The Tyranny of Electronic Systems

Some eight years ago the media was excited that Hillary Clinton and Newt Gingrich had formed an alliance about reforming health care. In 2005 Dana Milbank wrote in the Washington Post about a joint appearance in gushing terms –

Clinton, asked about electronic medical records, deferred, again, to her friend. “Newt has a very dramatic way of saying this,” she said, “which is ‘Paper kills.’” Gingrich sent the praise right back at her, hailing Clinton’s legislation on medical records as a “major breakthrough” in Congress. “This is absolutely the case that Hillary is making,” he said.

Of course, they were not alone. President Bush had already embraced the idea in his State of the Union speech to Congress.

Later, President Obama built the HITECH Act into his 2009 stimulus package and appropriated some $20 billion to make it happen. All promised to get everyone’s complete medical records in digital form by 2014.

Man, this is going to be GREAT! A model of modern efficiency! Bipartisan support! Interoperable! WOWSA!

Now, of course there were the usual naysayers and Gloomy Gusses. I was one of them in this research and commentary I wrote for the Heartland Institute. Dr. Bruce Landes, who comments here frequently, was another. Dr. Scott Silverstein at Drexel University was also skeptical. And Dr. Deborah Peele was very concerned about patient privacy in a digital era.

Most of these concerns were not about whether digital technology is a good thing. Of course it is, or can be, a very good thing. But the track record of top-down, politically imposed solutions is abysmal. And when you add vast amounts of money to the mix, chaos is inevitable. Great Britain went through a similar, though more modest, exercise and recently concluded that the whole thing was a failure, but only after spending some $12 billion.

But we skeptics were not able to overcome the hordes of advocates who were eager to get their hands on a bit of the $20 billion.

Now the results of all this are coming to the fore. The Washington Post recently ran an op-ed piece by Dr. Dan Morhaim, who is also a Democrat member of Maryland’s House of Delegates. (One of the refreshing things about bipartisan ideas is that the opposition can also be bipartisan.) He writes –

These systems tend to be fantastically complex. One doesn’t have to be intimately familiar with, say, Hertz or Enterprise to rent a car online. But many electronic health record systems have pull-down screens listing each of the 68,000 possible diagnosis codes in the World Health Organization’s International Classification of Diseases and 87,000 possible procedure codes.

Or consider what happens when I write a prescription: Every potential drug interaction or side effect listed generates a warning prompt. Inevitably, recognizing that the warnings are generally inapplicable and take time to sort out, clinicians start to bypass the alerts. Sooner or later, ignoring one will lead to serious complications.

Dr. Morhaim concludes –

"Perhaps the most pernicious side effect is the erosion of the provider-patient relationship. When I first began working with electronic health records, I caught myself staring at the computer screen instead of engaging patients, who rightly felt ignored. Like many colleagues, I’ve reverted to the practice of talking with the patient and taking notes with pen and paper. After the evaluation is over and the patient has left, I type in the data. This takes much more time, but it is the only way to complete a proper history and exam."

The result is decreased productivity and frustrated providers — and a lack of meaningful data to manage patient care.

And The American Journal of Emergency Medicine published a study finding that ER physicians are now spending 43% of their time on data entry and only 28% on direct patient care.

So we have spent well over $20 billion (that was the appropriation for the first year alone), and are left with a system that reduces productivity, fails to provide “meaningful data,” and destroys the patient/physician relationship. From 2011 to 2012 there was a 21% reduction in the number of family physicians who had “meaningful use” of electronic medical records, according to the American Association of Family Physicians. Yet the mandate to use this system continues.

Boy, isn’t it great to have policies with bipartisan support?

Meanwhile, I don’t know about you, but I think it would be swell to have a simple wallet-sized card that listed my emergency contacts, personal physician, allergies, and current medications. But that isn’t grandiose enough for the Washington elite.

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This Is What a Health Insurance Death Spiral Looks Like

A handful of reports last night suggested that the Obama administration had moved to delay the health law’s individual mandate—the penalty the law imposes on those who are uninsured. That’s not quite right: Instead, the administration will align the 2014 penalty date, which had been February 15, with the end of Obamacare’s open enrollment period, March 31.

It had been possible to buy insurance between February 15 and March 31 next year and still pay a pro-rated uninsurance penalty—something the Obama administration only found out a few weeks ago when a tax prep firm let them know.

Delaying the individual mandate might seem like an obvious response to the ongoing failure of the federal exchange system. But it’s a rather drastic step. And, in isolation, a potentially problematic one.

That’s because the premiums that health insurers calculated for the exchanges this year were determined based on the assumption that the penalty for remaining uninsured would be in effect, and would encourage people to buy into the market.

If you change the enrollment requirements—by, for example, ditching the mandate—while leaving the law’s preexisting condition rules in place, health plan participation will likely be lower. The result, as one insurance official told NPR yesterday, is that insurers will want to change their premiums. And in this case, “change” means “raise.”

That’s where the real trouble starts. Insurers raising prices as a result of lower than anticipated enrollment is an early step toward an insurance death spiral, in which premiums spike and enrollment figures drop until the only participants who remain in the market are very people paying very high premiums. We know because we’ve seen it before—in New York, Washington, and handful of other states that enacted preexisting condition regulations similar to Obamacare’s but without an individual mandate.

New York state’s guaranteed issue and community rating rules—the two regulations that limit how insurers can charge based on health history and require them to sell policies to all comers—took effect in 1994. At the time, there were about 752,000 policyholders in the state’s individual market, or about 4.7 percent of the non-Medicare population. But by 2009, according to a Manhattan Institute report by Stephen Parente and Tarren Bragdon, the state’s individual market had practically disappeared, leaving just 34,000 participants, or about 0.2 percent of the non-elderly population. Individual insurance premiums, meanwhile, were among the highest in the nation—about $388 on average in 2007, compared with just $151 in California, another big Democratic-leaning state. In New York City, the annualized premium cost for individuals was more than $9,300 and more than $26,400 for a family.

The result, in other words, was a combination of sky-high premiums and far fewer insured individuals.

Around the same time that New York was overhauling its insurance market, Washington state was implementing a similar set of health plan rules. Insurers faced new regulations regarding plans sold to individuals with preexisting conditions, and the requirement that they sell to everyone. For a brief period, there was a coverage mandate, but that never went into effect. The state’s individual market deteriorated. One insurer raised premiums by 78 percent in a three year period. As premiums rose, relatively healthier people left the market, and insurers were left covering a lot of very sick, very expensive individuals. In the end, many insurers simply dropped out of the market rather than lose money. According to a report on the reforms commissioned by the insurance industry, there were 19 carriers in the individual market in 1993. By 1999, there were just two—and they weren’t taking new applicants.

The individual market was effectively killed off by the reforms.

A delay of just the individual mandate would likely put the federal exchange system—which facilitates the sale of guaranteed issue, community-rated plans—on the same track.

(The administration, it should be noted, has made it quite clear that it thinks the mandate is absolutely essential to the larger insurance scheme, arguing repeatedly in court that the law cannot function without it.)

Now, it’s true, as The Incidental Economist’s Adrianna McIntrye points out, that there are risk adjustment mechanisms built into the law designed to protect insurers who end up with too many sick individuals. But as a Health Affairs brief on the law’s risk adjustment provisions makes clear, those provisions are designed to make sure that no one plan gets stuck with too many sick individuals. Plans with fewer sick people pay into a fund that creates a backstop for plans with a greater than expected share of sick policyholders.  That helps mitigate individual plan risk. But it doesn’t really solve the problem if the entire pool, across most all of the insurance plans, is smaller and sicker than expected. A death spiral that shifts some premium income around is still a death spiral.

The larger worry is that we may be on track for an insurance market meltdown no matter what happens with the individual mandate. If too few young and healthy people sign up for insurance through the exchanges, for whatever reason, insurers will have to adjust their prices eventually. The access problems in the exchanges exacerbate this risk by making it more frustrating to buy policies; as a result, only the most motivated people—which is to say, the sickest and most desirous of coverage—will end up buying coverage. The same goes for the high individual market premiums that many young adults will be faced with. A mandate delay would make the risk even higher. But it may be the case that Obamacare is heading toward a death spiral no matter what, and that if it remains in place, no plausible policy response will avoid it.

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Vulnerable Democrats: No, Seriously, Who's Up For an Obamacare Delay?

And they're not talking about the White House's two-bit non-delay delay either. West Virginia Sen. Joe Manchin's working on a bill that would delay Obamacare's individual mandate tax for a full year (bipartisanship!), while North Carolina Sen. Kay Hagan wants the law's enrollment period extended by a few months. It's easy to understand the political instincts at play here: Obamacare is unpopular, the individual mandate tax is extremely unpopular, and the idea that the government might end up fining people for failing to enroll through the government's broken website is outright toxic. We've got to do something to at least buy ourselves some time, these Democrats are muttering to themselves, shell-shocked as the law for which they've taken major political risks implodes. Alas, as I've noted previously, these "solutions" are untenable. They're worse than that, actually; they're counter-productive. Do these Democrats -- who've voted to pass and protect this law repeatedly -- even understand how it works? It seems not. An education:

*  Delay the individual mandate. On top of the incredible political embarrassment that would come from delaying a provision the Obama administration spent years defending in federal court, policy-wise, this would only exacerbate the problem mentioned above. If Americans aren't penalized for failing to purchase insurance, the young and healthy ones will have even less incentive to buy it. Insurers, who agreed to take on individuals with pre-existing conditions in concert with an individual mandate, would no doubt have something to say about this. If Obama bypasses Congress to impose this delay, perhaps injured insurers could craft a legal challenge. Heck, they could even borrow the Obama administration’s own briefs about how inextricably linked the individual mandate is to the greater regulatory scheme of the law.

* Extend open enrollment. Though the White House has emphasized that the enrollment period extends until March 31, the penalty for not purchasing insurance would hit people after Feb. 15 — including those who purchase insurance after that date. So even if the enrollment period is extended past March 31, it may not pull in that many more customers because those who haven't purchased by that point would have to choose to pay premiums on top of the penalty. It's also important to keep in mind why the time to enroll is limited. It seems counterintuitive at first. Wouldn't insurers want individuals to be able to buy their product all year round? The problem is that if there were no such limitation, then healthy people — knowing insurers could never legally deny them coverage — could simply pay the fine and only purchase insurance if they became sick or injured. How do you think the car insurance business would work if people could sign up for coverage after they were involved in an accident? Obviously, there’s a difference when extending open enrollment in the first year of the program’s operation, but for this scheme to work, it’s also important to instill in younger Americans a sense of urgency to buying insurance by setting a hard deadline and sticking with it.

If Washington delays the mandate tax and/or extends open enrollment without passing parallel delays of other elements of the law like guaranteed issue and community rating, the so-called "insurance death spiral" threat only becomes more acute.

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