For Obamacare It Matters If Enrollees Are Skewed by Health, Not Age

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Monday, 13 January 2014 21:51

The NYT had yet another silly front page piece warning that Obamacare is about to go under, this time because not enough young people are signing up. If it keeps doing this, people will mistake it for a Jeff Bezos publication.

The point, which was shown in this Kaiser Family Foundation analysis, is that the age skewing really doesn't matter much for the success of the program. The fee structure of Obamacare is designed to somewhat favor older enrollees, but the gap is not very large. The Kaiser study found that even large skewing toward older enrollees would only raise the cost by 2.0 percent.

The real issue is the risk of a skewing by health condition. If healthy older people sign up it actually benefits the plan far more than if the "young invincibles" sign up since the older people will pay three times as much for their insurance and basically get nothing back from the program. (My readers only seem to know sick people in the age group 55-64. In the real world, many are quite healthy. I couldn't find a quick reference for costs of the 55-64 cohort, but the cheapest quintile of Medicare beneficiaries cost on average just $331 per person on average. Presumably the cost for the bottom quintile of the 55-64 group would be even less.)

Anyhow, any serious discussion of the progress of the program would look for evidence of skewing by health condition. Remarkably, this NYT piece concludes with some good evidence on the health condition of enrollees, but failed to note it as such.

It told readers:

"Of people choosing plans so far, 60 percent selected silver plans and 20 percent signed up for bronze plans. Thirteen percent chose gold plans, and 7 percent platinum coverage."

This means that 80 percent of the people who have signed up for Obamacare have signed up for plans that will leave them with substantial deductibles and co-pays. Someone with severe health problems will know that their costs will far exceed these deductibles, so they would sign up for the most expensive plans in the system. Since the vast majority have not signed up for the gold or platinum plans it is reasonable to assume that they are not in bad health.

 

Addendum:

NPR committed the same sin in its top of the hour news segment on Morning Edition.

The Post also featured the same story although it did reference the Kaiser study noting that age-skewing will not be a huge problem.