Dear Duke: Let’s Not Normalize This Mode of Protest

The 25 Duke students who disrupted President Price’s address to gathered alumni last Saturday to issue a variety of demands announced today that their pending Student Conduct case has been closed with an informal letter of admonishment. The issues raised by our students are worthy of discussion, and I give them a lot of credit for activism focused on the well being of others.

However, I am worried that this episode will normalize a mode of protest that begins by telling someone who is scheduled to speak to get off the stage and not speak. I fear that this mode of protest will now be used (and reused) to shut down speakers with views that some find objectionable. That would be a terrible outcome for Duke, and much worse than last Saturday’s event, that could be viewed through the lens of a family squabble.

I would like to respectfully ask that all members of the Duke community pledge to not use this mode of protest to shut down the speech of others in the future, but instead that we commit to a robust ethic of free speech and flourishing academic freedom on campus, a task that can require special attention to insure that everyone has a chance to speak. Further, I would like for us all to imagine what it would look like for Duke to be a leader in this area.

In that vein, I highly recommend Free Speech on Campus, by Erwin Chemerinsky and Howard Gillman (Yale University Press, 2017) to us all.

Why did I stop blogging?

I realized over the weekend when someone asked me why I had stopped blogging that I haven’t written a blog post since August 20, 2017. I didn’t intend to stop (and I have greatly slowed blogging in the past two years, particularly as my administrative roles at Duke have increased). And I have commented some on twitter. However, blogging has increasingly felt like a waste of time to me of late, as I don’t think there is much interest in the policy nuances of pending legislation. That is a big change from when I started blogging in June 2009 as I started writing weekly columns (I did 29!; a great experience) for the Raleigh (N.C.) News and Observer on health reform. The blog was a place where I tried to ‘show my math’ and expound upon my attempt to document the debate over what became the ACA. I loved blogging in those days, as it seemed like there was a genuine policy discussion underway.

So, I never really decided to stop blogging. I mostly just drifted away over the past couple of years as I came to understand it as a waste of time. Maybe I will restart some day.

Thoughts on the Robert E. Lee Statue Removal from Duke Chapel

I became chair of the Academic Council at Duke on July 1, 2017, and was chatting with the Provost a few weeks ago and we agreed there “weren’t any hot button issues” on tap for the Fall semester. That, of course, is no longer true.

I support President Price’s decision to remove the statue of Robert E. Lee from the Duke Chapel Entrance, as well as with his commitment to preserve the statue in a way that will allows students, faculty and all of us to learn from it. The creation of a commission of faculty, students, staff, trustees and members of the broader Durham community to help guide the next steps shows that this will be an ongoing process. The removal of the statue is best understood as the beginning of a new chapter, not an ending.

Duke is a relatively young University, and I think this new chapter may provide a book end of what I often think of as the beginning of modern Duke–the Bassett Affair of 1903 (the University was then called Trinity College). Professor Bassett wrote that Booker T. Washington and Robert E. Lee were the two greatest Southerners of the previous 100 years:

….he inserted a sentence praising the life of Booker T. Washington and ranking him second in comparison to Robert E. Lee of Southerners born in a hundred years. Such a sentiment invited controversy at a time when race baiting was commonplace due to the revival of bitter partisan politics with the division of the Democratic Party, the rise of the Populist third party, and the revival of the Republican Party. State Democratic leaders in nearby Raleigh who were also represented on the Trinity College Board of Trustees demanded that Professor Bassett be fired. When parents were urged to withdraw their children from the college and churchmen were encouraged not to recommend the college to prospective students, Bassett offered his resignation.

The Trinity College Board of Trustees did not accept Bassett’s resignation, a founding chapter in Duke’s history that made clear the critical principle of freedom of speech for the University. Of course, it was non-controversial to so-praise General Lee in 1903, while today his likeness is the source of controversy.

The common denominator then and now is the life of the mind that should be the heart of the University, demonstrated first and foremost by the faculty and students engaging in scholarship, teaching and learning. This is a big moment for Duke and our country, and I believe that the University has special process and educational responsibilities not only to the members of our community, but to society at large. We have a chance to model that difficult issues can be navigated truthfully, respectfully and openly, and if done well, we can help to make our world a better place.

May we be up to the challenge.

The Senate bill confuses already confused consumers

The Senate’s Better Care Reconciliation Act (BCRA)[1] is a significant modification to the current Patient Protection and Affordable Care Act (PPACA)[2] exchange structure in a variety of ways.  One major change is the designation of the benchmark plan which determines the level of subsidy that the federal government provides to individual buyers on a health insurance marketplace.  There are two elements of note.  The first is that the benchmark plan is now a plan with a calculated actuarial value of 58%.  This is a significant change from the current benchmark plan with a calculated actuarial value target of 70%.  More importantly for this post is the benchmark plan in the BCRA is the median qualified plan.

Research has shown that consumers can be overwhelmed by too much choice[3].  Dominated choices can and often will be selected.[4]  Buyers have frequently confused the value proposition of Gold and Bronze plans based on prioritizing either more out of pocket maximum protections or lower monthly premiums. [5] Buying and using insurance is a complex task with significant uncertainty and cognitive demands.  The BCRA subsidy attachment system creates incentives for insurers to further increase complexity.

Within PPACA the incentive for insurers to clone plans with minimal meaningful differences between them only applies to the insurer which controls the least expensive Silver plan in a county.  This single, low cost, insurer faces a decision as to whether or not to design a second plan with the same actuarial value in a slightly different cost sharing structure in order to guarantee that this single carrier controls both the least expensive and the benchmark Silver point.  All other insurers plan offering decisions are made independent of subsidy attachment point manipulation purposes.

The BCRA creates a broader and more complex strategic design problem for carriers.  Every entry in the benchmark category influences the benchmark price.  Once an insurer has built a network and performed the basic actuarial calculations, modifying a basic plan design by altering co-insurance slightly or decreasing deductibles while increasing co-pays to achieve a constant actuarial value is a fairly low cost action.  A high cost carrier can introduce an isomorphic plan design to increase the benchmark and asymmetrically decrease the relative post subsidy price of its preferred offerings.  Low cost carriers have an incentive to offer one more plan to lower the benchmark and make its offerings more attractive compared to higher cost peers.

Counties with multiple insurers will face an unstable equilibrium.  Every insurer will have an incentive to add a marginal, incremental plan to be offered on the BCRA exchanges in order to move the subsidy attachment point closer to their preferred position.  Once this arms race begins, consumers will be asked to differentiate miniscule differences between dozens of plans offered by two or more insurers.  Common heuristics such as evaluating a plan first on the inclusion of a specific doctor or hospital in network and then examining a subset of plans based on maximally acceptable premium with the final decision step based on minimizing deductible will be corrupted.  Plans can be offered with low deductibles but higher maximum out of pocket exposure with a cost structure that significantly advantages or disadvantages certain types of consumers.  Insurance buyers will face decision fatigue and be overwhelmed with almost meaningless choice.

There are two possible solutions.  The first is for the Department of Health and Human Services to update stringent meaningful difference regulation.  Current regulation[6] allows carriers to offer multiple plans built on the same network ID and same plan type (HMO, POS, EPO, PPO) with fairly minor differences in cost sharing.  Stronger meaningful difference regulation would restrict carriers to offer only a single cost sharing design per network ID and plan type dyad.  The second is for the Senate to modify the benchmark.  Every participating carrier would place their lowest cost plan in the benchmark set and the median plan from the benchmark set would be the benchmark plan for the county.

These design modifications lower consumer confusion and will minimize strategic manipulations of the subsidy formula which will lead to more effective and efficient markets.

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Does Health Insurance Improve Health?

An old question has gotten some new evidence. Does health insurance coverage improve health? This is a simple (and important) question that is complicated to answer definitively due to methodological reasons, but the evidence base has grown by two important papers in peer review journals in the past few weeks:

  • Ben Sommers has a recently accepted paper in the American Journal of Health Economics that is available online as an eprint. He finds that Medicaid expansions in the early 2000s in 3 states saved lives, and he documents the costs of doing so. The point of the paper is better methods of determining if Medicaid expansions did in fact save lives and looking at the cost of coverage. His top level findings:
    • 1 life saved for every 239-316 persons newly covered by Medicaid (the range represents the uncertainty in the estimate–could be as high as 316 lives saved, or as low as 239, for each newly covered person).
    • The cost per life saved was $327,000-$867,000
    • He discusses the other things that could be done with this amount of money and notes these amounts are less than often paid per life saved for many interventions
  • Ben Sommers, Atul Gawande and Kate Baicker have a paper in the most recent NEJM that looks more comprehensively (not only mortality as an outcome, and at different types of insurance, public and private) and reviews the recent peer reviewed work on the broad topic of does health insurance improve health. This is a nuanced paper that focuses on the current health reform discussions that our nation is having and goes directly to how important losses in recent coverage expansions could be to public health. On the most basic question at hand they conclude

    There remain many unanswered questions
    about U.S. health insurance policy, including
    how to best structure coverage to maximize
    health and value and how much public spending
    we want to devote to subsidizing coverage for
    people who cannot afford it. But whether enrollees
    benefit from that coverage is not one of the
    unanswered questions. Insurance coverage increases
    access to care and improves a wide range
    of health outcomes. Arguing that health insurance
    coverage doesn’t improve health is simply
    inconsistent with the evidence.

The evidence base changes weekly. These two important papers need to make their way into the ongoing policy debates.

A cheat sheet to read the Senate version of AHCA

The Senate healthcare and tax cut bill is expected to drop soon. Here is a cheat sheet on how to read it.

1) Reconciliation places severe constraints on the bill

a) The Parliamentarian is most likely going to be stripping out significant, non-germane to the budget, items that were in the House bill.
b) $1 billion in savings must come from each of two committees (HELP and Finance).
c) Anything the Senate passes must meet or beat the $119 billion in budget window deficit reduction that the House AHCA was scored at.

2) Three major pots of money

a) Tax cuts
b) Individual market changes
c) Medicaid cuts to pay for tax cuts

3) Follow the money
Any extra dollar used to pay for a slower Medicaid termination has to come from either Medicaid on the back-end, fewer tax cuts or lower individual market changes. Anything used to up subsidies on the individual market has to come from itself, faster/steeper Medicaid cuts or fewer tax cuts. Anything that ups the tax cuts must come from the individual market or Medicaid…etc.

4) Index rates matter
Slower terminations but lower index rates on per capita caps is a budget gimmick. It gives a little bit of money in the 10 year budget window but leads to massive cuts in the out years against the current counterfactual.

5) Market design and incentives matter

a) Look at where the work disincentives apply

a1) Medicaid expansion where the FMAP disappears once a person churns out once
a2) Medicaid expansion to individual market transition without CSR as people move from high AV low premium insurance to low AV high premium insurance if they earn a dollar too much
a3) 350% FPL instead of 400% FPL

b) How does the individual market function without a mandate and without the patient and state stability funds?

Where to expect higher deductibles this fall on Healthcare.gov

The Silver plans are supposed to be 70% Actuarial Value (AV). AV is the percentage of costs for the pool that the insurer covers. 70% AV means the insurer pays roughly 70% of the costs, and the people in the pool pay roughly 30% in cost sharing. There are lots of different ways to arrange the cost sharing but that is a detail.

Under the Obama administration, there was a de minimas variation rule where a plan could be called Silver if it was between 68% and 72% AV. The Trump administration released a new rule that changed the allowed variation for a Silver plan to range from 66% to 72% AV.

The out of pocket maximums are likely to increase significantly in the highlighted Healthcare.gov counties below:

The highlighted counties have a Silver plan with a 2017 AV between 68% and 68.05%. I figure that companies are more likely to do what they were doing, reaching for the lowest possible AV if the rules are relaxed. Counties where the lowest AV was above 70% are, in my opinion, less likely to see their incumbent carriers race to the bottom as they already had not shown that proclivity. This is most of Oregon and significant chunks of Pennsylvania and Illinois with a few random counties elsewhere.

The distributional consequences are complex. Lower AV values, all else being equal, means lower premiums. The insurers pay less in claims. It is a good deal for the federal government as the premium of the benchmark Silver will either be constant or decrease so advanced premium tax credits will decline. It is a win for healthy people who are not subsidized as they weren’t going to hit the previous, lower out of pocket maximum anyways so they save 3% in premiums. It is a wash for people with Cost Sharing Reduction (CSR) subsidies as the CSR holds constant. It is a wash for subsidized buyers who don’t get CSR but who are healthy and were going to buy Silver anyways. It gets complex for those buyers who wanted to buy another metal band as county specific pricing variations will be altered. Bronze plans will be slightly more expensive and Gold/Platinum plans will be up in the air as to their relative price.

The worst off are the Silver buyers who are not receiving CSR assistance and who are likely to be sick. They are picking up more out of pocket. Non-subsidized buyers will get a slight improvement in lower premiums but all that plus more will go back out the door via higher cost sharing. Subsidized buyers won’t see the slight improvement in premiums. They will only see higher cost sharing.

Finally, the Tableau that I was using to play with this idea is below.

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