients' Choice Act is a serious, good-faith effort to reform health care with minimum government, but it needs a serious make-over.

Patients' Choice Act & "Auto-Enrollment"

On May 20, the insightful policy analysts Joe Antos and Grace-Marie Turner editorialized in favor of the "Patients' Choice Act" in the Wall Street Journal, where they labelled it the "GOP's health-care alternative."

Produced by U.S. Senator Coburn (R-OK), Senator Burr (R-NC), Congressman Ryan (R-WI), and Congressman Nunes (R-CA), the PCA immediately drew some heavy criticism by freedom-loving policy analysts Michael Cannon and Michael Tanner (a.k.a. "the two Mikes") over at the Cato blog.

The PCA would compels states to institute a number of policies. The first one that I found questionable is "auto-enrollment". This means that when you get a job, or a driver's license, or show up at the ER, you are "auto-enrolled" in a health plan. The Congressional authors cite the experience of auto-enrollment in 401(k) plans as an example of how it overcomes eligible beneficiaries' inertia in the face of complex choices.

Well, maybe so, but health insurance is quite different. First, suppose I move to Florida to start a new job and get a new driver's license when I arrive there. I am just about dumb enough to "auto-enroll" in both the default plan that my new employer offers me and the default plan offered by the DMV.

Also, if the hospital ER also offers auto-enrollment (which I suppose would happen if I went to Florida without a job and did not get a driver's license), that procedure misses the whole point of health insurance. It's kind of like the auto-body shop auto-enrollling you in car insurance when you show up after an accident! What kind of a self-destructive car-insurer would sign on to such a program?!?!

The other big difference between health insurance and a 401(k) is that if I stop contributing to my 401(k), the balance just sits at Fidelity (or Vanguard or Merrill Lynch,or wherever) until I roll it over. If I stop paying health-insurance premiums, I obviously auto-disenroll from the plan, defeating the whole purpose. Because nobody seriously proposes that a tax credit alone will fully fund a health policy, but that working people will pay some of their wages in premium, this will result in significant drop out.

Which brings us back where we begun: uninsured people. We either believe in individual choice, which will result in a certain number of uninsured under any scenario, or we believe in mandatory health insurance.

There really is no middle way.