ABSTRACT

This study analyzes the willingness to pay for health insurance and hence the potential market for new low-cost health insurance product in Namibia, using the double bounded contingent valuation (DBCV) method. The findings suggest that 87 percent of the uninsured respondents are willing to join the proposed health insurance scheme and on average are willing to insure 3.2 individuals (around 90 percent of the average family size). On average respondents are willing to pay NAD 48 per capita per month and respondents in the poorest income quintile are willing to pay up to 11.4 percent of their income. This implies that private voluntary health insurance schemes, in addition to the potential for protecting the poor against the negative financial shock of illness, may be able to serve as a reliable income flow for health care providers in this setting.

Read the full paper on ScienceDirect »

ABSTRACT

The AIDS pandemic in sub-Saharan Africa puts increasing pressure on the buffer capacity of low- and middle-income households without access to health insurance. This paper examines the relationship between health shocks, insurance status and health-seeking behaviour. It also investigates the possible mitigating effects of insurance on income loss and out-of-pocket health expenditure. The study uses a unique dataset based on a random sample of 1769 households and 7343 individuals living in the Greater Windhoek area in Namibia. The survey includes medical testing for HIV infection which allows for the explicit analysis of HIV-related health shocks. We find that the economic consequences of health shocks can be severe for uninsured households even in a country with a relatively well-developed public health care system such as Namibia. The uninsured resort to a variety of coping strategies to deal with the high medical expenses and reductions in income, such as selling assets, taking up credit or receiving financial support from relatives and friends. As HIV-infected individuals increasingly develop AIDS, this will put substantial pressure on the public health care system as well as social support networks. Evidence suggests that private insurance, currently unaffordable to the poor, protects households from the most severe consequences of health shocks.

Read the full article on Oxford Journals »

Led by presidential candidate Bernie Sanders, one-time supporters of ‘single-payer’ health reform are rekindling their romance with a health reform idea that was, is, and will remain a dream.  Single-payer health reform is a dream because, as the old joke goes, ‘you can’t get there from here.

Let’s be clear: opposing a proposal only because one believes it cannot be passed is usually a dodge.One should judge the merits. Strong leaders prove their skill by persuading people to embrace their visions. But single-payer is different. It is radical in a way that no legislation has ever been in the United States.

Not so, you may be thinking. Remember such transformative laws as the Social Security Act, Medicare, the Homestead Act, and the Interstate Highway Act. And, yes, remember the Affordable Care Act. Those and many other inspired legislative acts seemed revolutionary enough at the time. But none really was. None overturned entrenched and valued contractual and legislative arrangements. None reshuffled trillions—or in less inflated days, billions—of dollars devoted to the same general purpose as the new legislation. All either extended services previously available to only a few, or created wholly new arrangements.

To understand the difference between those past achievements and the idea of replacing current health insurance arrangements with a single-payer system, compare the Affordable Care Act with Sanders’ single-payer proposal.

Criticized by some for alleged radicalism, the ACA is actually stunningly incremental. Most of the ACA’s expanded coverage comes through extension of Medicaid, an existing public program that serves more than 60 million people. The rest comes through purchase of private insurance in “exchanges,” which embody the conservative ideal of a market that promotes competition among private venders, or through regulations that extended the ability of adult offspring to remain covered under parental plans. The ACA minimally altered insurance coverage for the 170 million people covered through employment-based health insurance. The ACA added a few small benefits to Medicare but left it otherwise untouched. It left unaltered the tax breaks that support group insurance coverage for most working age Americans and their families. It also left alone the military health programs serving 14 million people. Private nonprofit and for-profit hospitals, other vendors, and privately employed professionals continue to deliver most care.

In contrast, Senator Sanders’ plan, like the earlier proposal sponsored by Representative John Conyers (D-Michigan) which Sanders co-sponsored, would scrap all of those arrangements. Instead, people would simply go to the medical care provider of their choice and bills would be paid from a national trust fund. That sounds simple and attractive, but it raises vexatious questions.

• How much would it cost the federal government? Where would the money to cover the costs come from?
• What would happen to the $700 billion that employers now spend on health insurance?
• How would the $600 billion a year reductions in total health spending that Sanders says his plan would generate come from?
• What would happen to special facilities for veterans and families of members of the armed services?

Sanders has answers for some of these questions, but not for others. Both the answers and non-answers show why single payer is unlike past major social legislation.

The answer to the question of how much single payer would cost the federal government is simple: $4.1 trillion a year, or $1.4 trillion more than the federal government now spends on programs that the Sanders plan would replace. The money would come from new taxes. Half the added revenue would come from doubling the payroll tax that employers now pay for Social Security. This tax approximates what employers now collectively spend on health insurance for their employees...if they provide health insurance. But many don’t. Some employers would face large tax increases. Others would reap windfall gains.

The cost question is particularly knotty, as Sanders assumes a 20 percent cut in spending averaged over ten years, even as roughly 30 million currently uninsured people would gain coverage. Those savings, even if actually realized, would start slowly, which means cuts of 30 percent or more by Year 10. Where would they come from? Savings from reduced red-tape associated with individual insurance would cover a small fraction of this target. The major source would have to be fewer services or reduced prices. Who would determine which of the services physicians regard as desirable -- and patients have come to expect -- are no longer ‘needed’? How would those be achieved without massive bankruptcies among hospitals, as columnist Ezra Klein has suggested, and would follow such spending cuts? What would be the reaction to the prospect of drastic cuts in salaries of health care personnel – would we have a shortage of doctors and nurses? Would patients tolerate a reduction in services? If people thought that services under the Sanders plan were inadequate, would they be allowed to ‘top up’ with private insurance? If so, what happens to simplicity? If not, why not?

Let me be clear: we know that high quality health care can be delivered at much lower cost than is the U.S. norm. We know because other countries do it. In fact, some of them have plans not unlike the one Senator Sanders is proposing. We know that single-payer mechanisms work in some countries. But those systems evolved over decades, based on gradual and incremental change from what existed before. That is the way that public policy is made in democracies. Radical change may occur after a catastrophic economic collapse or a major war. But in normal times, democracies do not tolerate radical discontinuity. If you doubt me, consider the tumult precipitated by the really quite conservative Affordable Care Act.

Editor's note: This piece originally appeared in Newsweek.

One cannot help feeling a bit silly taking seriously the policy proposals of a person who seems not to take policy seriously himself. Donald Trump's policy positions have evolved faster over the years than a teenager's moods. He was for a woman's right to choose; now he is against it. He was for a wealth tax to pay off the national debt before proposing a tax plan that would enrich the wealthy and balloon the national debt. He was for universal health care but opposed to any practical way to achieve it.

Based on his previous flexibility, Trump's here-today proposals may well be gone tomorrow. As a sometime-Democrat, sometime-Republican, sometime-independent, who is now the leading candidate for the Republican presidential nomination, Trump has just issued his latest pronouncements on health care policy. So, what the hell, let's give them more respect than he has given his own past policy statements.

Perhaps unsurprisingly, those earlier pronouncements are notable for their detachment from fact and lack of internal logic. The one-time supporter of universal health care now joins other candidates in his newly-embraced party in calling for repeal of the only serious legislative attempt in American history to move toward universal coverage, the Affordable Care Act. Among his stated reasons for repeal, he alleges that the act has "resulted in runaway costs," promoted health care rationing, reduced competition and narrowed choice.

Each of these statements is clearly and demonstrably false. Health care spending per person has grown less rapidly in the six years since the Affordable Care Act was enacted than in any corresponding period in the last four decades. There is now less health care rationing than at any time in living memory, if the term rationing includes denial of care because it is unaffordable. Rationing because of unaffordability is certainly down for the more than 20 million people who are newly insured because of the Affordable Care Act. Hospital re-admissions, a standard indicator of low quality, are down, and the health care exchanges that Trump now says he would abolish, but that resemble the "health marts" he once espoused, have brought more choice to individual shoppers than private employers now offer or ever offered their workers.

Trump's proposed alternative to the Affordable Care Act is even worse than his criticism of it. He would retain the highly popular provision in the act that bars insurance companies from denying people coverage because of preexisting conditions, a practice all too common in the years before the health care law. But he would do away with two other provisions of the Affordable Care Act that are essential to make that reform sustainable: the mandate that people carry insurance and the financial assistance to make that requirement feasible for people of modest means.

Without those last two provisions, barring insurers from using preexisting conditions to jack up premiums or deny coverage would destroy the insurance market. Why? Because without the mandate and the financial aid, people would have powerful financial incentives to wait until they were seriously ill to buy insurance. They could safely do so, confident that some insurer would have to sell them coverage as soon as they became ill. Insurers that set affordable prices would go broke. If insurers set prices high enough to cover costs, few customers could afford them.

In simple terms, Trump's promise to bar insurers from using preexisting conditions to screen customers but simultaneously to scrap the companion provisions that make the bar feasible is either the fraudulent offer of a huckster who takes voters for fools, or clear evidence of stunning ignorance about how insurance works. Take your pick.

Unfortunately, none of the other Republican candidates offers a plan demonstrably superior to Trump's. All begin by calling for repeal and replacement of the Affordable Care Act. But none has yet advanced a well-crafted replacement.

It is not that the Affordable Care Act is perfect legislation. It isn't. But, as the old saying goes, you can't beat something with nothing. And so far as health care reform is concerned, nothing is what the Republican candidates now have on offer.

Editor's note: This piece originally appeared in U.S. News and World Report.

Health reform (aka Obamacare) is entering a new stage. The recent announcement by United Health Care that it will stop selling insurance to individuals and families through most health insurance exchanges marks the transition. In the next stage, federal and state policy makers must decide how to use broad regulatory powers they have under the Affordable Care Act (ACA) to stabilize, expand, and diversify risk pools, improve local market competition, encourage insurers to compete on product quality rather than premium alone, and promote effective risk management. In addition, insurance companies must master rate setting, plan design, and network management and effectively manage the health risk of their enrollees in order to stay profitable, and consumers must learn how to choose and use the best plan for their circumstances.

Six months ago, United Health Care (UHC) announced that it was thinking about pulling out of the ACA exchanges. Now, they are pulling out of all but a “handful” of marketplaces. UHC is the largest private vendor of health insurance in the nation. Nonetheless, the impact on people who buy insurance through the ACA exchanges will be modest, according to careful analyses from the Kaiser Family Foundation and the Urban Institute. The effect is modest for three reasons. One is that in some states UHC focuses on group insurance, not on insurance sold to individuals, where they are not always a major presence. Secondly, premiums of UHC products in individual markets are relatively high. Third, in most states and counties ACA purchasers will still have a choice of two or more other options. In addition, UHC’s departure may coincide with or actually cause the entry of other insurers, as seems to be happening in Iowa.

The announcement by UHC is noteworthy, however. It signals the beginning for ACA exchanges of a new stage in their development, with challenges and opportunities different from and in many ways more important than those they faced during the first three years of operation, when the challenge was just to get up and running. From the time when HealthCare.Gov and the various state exchanges opened their doors until now, administrators grappled non-stop with administrative challenges—how to enroll people, helping them make an informed choice among insurance offerings, computing the right amount of assistance each individual or family should receive, modifying plans when income or family circumstances change, and performing various ‘back office’ tasks such as transferring data to and from insurance companies. The chaotic first weeks after the exchanges opened on October 1, 2013 have been well documented, not least by critics of the ACA. Less well known are the countless behind-the-scenes crises, patches, and work-arounds that harried exchange administrators used for years afterwards to keep the exchanges open and functioning.

The ACA forced not just exchange administrators but also insurers to cope with a new system and with new enrollees. Many new exchange customers were uninsured prior to signing up for marketplace coverage. Insurers had little or no information on what their use of health care would be. That meant that insurers could not be sure where to set premiums or how aggressively to try to control costs, for example by limiting networks of physicians and hospitals enrollees could use. Some did the job well or got lucky. Some didn’t. United seems to have fallen in the second category. United could have stayed in the 30 or so state markets they are leaving and tried to figure out ways to compete more effectively, but since their marketplace premiums were often not competitive and most of their business was with large groups, management decided to focus on that highly profitable segment of the insurance market. Some insurers, are seeking sizeable premium increases for insurance year 2017, in part because of unexpectedly high usage of health care by new exchange enrollees.

United is not alone in having a rough time in the exchanges. So did most of the cooperative plans that were set up under the ACA. Of the 23 cooperative plans that were established, more than half have gone out of business and more may follow. These developments do not signal the end of the ACA or even indicate a crisis. They do mark the end of an initial period when exchanges were learning how best to cope with clerical challenges posed by a quite complicated law and when insurance companies were breaking into new markets. In the next phase of ACA implementation, federal and state policy makers will face different challenges: how to stabilize, expand, and diversify marketplace risk pools, promote local market competition, and encourage insurers to compete on product quality rather than premium alone. Insurance company executives will have to figure out how to master rate setting, plan design, and network management and manage risk for customers with different characteristics than those to which they have become accustomed.

Achieving these goals will require state and federal authorities to go beyond the core implementation decisions that have absorbed most of their attention to date and exercise powers the ACA gives them. For example, section 1332 of the ACA authorizes states to apply for waivers starting in 2017 under which they can seek to achieve the goals of the 2010 law in ways different from those specified in the original legislation. Along quite different lines, efforts are already underway in many state-based marketplaces, such as the District of Columbia, to expand and diversify the individual market risk pool by expanding marketing efforts to enroll new consumers, especially young adults. Minnesota’s Health Care Task Force recently recommended options to stabilize marketplace premiums, including reinsurance, maximum limits on the excess capital reserves or surpluses of health plans, and the merger of individual and small group markets, as Massachusetts and Vermont have done.

In normal markets, prices must cover costs, and while some companies prosper, some do not. In that respect, ACA markets are quite normal. Some regional and national insurers, along with a number of new entrants, have experienced losses in their marketplace business in 2016. One reason seems to be that insurers priced their plans aggressively in 2014 and 2015 to gain customers and then held steady in 2016. Now, many are proposing significant premium hikes for 2017.

Others, like United, are withdrawing from some states. ACA exchange administrators and state insurance officials must now take steps to encourage continued or new insurer participation, including by new entrants such as Medicaid managed care organizations (MCOs). For example, in New Mexico, where in 2016 Blue Cross Blue Shield withdrew from the state exchange, state officials now need to work with that insurer to ensure a smooth transition as it re-enters the New Mexico marketplace and to encourage other insurers to join it. In addition, state insurance regulators can use their rate review authority to benefit enrollees by promoting fair and competitive pricing among marketplace insurers. During the rate review process, which sometimes evolves into a bargaining process, insurance regulators often have the ability to put downward pressure on rates, although they must be careful to avoid the risk of underpricing of marketplace plans which could compromise the financial viability of insurers and cause them to withdraw from the market. Exchanges have an important role in the affordability of marketplace plans too. For example ACA marketplace officials in the District of Columbia and Connecticut work closely with state regulators during the rate review process in an effort to keep rates affordable and adequate to assure insurers a fair rate of return.

Several studies now indicate that in selecting among health insurance plans people tend to give disproportionate weight to premium price, and insufficient attention to other cost provisions—deductibles and cost sharing—and to quality of service and care. A core objective of the ACA is to encourage insurance customers to evaluate plans comprehensively. This objective will be hard to achieve, as health insurance is perhaps the most complicated product most people buy. But it will be next to impossible unless customers have tools that help them take account of the cost implications of all plan features and report accurately and understandably on plan quality and service. HealthCare.gov and state-based marketplaces, to varying degrees, are already offering consumers access to a number of decision support tools, such as total cost calculators, integrated provider directories, and formulary look-ups, along with tools that indicate provider network size. These should be refined over time. In addition, efforts are now underway at the federal and state level to provide more data to consumers so that they can make quality-driven plan choices. In 2018, the marketplaces will be required to display federally developed quality ratings and enrollee satisfaction information. The District of Columbia is examining the possibility of adding additional measures. California has proposed that starting in 2018 plans may only contract with providers and hospitals that have met state-specified metrics of quality care and promote safety of enrollees at a reasonable price. Such efforts will proliferate, even if not all succeed.

Beyond regulatory efforts noted above, insurance companies themselves have a critical role to play in contributing to the continued success of the ACA. As insurers come to understand the risk profiles of marketplace enrollees, they will be better able to set rates, design plans, and manage networks and thereby stay profitable. In addition, insurers are best positioned to maintain the stability of their individual market risk pools by developing and financing marketing plans to increase the volume and diversity of their exchange enrollments. It is important, in addition, that insurers, such as UHC, stop creaming off good risks from the ACA marketplaces by marketing limited coverage insurance products, such as dread disease policies and short term plans. If they do not do so voluntarily, state insurance regulators and the exchanges should join in stopping them from doing so.

Most of the attention paid to the ACA to date has focused on efforts to extend health coverage to the previously uninsured and to the administrative stumbles associated with that effort. While insurance coverage will broaden further, the period of rapid growth in coverage is at an end. And while administrative challenges remain, the basics are now in place. Now, the exchanges face the hard work of promoting vigorous and sustainable competition among insurers and of providing their customers with information so that insurers compete on what matters: cost, service, and quality of health care.

Editor's note: This piece originally appeared in Real Clear Markets. Kevin Lucia and Justin Giovannelli contributed to this article with generous support from The Commonwealth Fund.