Wall Street Journal Opinion Piece Distorts Health Study to Attack ACA

When You Can’t Argue on Merits, Lie, Cheat and Fabricate

This headline on the opinion pages of the WSJ gave us pause.

How ObamaCare Punishes the Sick

The obvious reaction is ‘how can this be’.  One of the great, if not the greatest provision of ACA is that insurers cannot discriminate on the basis of pre-existing conditions.  This means people with costly illnesses can get insurance, whereas under the so-called market system, they cannot.  So what’s going on here?

                 "Republicans are nervous about repealing ObamaCare’s supposed ban on discrimination                       against patients with pre-existing conditions. But a new study by Harvard and the          University of Texas-Austin finds those rules penalize high-quality coverage for the sick, reward insurers who slash coverage for the sick, and leave patients unable to obtain adequate insurance."

As we found out, the above paragraph is a pack of lies.  Why and How?  Well first of all the story is in the WSJ and second of all the author is a senior fellow at the Cato Institute, a well know conservative think(?) tank.  So immediately things are suspicious.  The article is based on a recently published study, so we decided to take a look at the study and see if it supports the conclusions of the opinion writer.

The basis of the above headline is this from the author of the WSJ piece.

“The result is lower-quality coverage—for MS, rheumatoid arthritis, infertility and other expensive conditions. The researchers find these patients face higher cost-sharing (even for inexpensive drugs), more prior-authorization requirements, more mandatory substitutions, and often no coverage for the drugs they need, so that consumers “cannot be adequately insured.”

The study also corroborates reports that these rules are subjecting patients to higher deductibles and cost-sharing across the board, narrow networks that exclude leading cancer centers, inaccurate provider directories, and opaque cost-sharing. A coalition of 150 patient groups complains this government-fostered race to the bottom “completely undermines the goal of the ACA.”

Well first of all those ‘150 patient group complaints’ do not want to do what the opinion piece does, they write to support ACA and want to see it improved.  So what’s the problem, well if one goes to the actual study,

NBER WORKING PAPER SERIES SCREENING IN CONTRACT DESIGN: EVIDENCE FROM THE ACA HEALTH INSURANCE EXCHANGES

Michael Geruso Timothy J. Layton Daniel Prinz

Working Paper 22832 http://www.nber.org/papers/w22832

NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 November 2016

one learns that the problem here is that insurers are gaming the system. 

We first show that despite large regulatory transfers that neutralize selection incentives for most consumer types, some consumers are unprofitable in a way that is predictable by their prescription drug demand. Then, using a difference-in-differences strategy that compares Exchange formularies where these selection incentives exist to employer plan formularies where they do not, we show that Exchange insurers design formularies as screening devices that are differentially unattractive to unprofitable consumer types. This results in inefficiently low levels of coverage for the corresponding drugs in equilibrium. Although this type of contract distortion has been highlighted in the prior theoretical literature, until now empirical evidence has been rare. The impact on out-of-pocket costs for consumers affected by the distortion is substantial—potentially thousands of dollars per year—and the distortion creates an equilibrium in which contracts that efficiently trade off moral hazard and risk protection cannot exist.

Basically what is happening is that insurers can tell high risk patients in some cases by the medicines they take, and they can screen out those patients by putting those medicines into high cost tiers even in some cases where they are not high cost medicines.

The WSJ opinion recommendation is to end requiring insurers to take everyone regardless of a pre-condition. 

It doesn’t have to be like this. Employer plans offer drug coverage more comprehensive and sustainable than ObamaCare. The pre-2014 individual market made comprehensive coverage even more secure: High-cost patients were less likely to lose coverage than similar enrollees in employer plans. The individual market created innovative products like “pre-existing conditions insurance” that—for one-fifth the cost of health insurance—gave the uninsured the right to enroll in coverage at healthy-person premiums if they developed expensive conditions.

If anything, Republicans should fear not repealing ObamaCare’s pre-existing-conditions rules.

Ok, notice that the Employer plans are irrelevant here, they are group plans that insure the group at the same rate.  And notice you would have to be healthy to get the pre-existing conditions insurance, already have the symptoms and you get to die in the streets.  And the author states and then just blandly dismisses this.

It doesn’t have to be like this. Employer plans offer drug coverage more comprehensive and sustainable than ObamaCare. The pre-2014 individual market made comprehensive coverage even more secure: High-cost patients were less likely to lose coverage than similar enrollees in employer plans. The individual market created innovative products like “pre-existing conditions insurance” that—for one-fifth the cost of health insurance—gave the uninsured the right to enroll in coverage at healthy-person premiums if they developed expensive conditions.

If anything, Republicans should fear not repealing ObamaCare’s pre-existing-conditions rules.

So what to do?  Fix the system so insurers cannot game it to discriminate against pre-existing conditions like the law was supposed to do.  That is what those 150 patient groups want; contrary to the WSJ piece which lies in implying they want to end the policy of no discrimination for pre-existing conditions.