Day 27 of the Exchanges

It is Day 23 of the exchanges. The blather erupting from the political class and their minions on Fox News and MSNBC is just amazing. I just can't help being a voyeur, toggling between the polar ends of the partisan spectrum and marvel at the their blindness to their own biases. I have tried to sort through the chatter and I am at a loss to predict how all this will play out in the next six months. However, I have come to these conclusions:


1. The Federal exchanges are a mess. The state exchanges appear to function better but it is not clear whether they are functioning well enough.
2. It is not clear whether the situation is improving quickly enough.
3. It is not clear whether the situation is any worse than what was previously experienced with the roll out of Medicare part D in 2006
4. It is not clear who is able to sign up and whether sufficient young healthy people will sign on to make this work. Most of those signing up are signing up for Medicaid.
5. In time we might be able to figure out what all this means.
6. There is much finger pointing to come.Much causality will be claimed and belief will be much more important than actual proof.

Measuring success with sustainability in mind

What constitutes success? It seems like a relatively simple question but it is actually very hard to define success because what appears like a success at one moment in time can end up as an abject failure at a later point in time. The converse is also true. This represents a truism in basically all realms of human endeavors.

Take for example the world of financial investment management. Bernie Madoff was one of the most
successful money managers of the late 20th century. Even before he was infamous he was famous for his remarkable returns on investments and by all measures was a remarkable success attracting celebrity clients, assuming leadership positions in his industry, and being a darling of the philanthropy community. He was almost universally viewed as a success until he was not. He turned out to be a fraud and a failure because his formula for success was not sustainable. World history has been littered with similar individuals. Just today the WSJ reported on Eike Batista, a Brazilian tycoon whose empire is not collapsing. He was on the Forbes list of most wealthy people in the world as recently as last year. Now he is the center of perhaps the largest bankruptcy ever to occur in Brazil with the prospects of sending destabilizing financial ripples throughout the country and world.  The same principle can be applied to institutions, states, and programs.

When I am driving in my care, I make it a point to take the opportunity to listen to the spectrum of political chatter, listening to both MSNBC and Fox  News (as well as NPR). I would argue that MSNBC and Fox news have more in common that they might think and they should each thank their lucky stars that both exist. Each serves to create content for the other. I am struck by the differences in what different ends of the political spectrum view as successes, acceptable failures, and looming catastrophe. Perhaps I am naive (I know that to be the case) but I wish to believe that each side is motivated by the desire to create a better world, but they have very different views on how to go about doing this. Furthermore, each side uses a different set of what amount to be surrogate measures to identify success or failure in a time frame where they can actually measure things. In each case the time frames used by these hedgehogs (always certain and frequently wrong) are likely not entirely useful for avoiding what I refer to as the Bernie Madoff problem;
embracing early what end up being transient and non-sustainable approaches to solve real problems.

The theme is recurrent; create some program replete with subsidies or tax breaks, spur the development of rapid investment in some particular target area or create or support politically connected entities which are uniquely enriched by politically derived resource flows. The picture may look great, particularly for the select few who derive direct benefits, but what about the broader public? The picture tends to be even more muddled that a simple model of short term success vs. long term failure might imply. What we face is more like a muddled picture in all time frames with bad outcomes always mixed with some good outcomes which are not uniformly distributed. The politically connected will always fight much harder to protect their specific subsidies and rents because they directly benefit. This always happens when the benefits are concentrated and the costs are socialized and not easily measured.

Each side of the political spectrum cherry picks the respective outcomes to justify whatever they are advocating at the moment, creating implausible causality linkages which conveniently justify their talking points. The latest case is using the government shutdown and making the claim that this resulted in the poor job numbers just released. This is despite the fact the numbers were actually collected before the shutdown. While this particular case highlights a dubious claim of the political left, they have no monopoly on such claims.  Reading David Stockman's books made me understand that success in politics going back to at least Nixon has required that one sell such dubious linkages to the public and deploy short term approaches to create transient success at the risk of creating long term failures. It likely goes back much farther (perhaps to the dawn of human civilization). I cannot help but think about Louis XV and his famous utterance about "After me the deluge". Success for him only mattered up until when he was dead.

Sustainability is one of those things which has been seized upon by various parties across the political spectrum. Here again the focus of sustainability anxiety differs across the various political parties. The right worries most about financial sustainability, focusing on deficit spending and the effects upon future financial growth and stability. The left focuses more on environmental issues and sustainability. In each case there are concerns that current practices are not sustainable and if continued they will lead to catastrophes. Who is right? How likely are these various scenarios to come about and in what time frames?

I must admit I worry more about financial calamities. They have happened with consistent regularity with spectacular financial and social breakdowns punctuating human history. Poverty and social chaos appear to be the default mode for the world. There are many more paths leading there than there are leading to wealth and order. In my limited experience the worst environmental degradation seems to happen where people are the poorest and the path to better environments seems to be through improved generation of wealth. The counter arguments focus on the possibility of existential environmental calamity driven by human action. If this is a "likely" possibility, it should change human behavior. However, we cannot come to an agreement as to what likely means and what threshold should inspire action. Good luck in driving a consensus. The problem is those most passionate about particular concerns function as advocates who have huge blindsides. There appears to be no ability to question their own beliefs and not vilify those with contrary opinions.

It leads us back to asking what is the success that we should aspire to and what cautions should be deploy on our way to those successes? It seems that all of us carry our own unique fears regarding what terrible events might unfold in our futures and we come to these conclusions using primarily emotional decision making tools. Based upon the work of Jonathan Haidt, it seems that these belief systems may be hard wired to some degree. The ends of the political spectrum hold certain things in common, most notably their certainty of being right and having short memories of when they were wrong.

Day 13 of the Exchanges

The enrollments apparently are now a trickle. The launch of the exchanges is now recognized as a "soft" launch. As expected, the state managed exchanges are performing marginally better than the federally run exchange Exchange data. None of this is really surprising with the exception of  the California data. They spent about $1 billion of Federal grant money to set up their exchange and they have enrolled no one? The Feds did not get their specs to the programmers until late this spring and there was no way this was going to get launched without serious bugs by the October 1 deadline. Given the other delays, the politics of this program where going to drive a launch by the October 1 deadline, come hell or high water.

My state elected to allow the Feds to run their exchange. Now that people have been able to get access to the sites and see t he offerings, we are now getting a feel for what the insurance offerings and  the networks look like. Similar to what has been observed in other states, the exchange here has offerings from a variety of insurers offering what appears to be much thinner networks than their usual products. For example, a number of the major health systems are not part of the Blue Cross and Blue Shield exchange offering. One thing I also did not realize is that those purchasing insurance through the exchange will get a tax break while those buying products outside of the exchange will not.

While the initial numbers insured through the exchanges may be small, over time they will grow for a number of reasons. First, the tax breaks available. This amounts to a subsidy independent of the direct subsidy. Second, there is going to be a transfer of those covered by employer based insurance to the exchanges. Employers will be able to better define and control their costs. They will simply say here is your money for insurance. Buy what suits your needs. While  their will be push back to start, employees will adjust quickly. I can't say that I view this as a bad thing. Employer based health insurance created more problems than it solved.

There are going to be a lot of people who will be insured but because of the narrow networks the meaning of being insured will be very different. What happens when those who are insured have some sort of condition where the expertise to treat falls outside of the narrow network? What sort of language is within the contracts to address this situation? What will be the responsibilities of the physicians within the network? What will happen when patients are told that no one in your network knows how to help you?

I am sure that this will evolve over time and hopefully the most robust delivery systems will be able to put in place systems which can identify where expertise and capacity are needed. However, perhaps not. One business model may highlight strategic incompetence with very low rates to attract the well and frugal. I could imagine being able to deploy a network at very low cost if a system did not have to deal with any actual illness.

I look at our own practice which is the destination for a number of patients within a six state region. What happens when these patients start to come to us out of network and are expected to pay the entire cost of their care? While ostensibly insured, they are basically uninsured to us. What will be our ethical obligation to them? The simplest answers to this question will be either, we are physicians are we should care for them without concern for cost or we should treat only who can pay. Take the former tack and we will go broke an be of no use to anyone. Take the latter tack and we will have lost our way in terms of our mission. In addition, if patients have to pay full freight, our referral pipeline will likely dry up.

Sick patients will need to end up somewhere and if networks become increasingly closed and their ability to shunt patients elsewhere for specialist care is impaired, how will this play out? Remember this is all going to happen in a world where patients have increasing access to information. Patients will be able to change networks but movement of patients with serious illness from systems unable to care for them to networks able to take on challenges will need to be associated with the right actuarial data which will allow networks attracting the sick to remain financially viable. Being a magnet for patients expensive to care for is not a strategy for financial success if one cannot collect the premiums to cover your costs plus a reason rate of return.

There are going to be some gaping holes and some scary patient stories. However, there are gaping holes and scary patient stories now. It will be difficult to see if the holes will be bigger and the stories worse for a while. As they say, this is the fog of war....

Knights, Knaves, and Pawns

I recently became aware of a series of articles published first in the social science literature (Knights,knaves or Pawns) and then adapted to the health care delivery realm (Are docs KKP?) which come under the rubric of people being noble (knights), essentially not to be trusted (knaves), or simply a function of their environments (pawns). There is both simplicity and power with this particular worldview because these labels line up with our personal perceptions relating to those around us. In our personal dealings, we quickly become aware that there are those who we can trust (knights), those who we will never trust (knaves) and those who we might trust in a certain contexts (pawns). In realms where know those who we deal with, we can use our judgement as to who we assign to specific categories. Unfortunately, many of our dealings are with individuals who we do not have sufficient information to judge. When this happens in the private realm, individuals have the latitude to make a broad range of  decisions, some of them good, many of them bad.

In his 1995 article in the Journal of Social Policy,  LeGrand addressed addressed issues that are important broadly for understanding the implications of social policy, especially the modern welfare state.

"To what extent are they a response to the perceived failures in the old systems? If they are a response to these failures, are they a good response? .....More specifically, I argue that both the quasi-market and legal changes in welfare systems are based on a particular view of human motivation and behaviour, and that this view is rather different from the assumptions concerning motivation that underlay older models of welfare systems. However, neither this ‘new’ view nor the ‘older’ assumptions are likely to provide an adequate account of the way in which people actually behave in welfare-relevant situations; hence welfare systems based solely on one or the other are likely to fail. What is needed are ‘robust’ welfare policies: ones that allow for the possibility of different kinds of human motivation and hence have the potential for more successful outcomes. This is a broad canvas. Inevitably in places the argument is speculative; equally inevitably it will involve both the caricaturing of distinguished thinkers’ arguments and the over-simplification of a complex reality."

This is politics in a nutshell. In order to gain political power to accomplish any goal, successful players must simplify, simplify, and simplify further. The cost of simplification is the loss of reflection, polarization, and a winner take all environment. This is unfortunate since understanding human nature is essential when defining social policy and there is nothing simple about human nature. Whether a particular social program meets its goals is completely dependent upon how people respond to the changing incentive structures and whether they act like knaves or knights will evolve over time as the norms of the population are changed by the changing social programs.

In the private realm, individuals and groups that make bad assessments regarding whether they are dealing with knights or knaves tend to do poorly over the long term. The rest of us can perhaps learn from their mistakes. In the public realm, politics pushes us toward "all in", one size fits all policies, driven often by slim political majorities. The time frames to assess success or failure often is beyond the ability of players to make key linkages. Success in the political realm may be defined by growth of programs and concentration of money and power. It rapidly gets very hard to figure out who are the knights and knaves.

LeGrand's work was applied to the medical realm, describing the evolving perspective of physicians (Are docs KKP).

"Le Grand’s work on post–World War II British social policy found that perceptions of human motivations gradually transformed, with the prevailing view of the typical British citizen morphing from knight into knave as the costs of maintaining an expensive welfare state increased. US perspectives on physicians have undergone a similar transformation with the increasing cost (both to taxpayers and to individual patients) of health care delivery. As physician behavior has been tied to these rising costs and increasing scrutiny has been applied to the quality of care delivered, policy discourse often reflects the perspective that physicians are an obstacle not an enabler to a functioning health care system. Rather than being counted on to exercise their professional ethic to address problems in health care delivery, physicians should be guided to do what is right with an increasing menu of incentive payments (ie, pay for performance or value-based purchasing) or strict regulations. Rather than being counted on to maintain their knowledge and expertise on their own accord, they are subject to periodic examinations to demonstrate continued proficiency. "

 We now appear to be in a world where physicians are no longer perceived to behave like knights. Some of this altered perception may be justified by less than honorable behavior of of knave like elements within the physician population. I would also venture that certain social programs implemented over the past 60 years have served to undermine physician professionalism, spawning gaming behavior in initially the few and more broadly over time.

We are not alone in being in a position of lost trust. What I find odd is when specific professionals lose the public trust, the response tends to be to recreate powerful regulatory structures within the realm of politics. What makes us believe that those who gravitate toward political  institutions are any more knightly or accountable? Can the problems associated with the complexities of human behavior by fixed best with political tools? I doubt it.

Day 2 of the Exchanges

It is end of Day two of the exchange roll out. By all accounts, it has been somewhat chaotic and by some accounts there is the suggestion that not a single person has succeeded in completing an enrollment. This is where no one should want to be an early adopter. I logged on to the Healthcare.gov site and was able to peruse the offerings. They were not cheap even though I put in demographics which were not indicative of high risk (young and no pre-existing conditions).

In the long run I suspect the computer glitches will be worked through and the enrollment process will be passable before the January start dates. Then the real fun begins. My guess (and it is a guess) is that for those who enroll, they will choose the least expensive programs while not understanding the financial implications at the outset. Those implications will be they will be insured....sort of. Patients will soon learn that costs will be shifted on to them and they better become savvy medical shoppers and fast. Simultaneously physicians and health care organizations will take a haircut. The cost cutting  pressures will be exerted from two sets of payers; both legacy payers (insurers) and end users (patients).

In as far as the ACA has served to drive changes in the insurance market it has been a key driver in the upcoming changes. Ironically, I do not believe the changes which will result were the ones intended by the authors of the legislation, that is the driving of out of pocket costs on to consumers but unless there is some dramatic change in how this is to be rolled out, it is what we are going to get. Yes, the Feds will provide some degree of subsidy to some on the lower half of the income scale but the math does not work. From an actuarial perspective, the only way to pay for this will be to deploy something which wakes end users up to the costs associated with both the volume and intensity of care. Make patients responsible for some of the costs and they will become less willing to consume health care.

As costs become transferred to the public, I see decreased demand and steady downward pricing pressure. Like all predictions, I could be wrong. Only time will tell.