Exchanges for Everyone!

Almost a hundred years ago famed reporter/muckraker Lincoln Stephens famously proclaimed, “I have seen the future, and it works.”  Of course, he was talking about the Soviet Union and time proved that he couldn’t have been more wrong.  I hope I don’t prove equally wrong when I say that our health care future lies in exchanges.

I should note upfront that my prediction may not mean what most readers probably think it does.

I’ve written about exchanges several times in the past (e.g., the botched rollout of healthcare.gov,  the rise of private exchanges, and – two years ago – questioning the resistance to the concept) but what triggered me again was a reference I saw recently that roughly one in two new Medicare beneficiaries enroll in Medicare Advantage (MA) plans.  It seems to be an accepted truism that baby boomers like MA, so as more of them become eligible for Medicare, MA grows.  Almost 30% of all Medicare beneficiaries are now in MA.

So we’ve got the Medicare population where enrollees are able to go online to view their choices of health coverage, compare coverage and premiums, and enroll.  It sure sounds like an exchange to me. 

Of course, for the pre-Medicare population not covered by employer coverage, we’ve got the much ballyhooed state and federal exchanges established under ACA.  They are starting to pick up steam; despite issues at both levels, exchange enrollment is now around 55% of projections, according to recent analysis from Avalere. 

Finally, we have employers rushing to private exchanges: Aon Hewitt research sees 33% of employers moving to a private exchange in the next 3-5 years.  No wonder many of the big benefits consulting firms, like Aon, Mercer or Towers Watson, plus some of the larger health plans (e.g., Wellpoint), have established, bought, or partnered with private exchange vendors.  It has become a favorite way for employers to lock in costs for retiree health obligations, and increasingly for active employees as well, both using “defined contribution” approaches.

The landscape looks like exchanges all around, even though that doesn’t mean everyone actually have many choices.  For example, The Wall Street Journal found 515 counties, in 15 states, where consumers getting coverage through the federal exchanges only had one choice of a health plan, out of the counties it looked at in 36 states. The New York Times reached similar conclusions in its analysis last fall.  Medicaid recipients often lack options as well.

Surprisingly, employers aren’t much better.  According to the Kaiser Family Foundation annual survey, 87% of firms offering health coverage only offer one plan type (e.g., PPO versus HMO or HDHP).  Choices within that plan type rarely even involve multiple carriers.

Consumers say they want choice.  EBRI found that that only 35% of those with employer coverage wanted to continue having employers make the choices of health plans.  45% wanted an exchange-type approach -- where they got to pick their coverage, their employer made a fixed contribution, and they paid anything about that limit – and 21% wanted the money from their employer to either spend on health insurance or keep, as they saw fit.  In terms of health plan choice, 26% were extremely interested in more choices, with another 37% very interested. 

EBRI noted that most employees were only somewhat confident of their ability to use objective ratings systems to make their choices, but I thought it was equally important that employees’ confidence that they could pick the best plan for themselves was virtually the same as their confidence that their employer picked the best plan for them. 

Having all these different exchanges for health choices makes no sense.  It’s crazy that people’s health plan choices vary so widely based on current economic status (e.g., Medicaid or not), not only employment status but also size and choice of their employer, age/eligibility for Medicare, and geography, to name a few factors.  The commercial market and the public coverage don’t typically even use the same types of network plans: Medicaid and Medicare tend to use HMOs, while exchange plans tend to be PPOs (although often ones with narrow networks).

I’ve complained about this before (Medicaid Is Different…Isn’t It?), but the very real prospect of someone having to cycle through very different application processes, coverage options, number and type of choices, provider networks, and sources of funding as they go through common life changes is just ridiculous.  It’s administratively expensive, confusing for everyone involved, and hell on continuity of care.

In a more perfect world, one in which there had been the possibility of bipartisan agreement and some prospect of a rational approach to solving problems, ACA could have established exchanges that would offer coverage that applied to everyone.  No hidden subsidies for higher income individuals, as is true for Medicare and for employer-provided coverage.  No archaic or (literally) parochial benefit designs.  Consumers wouldn’t have to switch their coverage just because they gained or lost a job, or turned 65.  Instead of that kind of sweeping simplification, we’ve just created another kind of balkanization in our health care system.

If nothing else, though, the exchanges may help prep consumers for radically different ways of obtaining their health plan.  A recent global survey by Accenture found that two-thirds of consumers would be willing to buy insurance from organizations other than insurers; 23% were interesting in purchasing from online companies like Amazon or Google, which has created some waves in the insurance world.  The study wasn’t focused on health insurance but the lessons sure seem applicable, and health plans should be worried.

I like consumers having a choice of health plans, offered on a uniform platform that facilitates comparison shopping, but exchanges for health plans are only a first step.  What I’d like to see are exchanges for provider services. 

I hate that a provider’s cost for a given consumer is dictated by whatever health plan a he/she happens to end up in, and that the best providers for a given condition may not even be part of their health plan’s network. 

Yes, most people would agree that we have a problem with transparency of cost & quality in health care, and, yes, there is a lot of work being done on the problem (see Does Anyone Really Know What Price It Is?), but exposing health plan-negotiated prices is not enough.  The underlying problem is that using health plans to price providers’ services just makes the whole process way too opaque.

We need to get to the point where providers’ services themselves are openly offered in a competitive market. 

Imagine being able to shop for, say, heart transplants or colon cancer care through an Amazon-like marketplace, with a wide range of providers offering the service, pre-set prices, full “product” descriptions, and plenty of reviews from previous patients.   If you think that sounds far-fetched, well, you can go on the Internet now and quickly gets lots of prices for laser eye surgery or concierge medicine.  It’s funny how lack of insurance coverage for their services “helps” providers advertise their costs.

Granted, people aren’t going to shop for the best provider when they are having a heart attack or their appendix has burst, but using those kinds of emergency examples as an excuse not to try to move to a world where we facilitate consumers directly shopping for the best providers in other situations is cutting our noses off to spice our face (and I wonder how much that would cost!).

Going to such a marketplace/exchange approach would require a very different competitive mind-set from providers, which many would hate but in which I think some of the best providers could do very well, especially if it meant less interference from health plans.  And, of course, it would mean a very different, less paternalistic role for health plans, an example of which I’ve previously proposed.

To paraphrase an old spiritual, let our people go!  Let them shop for their health care openly, not just their health plans.