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Gaming the System in Massachusetts

John on April 5, 2010 at 10:06 am

Hat tip to Doug Ross on this one…

The Boston Globe notices that people are gaming the system in Massachusetts:

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

[...]

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company’s data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

The current plan is to fix this problem by only allowing enrollment twice a year. Think about how this is going to work in practice…

It’s January and you decide you’d rather pay the penalty than buy insurance. You need the money right now. Then, come March, you’re hospitalized with a serious illness, say it’s some early stage of cancer. Well, you’re not in the system and you won’t get another chance to enroll until July or maybe next January depending how the new law works. In this situation one of two things are going to happen.

  1. You pay for cancer treatment out of pocket.
  2. Someone is going to issue some kind of waiver to let you back in.

If you do #1, well then the new and improved system isn’t any less brutal than the old (and much cheaper) system. If you do #2, well then you’re basically allowing the gaming of the system to happen officially, i.e. you can buy insurance whenever you need to including after you get sick. That’s compassionate but it’s going to force others to pay every increasing premiums to cover the expense.

All of this was seen far in advance:

“I raised these concerns with the Patrick administration, but I didn’t make much progress. And I even sent them my data,” said Charles D. Baker, a Republican candidate for governor and former chief executive of the state’s second largest insurer, Harvard Pilgrim Health Care. He blogged about these issues last June, when he was still at the company.

Baker’s data showed that about 40 percent of the consumers who purchased insurance from Harvard Pilgrim on the open market kept the insurance fewer than five months, and they incurred, on average, $2,400 a month in medical expenses — about six times higher than the monthly spending of other consumers.

No pre-existing conditions is not going to be sustainable. It’s an idea that is easy to sell but which invites consumers to game the system to their benefit. Stopping consumers from gaming the system requires arbitrary rules which will create a brutal system of time-rationing for those who didn’t opt in at the right moment.

This is almost certainly going to be an expensive disaster.

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Category: Health & Education |

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