 Thank you all for being here. We're really excited about today's event. We have two great speakers here with me, Margot Sanger Katz and Megan McCartle. They are two of the most interesting writers on health care policy, certainly in town. And they've been doing this for quite some time. Let me introduce them first. And then I'll give a few opening remarks. And then they're each going to give some highlights of how the ACA is going from their perspective. And then we're going to have a dialogue among the three of us, conversation. And then the last 10 or 15 minutes, we want to hear questions from you and what's on your mind. Margot Sanger Katz is a health care correspondent for the New York Times. She writes for, thank you, she writes for the upshot. Before joining the Times, she was a reporter at the National Journal and the Concord Monitor. And she's an editor at Legal Affairs and the Yale Alumni Magazine. Megan McCartle is a columnist for Bloomberg View. She writes on economics, business, health care. She writes on just about everything. She is the author of The Upside of Down. And she previously wrote for Newsweek, The Daily Beast, The Atlantic, and The Economist. Once again, my name is Brian Blaze. I'm a senior research fellow at the Mercatus Center. The first research project that I undertook at Mercatus was a study of how the Affordable Care Act is performing relative to initial expectations. So I went back to what was projected about the law in 2010 and compared it to what we know about how the law is performing, particularly with the exchanges. In 2010, four major organizations projected what enrollment would be in 2016, the Congressional Budget Office, the Office of the Actuary at the Centers for Medicare and Medicare Services, the Urban Institute, and the Rand Corporation. And if you take the average of what those four organizations said, they expected about 24 million exchange enrollees in 2016. Three weeks ago, the administration announced there were about 12.7 million sign-ups for this year. And given that there is a net attrition over time in exchange enrollment that we've seen in 2014 and 2015, we probably won't get 12 million people on average this year. So we're really just under half of what the expert consensus predicted when the law passed. It's not only that there is lower enrollment, but the risk pools are skewing older and more expensive than what was expected. And that is pretty clear from the large losses that insurance companies have reported. So most of you are aware that the law had startup funding for new health insurance companies called co-ops. 23 of them were started. 12 of them are no longer in existence. But it's not only these new startup companies that have lost money. Blue Cross, Blue Shield of North Carolina recently reported that they lost $400 million selling ACA compliant plans in 2014 and 2015. And as a result, they increased premiums 33% from 2015 to 2016. Another thing we're seeing with enrollment is that the enrollees tend to be much poorer than expected. So one data point I have for that is the Urban Institute last January when they were coming up with their estimates for King Burwell. They projected that there would be about 25% of enrollees would be above 400% of the poverty line. In the data that HHS released in January, turns out that there's only about 3% of enrollees above 400% of the poverty line. Most of the enrollees are concentrated below 200% of the poverty line. 200% of the poverty line is about $23,000 for a single person and about $47,000, $48,000 for a family of four. People below 200% of the poverty line qualify for two types of subsidies to purchase Obamacare plans. They qualify for premium tax credits, and they're very generous for people in that income group. And they also qualify for generous cost sharing subsidies, which reduce deductibles and other out-of-pocket payments that people receive. There's two other aspects of where people get their coverage, Medicaid expansion. So we've actually seen the Medicaid expansion has had higher enrollment than what was expected in the states that have opted for the expansion, and I think 31 states that have opted for the expansion. They've seen more enrollees and a higher cost from the Medicaid expansion than was anticipated. The other big market, obviously most people get their insurance through their employers. I think this is an area of some surprise that most of the experts expected that several million employees would be moved into the subsidized exchanges as a result of the ACA. And there's probably been some decline overall in enrollment in employer-sponsored coverage, but certainly much less than the experts generally agreed would happen when the law passed. Finally, make one point, I think it's pretty important. There were three risk adjustment programs put in place by the law. The largest one is, I think the most significant one is the re-insurance program, which compensates insurers for a large cost of their most expensive enrollees. In 2014, re-insurance delivered $8 billion to insurers selling ACA compliant plans in the individual market. To put that in perspective, that equaled more than 20% of premiums collected in that market. Administration just announced last week that they're delivering another $8 billion to insurers in 2015. Now what's important through the re-insurance program? Now what's important, I think, about the re-insurance program to know is that 2016 is the last year it's supposed to be in effect. So when these sort of back-end subsidies that insurers are receiving through re-insurance goes away, that is gonna put significant upward pressure on premiums, and it's something clearly to look at when premiums come out later this summer. With that, I'm gonna turn it over to Margo. So the first thing I always like to say about the Affordable Care Act whenever we talk about it, it's just what an enormous and ambitious and expansive law it was. So Brian just said a lot of really important things about what's happening in the new exchanges, these new marketplaces for people who wanna buy their own insurance, but if you think about what the Affordable Care Act did, that's actually like one little slice over here. So a very big goal of the law obviously was to try to expand insurance to people who didn't have insurance before. And so the marketplaces are a part of that, the Medicaid expansion is a part of that, and kind of regulations that prevented insurance companies from excluding people on the basis of previous health conditions. Like that part is sort of like the coverage expansion part, but then there are a lot of other parts of the Affordable Care Act that I think we think about and talk about less, but are also really interesting and important. So one is that the Affordable Care Act really reformed Medicare in pretty substantial ways. It reduced the amount that Medicare pays hospitals going far into the future, and there's some question about whether those changes will continue to be sustainable. It created a whole center to try to come up with new ideas about how Medicare should pay doctors and hospitals to try to reward them for giving care that's less wasteful and more thoughtful and potentially less expensive. There is a provision in the Affordable Care Act that requires drug companies to disclose the money that they pay to speakers and other outside consultants. There is a rule in the Affordable Care Act that says that workplaces larger than a certain amount have to provide women with a place to express breast milk. There is part of the Affordable Care Act that says that chain restaurants need to provide calorie information as part of their menu. So I can sort of go on and on, but I just, I always feel like we tend to talk about the kind of nitty gritty of this coverage expansion, and that obviously is really, really important, but there's a lot of other stuff in the Affordable Care Act and it's just, I think it's good to remember that it's there. And the other piece of the Affordable Care Act that I haven't mentioned is that it also created a lot of new and quite substantial taxes to help finance this coverage expansion. So Congress obviously recently postponed the enactment of a few of those, the Cadillac tax, which was designed to tax really expensive health insurance plans, but also taxes on medical devices and health insurance. So some of the financing for the law is not there anymore. And the second thing is that because it's such a big law and because it's been such a controversial law from the beginning, it's not, it has not been set in stone. So there have been a number of changes that have happened through administrative choices and through legislation. So the taxes that just were postponed are an example of that. There was a provision of the law that was designed to provide long-term care insurance for people that the Obama administration decided just like wasn't sustainable and it basically was, was stopped and then removed by an act of Congress. There has been funding that's been cut. And so there are a lot of, of course I'm sorry, the really big change is that the Supreme Court decided in 2011 that the law's provision expanding Medicaid in every state to cover people under a certain income threshold was not constitutional. And so what's resulted is that we kind of have more of a hodgepodge where most states have opted to expand Medicaid, but there are substantial number that have not. And so poor people in, especially in the American South, but in a lot of parts of this country just don't have access to health insurance the way that low-income people do in other states. But anyway, so to the coverage expansion, because I do think that's probably the thing that you guys are most interested in, the Medicaid expansion I think has really exceeded the expectations of most of the forecasters in terms of how many people have signed up for Medicaid, especially given that there are many states that did not expand Medicaid. So a lot of people who were newly eligible, who were kind of working families, kind of low-income adults without children or who had children who were older, those people signed up in the expansion states. But also what I think surprised a lot of people is that people who had always been eligible for Medicaid, so people who had disabilities or who had very low incomes or parents and young kids, a lot of them signed up too. And depending on whether you think that's a good thing or a bad thing, there are sort of two words for that. So the people who like that call it the welcome that effect and people who dislike it call it the, oh no, I forgot. The woodwork effect. The woodwork effect, thank you. So Medicaid expansion has resulted in about 15 million more people having health insurance than did in 2013. So that's a really big change. On the exchanges, I just said the latest numbers, 12.7 million people have signed up, probably not all of them will stay signed up, but we're looking at some people. And that is substantially less than was originally forecast. Part of the explanation is that employers are keeping people on their work insurance and that was not expected. There were a lot of kind of smart and credible forecasters who thought what was gonna happen is, as soon as there was this new option available, employers, especially small employers, were gonna say, I don't wanna bother with health insurance benefits anymore if I just drop this very expensive benefit that I offer, people will have another place to go. And that just really hasn't happened. When the census put out its health insurance numbers for 2014, it was really, to me, one of the most surprising findings that I've seen since the Affordable Care Act was passed, was enacted is there just hasn't been any movement. Employers are continuing to offer insurance to their workers. That may not be true forever, but that's part of the reason why these exchanges have been sort of unattractive for people to sign up. But Brian points out, I think, what is a really smart observation, which is I think when the exchanges were designed, they were sort of imagined as being a place that kind of middle-class, self-employed people, you're an independent contractor, you're a consultant, you're someone who maybe retired a little bit early, but no longer has health insurance through work, that those were gonna be the kinds of people who were gonna sign up for this kind of insurance. And instead, really, what it's become is an insurance program that's been very attractive to people who are very low on the income scale. The vast majority of signups are people in the states that didn't expand Medicaid, who are around the poverty line, and then in other states, people who are sort of between one and two, and one time, and double the poverty line. And so that's interesting because it means that there will mean people who are uninsured who have higher incomes, who are not choosing to go into this market. But it's also interesting because it means that if premiums get more expensive, which it seems like probably they're going to, it may not matter as much for the people who are actually in this market. So the federal government provides subsidies that help people buy their insurance plans, and those are based on your income, and then they're based on what the prices are in the market. And so if you're someone who is getting a whole lot of subsidy, you're essentially held harmless if the price of insurance goes up from year to year. So there's a lot of evidence that premiums may go up next year. That's probably gonna matter more for the federal budget than it's gonna matter for the individual people who are in the market. So I'm gonna stop talking now. I'm happy to talk about the stability of the market and how the insurers are looking at this and what their behavior may be in the future, but I think that's probably a good place to stop. Okay, I'm good. Sorry, I have heard my back, so if I'm here to be sitting up here slouching and doing weird things, it's exactly safe in this incredibly strange position. However, it has given me a lot of experience with the U.S. health care system recently. So I think the place to start, because I'm a columnist, I like to do things like meet threes. So let's start with what the problems were that people were trying to solve. In fact, there were a lot of problems and as she has laid out, they then looked for other problems they might just incidentally solve while they were at it. But maybe three big ones were price, both individual health care treatments and of insurance more generally. The second problem was pre-existing conditions. We have heard huge amounts about this, about the people who had pre-existing conditions, they wanted to buy health insurance, they had the money, they just couldn't get an insurance or write them a policy. And the third big thing that we heard about was obviously the poor, although less than you would think. Most of the uninsured are poor and you're poor. The above administration tended to kind of maybe not emphasize that so much precisely because they wanted this to be a middle as soon as a middle class kind of thing. That's really important. One of them, this is actually true, but there was certainly a very strong feeling on the democratic side of the aisle, that a program for the poor is a poor program. And you can look at Medicaid, it is the Office of the Lease Generous Reimbursements, it's part of the Medicaid doctors, there was some logic to what they were doing, but they tended to really oversell having to do the glass and really undersell the fact that we use mostly a massive transfer of the poor. Those were the three problems that we kind of attacked. So how did we attack them? And apologies if I'm not reviewing, but for anyone in the audience who was asleep during the 2010, it was difficult to three-legged school. And in fact, this school is like an octopus, it just keeps growing, it's like actually like a starfish, like it just keeps growing through legs, right? But I think maybe like a five-legged school is more where we're going to end up. Those legs are community rating, which is to say that you have to price insurance for everyone the same way. You can't be like, well, Megan's got her fat back and she's got an autoimmune disease and she looks incredibly healthy, so I'm gonna charge Megan nine times more for a policy than the healthy person sitting next to me. It's sure just both the same. You can rate it for our smoking history and our age, but that's it. Second leg of the school is something called guaranteed issue. You can't look at me and say, okay, well, I effect the price at the same, I don't want to sell your insurance, Megan, go away. You have to sell us both policies. The third thing is the individual mandate. This is obviously very controversial. Obama had a campaign nomination that he was gonna have a mandate, that was a lie. I think it's fair to say like he had to know they were gonna have to have one, but it doesn't sound like people hate it. It's one of the most liked features of this policy, but it's really necessary. You don't have a mandate. You guarantee the issue and community rating. A lot of states have it, not a lot. New York State and Massachusetts basically had something like that before Obama here and before Romney here, and what happens is I wasn't insured for years in the State of New York because I could not buy a policy for less than four or $5 a month even though I was a healthy 28-year-old on a smoker. Simply, what happens is you get what is called the trade, the adverse selection death spiral. As a guy who recently interviewed me said, I'm gonna name my next medal, they have that. And basically what it means is this, like you start off and you say, well insurance is gonna cost $1,000 a month for everyone. And if I'm a healthy 28-year-old and I notice the doctor, I'm like, maybe I'll just risk bankruptcy if I get to buy a truck. And then unfortunately, you look at the pool next year and it's more expensive, so you say, okay now it's $1,200. Well, a few more people dropped out. And you sort of rinse and repeat until you get to the point that New York and Massachusetts were in. Which is why New York and Massachusetts have all of the states who have this experience of seeing their insurance prices fall dramatically. Because insurance prices were so high because they had community rating and guaranteeing issue without the mandate, there was enormous room to drop them just by adding that mandate in. That is not in the experience of most states, but in New York and Massachusetts who really saw a much better deal with consumers once the mandate came in. But to that we, I think you need to add two stalls and one of them is the subsidies. And the subsidies are important for two reasons. First of all, because as she says, this really reduces the price sensitivity of people to premium increases. But it also means, if you tell someone who makes $12,000 a year, you have to buy this insurance and look, it's only $300 a month, they're gonna laugh at you. And a lot of those people are in fact a young and relatively healthy month in your pool. And then the last thing is this open enrollment period. And that wasn't really talked about during the passage of law at all, but the idea was basically look, we're gonna say you can only sign up a couple months a year, so you can't be like, ooh, I have cancer. Now I owe my insurance and get treated. How is it going? A few things, prices, the Obama administration has tried to claim credit for reducing healthcare prices and I don't see it. If you look at it, there's a pretty sharp trend line down from about 2006. It then bottoms out and starts to go back up just as Obama care takes effect. I don't think they can sort of realize this good plan that it had a big effect on prices. And that's largely because there was this idea during the debate over healthcare that there was what I started calling the matter pot of money. For a while it was unnecessary back surgery, unnecessary end of life care. There was some amount of money, large amount of money, fabulous cost savings to be gained by stopping unnecessary treatments that would not anger any key constituency and would not result in anyone not getting treatment they wanted. That was a lie. They were lying to themselves. There were people genuinely believed this but you remember when Obama's for talking about the unnecessary amputations that we got saying that we should stop doing unnecessary amputations, that was not something that just for surgeons to enrich themselves, that did not go over well with the American Medical Association and he had to walk it back. And it turns out that in fact, look, first of all, if you look at like the decline in manufacturing, who are our best paid workers now? Where did those people who used to get manufacturing jobs, where are they told to go? Told to go to healthcare because these are stable, high paying jobs, especially in rural and sort of devastated by the recession communities. Are you gonna go in and tell LPNs that they're gonna make what they make in Holland, which is like half what they make here now? So part of the problem is that like everyone in the U.S. healthcare system is paid twice what they would get paid in any other country and that vastly increases the prices that we pay for procedures. We wanted to believe that it was all of these really unnecessary procedures and it turns out that a lot of it, huge amount of it is healthcare wages, income to people who will get very, very angry if they take it away. So that magic bottom money never showed up and so the sources that we had, things like the Cadillac tax, which was supposed to put pressure on prices, by basically taxing high value plans. So if you have that high first value coverage, covers everything, any doctor, it's really expensive to provide. Unfortunately, it's also stuff that is much beloved of key democratic interest groups. So a lot of us at the time said, that's never actually gonna happen in so far experienced, completely borne out. It did not happen. A lot of the revenue sources that were repealed, they were sort of reluctant to enact the Medicare tax cuts that they had. On the other hand, I'm not sure it followed by roughly a third, right? Unless you're just like in favor of more people being uninsured. I can actually kind of make an economic argument for it. It's not even quotable argument, so I'll stop there. Or for having more people without like this kind of sort of first dollar coverage, high value insurance. But people love first dollar coverage and it's very hard to take it away from them. The exchanges, I think, the Medicaid expansion, I won't cover the stuff that people have already covered. So I'm gonna talk a bit about the exchanges and where we are and then I'll just finish that by. What we're seeing here is a pool and insurance pool is a really delicate thing. You want it to be as big as possible because you want it to be as diverse as possible. The law of large numbers basically results in if like I'm insuring this room, there's a not, and I charge you the actuarially expected value of like abnormal American insurance pool. There's a non-zero chance that two of you could just get some extremely expensive cancer and one if you could have a neonate come in and cost me and bankrupt me, right? But the more people that I get in the pool the less likely it is because those cases are then balanced out. It's the law of large numbers. So you want pools to be as big as possible. You want them to be as diverse as possible because that's what makes it easiest for you to calculate how much you're gonna spend. Insurance, so far, had a really, really, really really hard time calculating what they're gonna spend. They're all losing money. Not all. There are some who are making money. It's really inconsistent. Even companies that made money one year like Anthem are now saying, eh, we're kind of hoping we'll break even this year maybe, and that is in part because this is kind of like a, it's like a date, right? I mean, it's deadly serious, but it's like, you know, evolution. The insurers do something. The customers do something. The insurers strike back. The customers come up with a new strategy. And so what we've seen, for example, as young people, the administration's predicted to be 40% years old. And by young, you're not having children. I mean, people between the ages of 18 and 35, which is basically your, like, trow health care usage. It's one of the people that don't even go to the doctor. And if they do, they're almost never sick. And again, they have babies. Yeah, well then they have babies and they get expensive. But so, those people are the people they really wanted in the pool. They said they needed 40% because, you know, I'm sure it's you disproportionately wrong. Young, for the obvious reason, that if you don't need a lot of health care, insurance is less valuable to you than it is to other people. And you also tend to have less money than you really are in your career. They wanted to get 40% of these changes. They basically kind of really seem to be maxed out below 30%. They can't get that. And it doesn't sound that big, right? So 10%, it's a huge change. Because if that shrinks your pool and overwears it with your sickest people. And so each year, and I'm sure it's a kind of price, it's thinking, this is going to be, this is going to be the year it turns around. And each year, this is not the year it turns around. Because they set the prices in advance that you can probably expect that yet again next year we'll see if you're going to increase this. The bigger risk, because the pool is a little bit like, you guys heard about like network effects and technology companies like Facebook, right? The network is more valuable than more people that are in it. Those kinds of, and so the idea is that like Microsoft or Facebook or something, what's called a natural monopoly. Because it's, so the network is so valuable that there's basically everyone can be on Facebook and no competitor can possibly compete with it. Because why would you be on Facebook with two people? So that they can grow. Well, those sorts of industries display a bad future, which is that when they're growing, the industry is very powerful and when they start to shrink, yet they experience explosive growth, they also experience explosive shrinkage. As the network starts to shrink, right? Once people start leaving Facebook, it rapidly becomes less valuable, you're not getting new users, and all of a sudden they're going to freeze. If you guys remember Friendster, that's what they were doing really well until suddenly they were near where. Myspace, same thing. They were huge and then suddenly they were near where. And that's a risky you also have with insurance pools for the same reason, which is that they're more valuable to you when there are a lot more people in there. So as, the big risk for the exchange of the new ones really talking about is if people start, because they're not really very stable right now, prices are going up, if people start leaving them, they are also vulnerable to that kind of explosive shrinkage, which is, as I said, that that's what we call the adverse selection, that spiral. So why are we worried about that? Three reasons. First of all, these three insurance plans. Republicans, the administration had envisioned basically making holding, you might say holding insurance companies harmless for the first three years. No matter what they did, they were sort of scheduled for breaking out. Maybe they'd make a little money, maybe they'd lose a little money, but the way these programs were set up, the insurance that the administration had by 2012 planned that the insurance companies would not lose money on these markets as a way to keep them there and all this got established. In 2014, Republicans basically stopped that. They basically refused to appropriate funds to allow those slush funds to operate and now insurers are losing money. They also underpriced the talks where a disastrous idea, they all seem to have the same idea which is the old economist joke, we're losing money in every unit, but we'll make it up in volume. They dramatically underpriced, they went bankrupt, very few of them were ever gonna be left if any. So that's one, but then there was these other weird features, right? So yes, right now the subsidies don't matter, the subsidies are capped. No one seems to talk about this because it's this obscure paragraph, like buried down, it's like we're forever to find. Basically, the subsidies are capped at 0.504% of GDP. I do not know how they got to that precise number. But what happens if the amount of subsidies hits that number is that then they have to, they can't, they have to start taking subsidies away from some people, which means that some people are not only experiencing premium increases, but they're subsidy declining. Right now, premiums are pegging your income. So basically if you make 400% of the poverty line, it essentially functions as like a cap of about 10% of your income for people who make below 4% of the poverty line. It goes, that cap goes up as they, as it goes down as people get a very poor, so like if you're at the poverty line, it's a 1% of your income. The problem with that is that if we hit the cap, now we're not near that right now, precisely because the exchanges are under a roll. If we hit the cap, but with premiums rising so much, there's a danger that we hit the cap, and then they have to start withdrawing. It will probably consist of withdrawing it from people at the 400% level, and then then 395, and you keep going down. The problem is as those people exit the market. But because we don't have a lot of people at the 400% level in the market in the first place, we're really looking at it pretty quickly, hitting into that 250% of the poverty line group that's where most of the action is. Those people don't know how a lot of this was willing them. If they have to start withdrawing subsidies from that group, that's an enormous problem. Now, if there's a democratic administration in, they will probably look for ways to get around this. There's not a lot of flexibility there. Both Congress has not been happy to help the Republican House into 2020, which means that they're not going to have room to do a lot, and that means that, if there's a Republican and they're not, they're not going to start increasing the subsidies, partly because it's real money. It's like $100 billion a year, 0.5% of GDP. Finding extra money to put on top of that is not going to be a popular Republican cause. So there's a real danger that the subsidies have to be withdrawn, the reinsurance will have ended mostly, and that insurers will start exiting the market and that what you will then end in place for is a collapsed market. What does that matter? The individual market is the exchange market. It's the same insurance. They cannot differ the prices they charge between the individual and the exchange markets. So people keep saying, well, there's often exchange enrollment, it doesn't matter, it's the same policies. If you see this phenomenon on the exchanges, that price problem is going to filter over very rapidly as the rest of the individual market. So this is kind of like the big, is this definitely going to happen? No, there's a lot of steps between here and there. But that is the major vulnerabilities. The exchanges have not, as I would have expected, stabilized at all. We're still seeing wild prices, the enrollment growth isn't there, wild price swings, and the pool does not look good in a way that suggests that we're in for bigger price increases in the future. So I would say, if Obamacare are going away, they're not gonna, Obamacare are not gonna reveal it. Could you end up with a phenomenon where we had a Medicaid expansion, but now also we have sort of destroyed the market for individual insurance in the United States, the way that we had in Massachusetts and New York, yes. But I mean, the last thing I should say to that is, look, the other thing that's happening this year is the mandate penalties are getting bigger. We don't know where that's gonna shake out. That's the thing, that's kind of the last shoe that I'm currently waiting for to drop, is does that mandate penalty finally get those, they're gonna be hit for it the first time next tax season. So just that larger mandate penalty finally get people to walk in the door, young people in 2017, 2018. They really don't know the answer to that. But I think those are the things that we watch before going forward. Can I do one more thing? Of course, yeah. So I just, just to zoom out one more time, I think that a lot of the most interesting questions about whether the Affordable Care Act is accomplishing its goals are gonna take a while to answer. So I feel like in the first year it was really exciting because we could see the uninsurance rate dropped a lot and we saw that the premiums we're doing with the premiums, there were sort of these early indications of things that were changing as a result of the law. But when I think about how am I gonna evaluate the legacy of this law over the long term, so there are some really big questions that I'm interested in and I don't feel like we know the answers to them yet, but just to the degree this is helpful to you, this is my framework. So one is what does Islam mean for people's financial security? So if you just give them health insurance and like their bankruptcy rates are the same and they still have bill collectors coming after them and they're still experiencing like extraordinary financial distress when they get sick, then like that insurance hasn't really helped protect them against the financial risk of illness. And I think the early evidence is that especially the Medicaid expansion is making a difference. So for really poor people, if they have insurance that covers most of their healthcare needs, it means that they, you know, the medical bill is like not gonna make them lose their home or, you know, have a, create a real shock to that family budget. But I think that's something we have to watch over a longer term. The really good evidence about that takes a long time. And the other question is, is this gonna really have any kind of effect on public health? So like, are Americans like actually gonna be healthier as a result of the federal government having spent all this money to provide them with insurance and, you know, change the regulations around insurance? And that's a question again, where I think like we really just don't know the answer right now, there are like a couple of indicators that you can look at like among young adults who got the coverage expansion the earliest. It looks like maybe they're getting like more mental health services. You know, it looks like maybe some preventive services that are now free as a result of the Affordable Care Act. You know, people are using them slightly more. But I think like all of these details about like how we're gonna finance health insurance for people, like I don't know if like any of that really matters if people aren't getting healthier and if people aren't getting more financially secure. So that's sort of like my big zoom out perspective that I just wanted to share. So can I like, no, I would say like like my sort of questions, open questions, when I wanted to just, you know, how much is this gonna change the way to get insured? I think the answer that we now have and with what looks like pretty much a leveling off, I would say an uptake. I mean, this year's enrollment was not exciting by anyone's standards. It was exciting only because the administration had so involved. And they were like, enrollment's gonna go down. When it didn't go down, they got really, you know, look, we exceeded expectations. So, you know, say, is it gonna affect public health? I had in 2010 written, I think the first article that suggested that maybe health insurance doesn't have much impact on mortality, which basically got me sort of pilloried, but is now kind of emerging as, you know, because what I said was so equitable, which is not, it doesn't, but maybe it doesn't. I think actually now emerging is kind of a conventional wisdom, because we did some studies on Medicaid, there have been some larger studies that came out that are just not showing what we would have expected to see with mortality in Massachusetts. You really have to kind of explain hard and like find your embarrassing counties. You know, I think the short way to say this is that randomized controlled studies show no effect. Multiple regression studies show a lot. Multiple regression studies are a lot easier to kind of keep lining until you find the factor you're looking for. Then there were the things that I was worried about and I wasn't really worried about whether people were gonna try me. Like it's sort of trivial that if you give people something cheap, they will take it. Like some people are saying, look, people have signed up for this. You, the critics are wrong. Like I never said no one's gonna sign up for insurance. That would have been a really stupid thing to say. My concerns were this, and first of all, the budget. You know, we made these changes to Medicare. Look, Medicare is still in trouble. We took all the savings. We took all of the plausible budget savings that we had in any program and we spent it all on this new entitlement. We've now done nothing about our old entitlements, which are still there, and still have huge problems. How are we gonna fix the budget problems, especially if Obamacare itself develops budget problems? Because they continue with the lazy of all the pay forms, right? Everyone loves the treats, no one loves the bill. And how are we gonna pay for all of this? If Obamacare starts opening holes in the budget, which I think arguably it already has, although relatively small ones, the studio has stopped scoring. Obamacare is the way to actually tell. Then what do we do financially? Second was the effect on immigration. I think that in general, the price incentives in any national healthcare system is for the government to step in and control prices. We haven't done that yet. There's a lot of counter-railant political pressures in the United States, but I think that's really there and it's a big concern. Especially because it's not like they actually put pressure unnecessarily efficiently. They put pressure on who is the less, the least politically vocal interest group, which in the United States unfortunately is medical device manufacturers and pharmaceutical companies. The two parts of the healthcare system are actually innovating. Those are the parts that we are most likely to try to take all of the money from. And unfortunately, again, since they are actually not that big a portion of our spending, like the labor, your proton beam machine costs a huge amount of money, but the labor run-in is the larger expense over the long term. You try to take the money on the proton beam machine. Great, now you don't have to have a proton beam machine. We still have the labor because those people have an incredibly powerful lobbyist and every time you try to cut their wages, they run these ads. I think my favorite was one in New York, a woman running through the streets with a baby and ending up in an emergency room that had been padlocked by governor, I think, for talking. And so that I'm still worried about, it's a long term worry about. We're not gonna know for 10, 15, 20 years. I don't think we're gonna see a big effect on medical bankruptcies and we'll see some. The most medical bankruptcies seem to be driven a lot by income loss, which is just not what you want to hear about. I mean, it's there, but the point at which you are really dying over a $10,000 medical bill is the point at which you don't have enough income to support yourself, right? That means that you have no savings and you're very close to the money already. The big bills are negotiable, usually. You can negotiate those down to a settlement and they know they're bankrupt, so they're not gonna be paid anyway. The inflexibility of the system, right? There's this kind of syllogism in policy is something must be done. This is something, therefore, this must be done. We had some option value before Obamacare on how we were gonna recall the system. We now don't. This is the system we're locked into. No one on either side has any appetite for changing it. It has a lot of weird, no one, I think, I think it's fair to say that no one, literally no one who passed Obamacare wanted this system. But if you'd said sit down and design a system that is a good system that we should have for our healthcare system, no one would have come up with this. This was this incredibly weird layered onto it. It's like a klooch upon klooch upon klooch. It's like you fixed it with bailing wire and then you added some spit and bubble gum and paper airplane because you had that. It was only if you jam it all week. And at the end of it, right, we made that problem a lot worse. This is bad before. American regulatory policy is terrible. It always has been. But now it's really bad and it's totally unfixable. It's really, really hard to pull any piece of this thing apart without the entire thing just completely collapsing. And so it's now really, we're locked into this weird architecture. And what does that mean in 20 years as the cracks start to shimmer? I have no idea. Because I don't think- Such an optimistic story you're telling. I'm like the voice of doom, sorry. Let me make two quick points and then ask a question. Megan referenced the Oregon Medicaid experiment which was a sort of random assignment of people. There was a lottery that Oregon had a couple years ago and a whole bunch of economists because there really hasn't been a randomized healthcare experiment since the famous RAND study from the 1970s. And the RAND study sort of assigned people to different levels of insurance generosity and found that if insurance is more comprehensive, people do use more healthcare but basically found no significant effect on health from that additional healthcare. So two things. People had better vision. It's also not clear, well I lost this kind of trivial but it's not really clear like, you know there's something called the Texas Sharpshooter Fallacy where if you draw a bull's eye, right? I mean they tested a lot of stuff, they found one. And so it's not clear whether that was an actual effect or just the one thing that they could name that it actually improves. But it's also you can tell a story where hypertension I moved for, it's very treatable and where that would have some effect. I've also heard arguments on the RAND study that, you know this was a study that was conducted in the late 70s going into the early 80s and that sort of secondary prevention has gotten a lot better since then. And so, you know what the RAND study found is that if you give people less generous health insurance then they use less healthcare and that saved some money and that they overall seemed like about as healthy. And so the question is, is the healthcare that they would forego today when they're subject to the same financial incentives more valuable than the healthcare that they forewent at that time? And I mean that's sort of an open question but I do think it's an interesting one. I think it is but I think that Oregon found the same thing and on exactly the stuff that you'd have expected it won't see control for diabetes, hypertension and cholesterol. Like they looked for three targets. The authors, there's been some quibbling about this for the authors who are very, very adult. Say we were powered to detect the expected effect. There were enough people in the study to detect the decline that we should have had based on what we know about treatment of these conditions. They did not detect the decline they were expecting in people who had bad hypertension and bad blood sugar levels, bad cholesterol. So like the two RCTs we found, it's a problem. It's really hard to do our randomized control trials on human beings but they both found the same thing and that surprised the heck out of me when it happened. I was not the result I was expecting. I think it's totally an open question but I think that both of the two randomized control studies that we have shown the same thing which is and it's actually not that surprising. So even people with insurance nine months after we have hypertension and I actually take hypertension drugs every day and they make me dizzy and I understand nine months after they're prescribed the majority of people like 75% are not taking those drugs. Compliance is really terrible and so when you're looking at a population that is often has other issues, like their lives are more stressful, et cetera, it's not necessarily surprising compliance on these prevention regimes is not high enough to produce the effect that we'd like to see. And Margo's question is, we have to look at the benefits, right? Are the benefits going to justify the cost? And obviously there's a lot of new spending and if there's great health benefits that come out of this I think we'd say, well yeah, that spending is justified. The same researchers that did the Oregon Medicaid experiment released a paper last June where they estimated the value that the Medicaid enrollees placed on that coverage and they came up with a pretty robust estimate of 20 to 40 cents on the dollar. Let me change gears and ask about something that Megan has written about. I think last month Megan, you wrote a paper on how gaming could be the fatal threat to the ACA and you talked about the special enrollment periods and if people are taking advantage of the special enrollment periods to sign up for coverage when they expect to have healthcare services that are gonna be pretty costly and then dropping coverage thereafter, there's also a 98 grace period in the law that allows people to, if they're getting a subsidy to pay one month's premium and the insurance company can't drop them for three months even if they fail to pay premiums for that entire time. Megan, if you wanna take one minute and sort of talk about your argument and then Margo, if you could comment. Sorry, I know I talked too long. So basically what we seem to be seeing, United Health had a conference call. It was amazing, like in October they had a conference call saying these changes are great, we're really excited. In November they had a conference call saying pulling out, this is terrible, we're losing a ton of money. That corporate messaging meeting must have been fascinating. I think it's on the side. The fact that they moved their message so quickly, like I think you can read some things into that also. Yeah, no, I'm getting that in a second. So they're not the only people though, so a bunch of the insurers are now complaining that what they're seeing is that outside of open enrollment you can enroll if you've, what's called a qualified life event. You can marry, you have a baby, you move states, there's various things, you have a job. And what they're seeing in that period is that they're getting extremely high utilization from people who buy insurance, run up a ton of bills and then drop it. And people are also using that three month race period especially at the end of the year to basically enjoy the many benefits of health insurance without paying for those benefits and that they can just bring roll next year because there's no way to keep them out of the market. Couple things about that. So if this is true and if it is not halted, that is an existential threat to the exchanges in a way that a lot of things aren't. If that can be done, because the problem is that even people who don't want to game, the people who do will draw to the price of insurance to the point where the people who don't, who would like to mortuously buy insurance for, and use it only when they need it, have to feel that they have to game because they just can't afford not to play this terrible game. That said, there's a few things we should say. It's first of all something that I think that Mark would be about to get into is anything an insurance company says is part of a vast strategic negotiation with the administration. And at this point, they're trying to get the administration to give them a bunch of money through the insurance, the reinsurance facilities. So you always have to take everything you say with a grain of salt. That said, these are audited financial statements, they are not allowed to make up lies. The SEC cannon will come and flat you with gigantic unpleasant fines if you say things that are just flatly untrue. Their auditor will not sign off. They are in fact losing money on these policies. That is not in dispute. Why are they losing money? And because there's also other reasons they might be. So for example, something that's not really gaming, but okay, I lose my job, I didn't have insurance in the job, so I can't go Cobra. Well, if I just lost my job, if I get my insurance then, you know, go down to Walmart and some applications see what happens. Three months later, I get a job and I go out. Okay, I lose my job, I'm sick. I'm on the exchange that day making sure I have health insurance coverage. But there may just be some adverse selection in that open and that non-open enrollment period that we're seeing. I don't know. So I don't know how bad gaming is, but if it is as bad as the insurers say, and you should be very cautious before deciding that it is, but even if it's not that bad but happening, I'm surprised. Gaming laws like this usually takes, there's a lag. It takes people a while to figure out the little exploits. Things like, I don't remember the, to use one that I use myself to literally go backdoor IRA where you can put money into a non-taxable, a non-tax-advantaged IRA and immediately roll it over into a Roth IRA, which makes it tax-free, okay? That's it, like, everyone does this. I'm not casting moral aspersions on people who do it. It takes a while, it took a long time to figure out the backdoor IRA strategy and for it to become widespread. If gaming is this widespread that early, that is a huge problem for the exchanges. The administration, however, is talking about cracking down on the documentation, so I don't know if it may be fixed, if it may not exist, it's all there out in the air. I do think the administration, especially early on, if you guys all remember the first year of the exchanges when the website didn't work and it was just like sort of bad news and doom and gloom all the time, I think that early on there was a real desire to just get as many people in the door as possible because there was a feeling that politically you just need to get the enrollment numbers higher so that the whole program is not doomed to failure. It does seem like now they're starting to crack down on some of this stuff and they're making it a little harder. Last year, they created a special enrollment period for people who got hit with a tax penalty or they said, okay, when you get your tax bill, if you wanna sign up for this year, we're gonna let you sign up late. So they didn't have that this year and they had some special enrollment periods for people who couldn't provide documentation that they were US citizens or that they were residing in the US legally as immigrants and they got rid of that. So I think there is some question about this but I think ultimately it's really important to remember like this is a brand new market that didn't exist before with like a very complicated regulatory regime that didn't exist before and like insurance, they made some mistakes. I think that if the markets get too small or the risk mix gets too bad or if the administration is like allowing too many people to only come in when they're sick, those are problems but I think ultimately once the insurance figure out how these markets work, like they are experts at pricing for these kinds of markets and it seems like what a lot of them did is they just didn't understand who was gonna buy insurance and in what way and they priced too low and that's why they lost money. So it doesn't seem to me like that is necessarily an existential problem. I think they can just solve that problem by like learning from these couple of years of experience and maybe pricing a little higher next year and that will make insurance more expensive for middle class people who aren't getting these subsidies but for most people who are in this market until we hit that cap. It's not really gonna hurt their pocketbooks. It matters for the federal budget. It does matter I think, you know, sort of in a very long term for the stability of these markets but I think it is reasonable to assume that it's just like gonna take a couple of years for everyone to figure out how this works. Although I'm also not sure entirely that the reason, some of them like, I think the co-ops were just stupid. I think they were inexperienced but I think a lot of them may have underpriced in the theory that they wanted this market to get bigger and it's kind of a problem that it didn't, it's surprising and problematic that like the insurance wasn't that expensive and basically no one was getting a subsidy wanted to buy it. So when United made its announcement that they were considering withdrawing from the exchanges next year, it made a lot of news. I'm gonna ask a question where you just have to give me a number. What do you think the percent chances that United withdraws from the exchanges next year? I don't have enough expertise on the details of United's position to answer that question with a number but I have to say that my kind of cynical reporter viewing of what United is doing is that they are sending some pretty specific signals to regulators that they want more payments from this risk corridor program that they want the administration to tighten up some of these special enrollment programs and also they have competitors who are trying to merge and I think that they are trying to send a signal that these markets will not, will cease to be competitive in the future as a way of trying to influence the way that different federal regulators view those merger talks. And so I think you just have to see this as part of a kind of, they are losing money. I think that, as Megan said, these are real audited financial statements. They are losing money in this market but there's a lot of money in the market. It's not a small amount. But I think that if they price their product too well and they wanna stay in this market all they have to do is raise their prices next year. There's not, the problems that they're experiencing are not ones that are like fundamental to the exchanges or to their business and I think that what they're really engaged in is like a complex or regulatory negotiation with these threats to leave. I'm gonna put it a little higher. It's an audited financial statement. You know, these guys float possibilities with stuff all the time. I think they're absolutely trying to signal regulators with everything that they say in public including their audited financial statements. At the same time, they're losing a lot of money. I mean, this is not a small amount of money and I think what you're hearing from them is that like, first of all, we don't know how to price for this market and it's costing us a fortune to learn that we don't know how to price for this market. Basically, they've gotten almost no information in the first three years because the market wants to be able to stabilize. They really only lost money in the second year. Right, but they haven't gotten information. They wouldn't have even if they'd been in, right? I mean, the Blue Cross, Blue Shield, South Carolina was, I believe it, Anthem was definitely making money. I think the Blue Cross, Blue Shield, surely wasn't losing what they lost this year. Is it the markets, like people are losing more money, not less, which is not what you wanna see if there's a learning experience, right? Is that because the market's been stabilized, the information they got in the first three years appears to be virtually worthless. And so, except that like, we know the pool's old and sick. And so, I think what they're saying is like, it's costing us money to learn that we don't know how to price this stuff. And also that like, you may not be able to sell in this market at a price that just makes sense, where we're gonna get enough people because we're only regulatory overhead for doing this and that's a fixed cost. So unless you're, unless, and it's true, this is true in each market. So for example, like California has two there's regulatory overhead for each policy that you set up in each market. And then when you look at that, you may just say that this market is too small, it's not worth it. That said, I do think they're trying to signal it. Regular, I would put in about 35% chance they withdraw. I expect that some of that sort of depends on what the administration does and what they're politically able to do. I think the employment administration's been for a really hard time coming up with a lot of money for insurers in an election year. Like Hillary Clinton does not wanna go in campaigning as Obama too on like, I'm gonna be out there shoveling more money into money-losing insurance firms, right? And so I think that it's gonna be politically difficult Republicans are gonna have to block it as much as possible, which means that I suspect that there is a real risk, although I think not a majority risk that they will pull out. And I think insurance companies have to be considering there's gonna be a new administration, right? And they have to be basing sort of what are the conditional probabilities you get a new administration. Now it's a Republican administration and they're not giving you any money at all. And if it's a Republican administration, I mean, one of the questions that I have is are they going to look at just providing additional exemptions from the individual mandate penalty? I could plausibly sort of see a new administration coming in and doing that.