October 24, 2013

"Health Care Law Fails to Lower Prices for Rural Areas."

A NYT headline.
While competition is intense in many populous regions, rural areas and small towns have far fewer carriers offering plans in the law’s online exchanges. 
I'm impressed at the investigative reporting here. They got into the online exchanges and got to the point where they could find out what's on offer in many places? Apparently. But some of the analysis is based on a list from the Department of Health and Human Services showing which insurance companies are serving various counties. 58% of the counties have 2 or only 1 company offering insurance.
The analysis suggests that the ambitions of the Affordable Care Act to increase competition have unfolded unevenly, at least in the early going, and have not addressed many of the factors that contribute to high prices. Insurance companies are reluctant to enter challenging new markets, experts say, because medical costs are high, dominant insurers are difficult to unseat, and powerful hospital systems resist efforts to lower rates.
This feels like a foundation for the argument that markets don't work and therefore a fully government-run health care program is needed.
It is unclear how the online marketplaces might evolve over time. Many large insurers are closely watching what happens in the first year to decide whether to more aggressively pursue new markets. In the meantime, problems with the healthcare.gov Web site are making it harder for them to know whether the exchanges’ slow start is the result of technical difficulties or more serious underlying problems, such as a lack of consumer demand, that would discourage them from entering.
This seems to set up an argument that we never got to see what private companies would do in the marketplace, since the promised marketplace was never there in a form where it could be observed and intelligently responded to.

(There's much more in the linked article.)

43 comments:

TML said...

Here's the entire healthcare.gov price spreadsheet, uncovered and PRE-subsidy.

Have fun.


https://data.healthcare.gov/dataset/QHP-Individual-Medical-Landscape/ba45-xusy

TML said...

I failed to mention my point: The NYT didn't do any "investigative reporting" at all if they based it on this spreadsheet, because someone else found it and posted it two days ago. They had an intern sort it.

rhhardin said...

It's a golden opportunity to outlaw health insurance entirely.

People pay for services they use.

That worked as recently in the 50s.

Know how? Health care is not transferrable. Doctors charge what the patients can afford.

The rich wind up paying for the poor, via the doctor as mediator.

Private charity is hard to game, but is very responsive.

Put the market back in charge.

madAsHell said...

.....cuz rural folk are the wrong skin color??

rhhardin said...

Health care used to be listed in economics texts as an example of there being no market-clearing price.

Because it's non-transferrable, the price can be tailored to the consumer in question.

Supermarkets do this a little with coupons and sales, picking up the poor with a lower price while the rich mostly pay more, not caring much about the difference.

surfed said...
This comment has been removed by the author.
surfed said...

The ball's in the back court. The NYT is dribbling it up and makes a long pass to the corner where the point guard Sebelius takes the pass and pivots in the lane to a single payer system... The shot bounces harmlessly off the rim. Or one would hope anyways.

traditionalguy said...

It was designed to fail. The benefits were set as high as possible with no choice but to take it as is.

Then "poor" get it subsidized and the rest pay for it with 300% premium increases.

When that re-distribution goal fails it will all become Free, but with actual services/benefits re-set way down by Medical Ethicists (a/k/a Death Panels).

rehajm said...

The Times metric for competition appears to be the number of insurers within a given market. True competition in a marketplace would have providers offering things like high deductible catastrophic plans, but unfortunately the 'competitors' are all forced by ACA to offer only slightly altered versions of the exact same product, with only some relatively small changes in copay, or upfront cost.

Jane said...

This is what democracy looks like -- the rural people will always get the shaft.

wildswan said...

I may be wrong but it seems to me that you would have to withdraw the Obamacare law to set up a single payer system. I mean you couldn't go forward with O_Care and build it into s single payer system (which is what a lot of single payer supporters hoped for) if 0_Care is a mess. You have to start over. But starting over makes people aware that government can take a problem and make it worse. Like Communism in Russia. I don't think people will go for single payer if 0-Care fails.
I think it will fail because
when you get past the first screen you come to the second and then the third and it seems that each screen has problems. Moreover the problems get deeper and more damaging as you progress to the next level.
-First you can't open the screen. --then you can open it but not sign up or shop.
then you can shop but the prices are wrong (here's where it begins to hurt ... or would if you could sign up)
then you can shop but you can't sign up
OR then you can shop and you seem to sign up but it dumps you secretly with a promise to send an e-mail
OR then you can shop and sign up but you are relying on false ideas about the price plan
OR then you can shop and sign up but wrong information is transmitted
AND THEN
your doctor isn't in your plan
the specialist you need isn't in your plan
the hospital you have been going to isn't in your plan
OR NEW PROBLEMS
CMS refuses to cover the treatment your doctor / specialist / hospital advises
CMS flags you as "expensive" and begins "behavioral surveillance" as a preventive measure, i.e. smoker, drug user
CMS flags you as "potentially expensive" and begins "behavioral surveillance" as a preventive measure i.e. potentially a drug user based on your genetic profile.

The further down the road you go the worse it gets as in all IT games.

Peter said...

The actuarial soundness of the entire system is based on the assumption that young, healthy people can be convinced to sign up and keep paying. Will they? If not, how high will premiums go?


The first sticker shock will be the price of even the least-expensive "bronze" plans. But the second will be the high deductibles- as much as $4,000. for an individual.

If you're young and healthy and you find yourself paying $hundreds per month for a policy that doesn't seem to actually pay for anything (except free contraception and preventive checkups) because your expenses never even get close to the deductible, are you going to keep paying- or just take the (relatively small) penalty?

After all, this isn't like insurance through your employer, where the premium is deducted from your paycheck- paying a positive option, you have to be willing to keep doing it.

Am I being a Cassandra here? The initial news is bad, but there's the potential for it to get so much worse. And the increasing sense that no one really thought this through (let alone prepared for contingencies).

Jane said...

My Uncle is 72, and he's never enrolled for Medicare, because he hates it -- he's been a frugal saver all his life.

Well, he had pain he couldn't ignore -- so he consented to let the Dr. scope his throat and stomach. (Turned out to be a high hermia, nothing more). My uncle asked the doctor if, while he was unconscious anyway, if he could perform a procedure to stretch his throat to relieve a choking sensation -- his sister had had the procedure done with good results.

When he woke up, the procedure hadn't been done. He paid $17k out of pocket for the first procedure, and the doc said he would need to bill him the same for the second, since they were different "codes" and he was used to billing everything separately, so two things couldn't be done at once.

The Uncle signed up for medicare after that. Taxpayers are on the hook because of insurance stupidity.

mrs. e said...

Many rural Americans have limited access to health care, in part because most don't have any health insurance and from a severe maldistribution of physicians, from which rural areas suffer the most (a low number of residencies and and aging physician population).

Without the insurance, there isn't going to be much of a market.

Hagar said...

So, how much of "insurance stupidity" comes abot because of government regulations already in place?

Besides the federal regulations, the insurance industry (or -ies) is heavily regulated by the states and has always been a cash-cow for political contributions.

Larry J said...

mrs. e said...
Many rural Americans have limited access to health care, in part because most don't have any health insurance and from a severe maldistribution of physicians, from which rural areas suffer the most (a low number of residencies and and aging physician population).

Without the insurance, there isn't going to be much of a market.


When I was stationed in Nebraska (80-82), I was at a very small communications site a long way from anything. I could've lived in Silver Creek (pop: 490) that was closer to work but instead I lived in the town of Genoa with a population of roughly 1000. The town served the local farmers. It had a single school, a couple gas stations, a bar and a welding shop. There may have been a barber shop but I don't remember much else. I do remember what a big deal it was when someone opened a coffe shop.

Rural areas don't have much of a market for anything because there are so few people, usually spread over a wide area. Few small towns have doctors because there aren't enough patients for the doctor to make a living. If I needed anything beyond what those local businesses offered, I had to drive about 30 miles to Columbus (actual tee shirt: "Columbus Nebraska: Known for Absolutely Nothing"). As a town with over 20,000 people, it had much more of everything available.

TosaGuy said...

I don't think this scheme to get a national health system (single-payer is a better polling euphemism) will work that well because people already associate this fiasco with the government via the healthcare.gov URL.

Will people actually tolerate with what they perceive is the government doubling down on failure?

The Drill SGT said...

what rehajm said...

Curious George said...

"TosaGuy said...
I don't think this scheme to get a national health system (single-payer is a better polling euphemism) will work that well because people already associate this fiasco with the government via the healthcare.gov URL.

Will people actually tolerate with what they perceive is the government doubling down on failure?"

Remember November 6, 2012?

Steve said...

What do they expect? Those flyovers didn't vote for Obama.

CWJ said...

Point of information.

According to healthcare.gov, Jackson County (I.e. Kansas City) has only two providers - Coventry & BC/BS. So how is that case different from the rural areas that the NYT is highlighting.

Yes yes, we can't rule out the possibility that the NYT considers KC rural.

David said...

You have to look through the insurers to the providers in rural areas.

In rural areas, or even in isolated small cities in thinly populated areas, there are often single providers for most services. As a result provider cost is far higher than in places with multiple providers. (I learned this to my financial detriment when I volunteered to pay a hospital which had treated my uninsured adult son in a small city in Wyoming. But they had probably saved his uninsured life, so it seemed the right thing to do.)

Because the providers in these areas rule the pricing, the insurers have great difficulty operating at a cost that customers are willing to pay.

So while this provides an argument that competition does not work for insurance, it also shows the beneficial results of competition among providers.

Competition does work, but only where there are viable competitors. In a town with one gas station, the price will be higher. Ditto many other products or services.

So there are areas where competition will work poorly.

This is not an argument to forego competition as a price reduction in most markets.

Plus, as usual, the people designing these systems are from large and affluent urban areas. The give only the tiniest and least acute thinking to problems of people unlike them.

cubanbob said...

A solution to areas with few carriers would be to just get rid of the federal ban on interstate health insurance policy sales. Indeed all insurance should allowed to be sold this way. The States are just as bad as the Feds with their insistance of must provide.

ObamaCare will fail for actuarial reasons as noted by another commenter above. Unless the penalties are close to or higher than the cost of the premium-tax adverse selection virtually guarantees it will fail. The ACA was really intended to prop up Medicaid and Medicare by passing the needed subsidy to private insured instead of raising taxes and budgeting for them which Congress really hates doing since that would put the members on the hook for raising taxes and capping benefits. The failure of the ACA will force Congress to deal with politically difficult choices-taxpayers versus beneficiaries and that will be an especially hard one for the Democrats.

Larry J said...

Unless the penalties are close to or higher than the cost of the premium-tax adverse selection virtually guarantees it will fail.

From what I just heard, the law only allows the IRS to collect the penalty from tax refunds owed. If you structure your withholding properly, you don't get a refund nor do you owe very much. If that's the truth and if Obama actually holds to the law (big "if" on that second point), then people will easily be able to avoid the penalty.

John Constantius said...

TradGuy, I feel your pain but the mistake you make is thinking that this system is intended to subsidize the poor at the expense of the rich. Like every major US redistribution system, it is intended to subsidize the old at the expense of the young, regardless of wealth.

Think about it. There were three major wealth redistribution systems in the US, all of which effectively take money from the young and give it to the old: Social Security, Medicare and the income tax (retired people have little income). For some reason, three big systems wasn't enough so we now have a fourth in Obamacare (or will anyway, if and when it actually works).

I suppose it's no surprise this is the case -- as a matter of demographics there are more old people than young people and old people are more politically active.

As Jefferson observed, the biggest problem with democracy is that 51% of the population can vote to punder the other 49%. Our Constitution was supposed to stop that kind of thing but it hasn't really worked out in practice.

Strelnikov said...

"This feels like a foundation for the argument that markets don't work and therefore a fully government-run health care program is needed."

You've accidentally summed up the raison d'etre of ObamaCare.

Larry J said...



Strelnikov said...
"This feels like a foundation for the argument that markets don't work and therefore a fully government-run health care program is needed."

You've accidentally summed up the raison d'etre of ObamaCare.


Yes, the "failing forward" strategy. It only works if you can convince people that despite the dismal failure of your earlier efforts, you can trust them to get everything right if you give them even more power. Does that make any sense?

Suppose you had a relative who fancied himself a handyman. He's unable to find work so you hire him to do some odd jobs around your house. He then proceeds to screw up everything he touches. Would you then turn around and hire him to build a new house for you? Does that make any sense?

Sigivald said...

Rural counties with no people have little competition for an expensive service?

I am shocked.

(For that matter, they're ignoring a bit of competition that's always there: paying cash.

Lots of Doctors and facilities will give you very nice rates for cash; far lower than what they try to charge insurers.)

cubanbob said...

From what I just heard, the law only allows the IRS to collect the penalty from tax refunds owed. If you structure your withholding properly, you don't get a refund nor do you owe very much. If that's the truth and if Obama actually holds to the law (big "if" on that second point), then people will easily be able to avoid the penalty."

Larry J that's easier said than done for most people. Besides the IRS can always can always re-jigger the withholding schedules by applying a multi-year income averaging to determine the amount of tax witheld from your pay check. The W-2 world will be living in the 1099 world's reality if that were to happen.

Hammond X Gritzkofe said...

Will the AMA fail? That depends.

Fail to deliver service at terms and price expected?

Fail to deliver service at the terms and price promised?

Fail to deliver the expected service at any price?

Be such a colossal donkey dance that it will be repealed entire?

My opinion: the Feral Gummit will flog the AMA like like a rented mule, at great expense and inconvenience to the public; costs will increase and delivered service will decrease.

I fully expect to have legions of re-hires from the 2010 census going door-to-door, visiting every suburban home, isolated farm house, and inner city flop-house to contact all living persons about their health insurance status.

I do not expect a sufficiency of voters will emerge to cast out the Political Class which has thrust this culminating evil upon us.

H.L. Mencken: The government consists of a gang of men exactly like you and me. They have, taking one with another, no special talent for the business of government; they have only a talent for getting and holding office. Their principal device to that end is to search out groups who pant and pine for something they can't get and to promise to give it to them. Nine times out of ten that promise is worth nothing. The tenth time is made good by looting A to satisfy B. In other words, government is a broker in pillage, and every election is sort of an advance auction sale of stolen goods.

The premise of the ACA is that by interposing the Government between Physician and Patient, more and better service will be provided, and at lower cost.

I think the line is from Jerry Colonna, maybe Bill Dana as Jose Jimenez: Pardon me for laughing in your face, Senor.

Hagar said...

How come no one yet has commented on the absurdity of the headline itself?

"Health Care Law Fails to Lower Prices for Rural Areas."

Kirk Parker said...

Jane,

There's something wrong with your uncle's story. If he was paying out-of-pocket, insurance had nothing to do with it. Instead, the problem was your uncle not pre-negotiating the whole package, and finding a different doc if the first one wasn't reasonable.

Hammond X Gritzkofe said...

Neglected to mention that FAIL - along with FAIR - is a four letter word beginning with F, which has been so over-used as to be rendered devoid of any particular meaning. It simply leaves the hearer with a mild feeling of puzzlement, mild disgust, and lost respect for the speaker.

But will the AMA fail? No. It will ALWAYS be deemed a success by those who make a living from it - the elected political class and the hired bureaucrats.

Levi Starks said...

The affordable care act was never, ever, about healthcare. It's about the redistribution of money from those who've figured out how to live successfully in this country to those who haven't. It's about creating just one more revenue stream of dollars into the federal coffers.
But please don't listen to me Ann, Listen to the mainstream media who told you how Obama was going to be the best president in our lifetime. If you're so busy living the comfortable lifestyle of a college professor who can obsess over the floor finish in the living room, and whats the most nutritional dog food available, that you can't be bothered to make a personal examination of the man you're voting for as president, then you and everyone like you deserve exactly what we're getting.

TosaGuy said...

"Will people actually tolerate with what they perceive is the government doubling down on failure?"

Obamacare in 2012 was a concept and Romney didn't hammer Obama on that concept. The race was turned on other issues.

I don't see the Dems able to rally up the support again to do a massive overhaul when people are screaming at them about the trainwreck their last big idea turned out to be.

Perhaps I am a bit too optimistic, but it's hard being cynical all the time.

Sam L. said...

Quelle suprise! That it's in the NYT.

Strelnikov said...

Or anywhere else.

Hagar said...

Current MSNBC headline:

"Obama: 'This is the moment' for immigration reform"!

Kirk Parker said...

"Perhaps I am a bit too optimistic, but it's hard being cynical all the time."

Really? At least when thinking about government, I find it no effort at all. But maybe you're of a different species or something... ;-)

-Kirk ("The Cynical Optimist")

Jane said...

Kirk,

That was the story, and it happened just six months ago, so it's still so recent.

My Uncle is a farmer in a rural area, which is why this post caught my eye. There aren't very many doctor choices or negotiations that are possible, and he's a simple, quiet, trusting man. He always does the right thing for people and I think he thought he'd made it clear to the doc.

You're right, of course, things in writing are a good idea. But the doctor's excuse was homestly that one about the insurance codes.

I run into it all the time with my kids - you take them in for one thing and ask the doc for a (seriously) quick something else, and the answer is NO because of insurance billing.

This is why a whole lot (maybe all, in fact) of my mom friends regularly use the CVS minute clinic for kid problems -- it's much cheaper and less hassle. I've been amazed recently to find out that my friends with the most amount of kids have been getting by with no insurance, so now I understand why they look for expedience and cost savings.

Kirk Parker said...

Jane,

I didn't mean "left out" in the sense you forgot (or didn't now), but rather something significant that didn't happen.

And yes, being far from competition and choices really hurts one's ... ... ... choices. Going forward we're all going to need to pay a lot more attention to alternatives when procedures are (a) expensive and (b) non-emergency.

Biff said...

The Professor wrote: This feels like a foundation for the argument that markets don't work and therefore a fully government-run health care program is needed.

Well spotted, Professor. "Market failure" is a common refrain among healthcare reform advocates, and it is used most often to tip the balances towards single payor medicine.

In practice, market failures in healthcare are driven by preposterously arcane laws or regulations that require market participants to behave in ways that defy common sense. The fact that companies like aetna have decided to stop issuing individual policies in their own home state of Connecticut is no doubt viewed by many as a market failure, despite the fact that they were able to do so successfully for many years before Obamacare.

With respect to the NYT article, there was an attempt to explain the differences in costs between Wyoming and Montana as due (in part) to differences in the number of competitors in each market. While that may be a contributing factor, it's probably true that differences in state laws and coverage mandates is a much greater factor. Similarly, people in NJ can pay twice as much for coverage than neighbors a mile or two away in Pennsylvania, despite nearly identical demographics and multiple competitors in both places. The difference? The laws.

It also was interesting that the NYT article didn't mention a recent SCOTUS case, Federal Trade Commission v. Phoebe Putney Health System, Inc., which considered a possible state-sponsored anti-trust violation in rural Georgia. The technical implications of the case are convoluted, but the practical results leave a monopoly standing.

donald said...

I live in a really nice area and one thing I can tell ya is that the tennis moms/wives know their way around some coupons.