Perverse Incentives in the Exchanges

The deductibles are higher than what most people are used to, the networks of doctors and hospitals are skimpier (in some cases much skimpier), and lifesaving drugs are often not on the insurers’ formularies. Even after the government’s income-based subsidies are taken into account, the premiums are often higher than what people previously paid.

Why is this happening? Because the new law gives insurance buyers and sellers perverse incentives to behave in ways that create these problems. Things will only get more out of whack as more and more unhealthy people enter a system designed to be paid for by premiums from healthy people.

From my Wall Street Journal editorial.

Comments (15)

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  1. Howard L. says:

    No one would buy a pizza that is widely known for not tasting good, especially if it is expensive and if the toppings options were limited. If no one would by a pizza like that, why would someone buy an insurance that has the same issues (a program with high deductibles, narrow networks, and few drugs covered, etc.)?

    The problem with Obamacare is that the program forced individuals to buy a defective product, that doesn’t meet user expectations. How can we solve the Healthcare crisis when the solution is flawed as well?

  2. Charlie O. says:

    This program is filled with perverse incentives. Additionally it doesn’t seek the common good. I don’t understand how this program can solve the issues in the healthcare system.

  3. Perry says:

    Originally it was my understanding that at least 40 million were uninsured. Now we have maybe 2-3 million insured, plus a large number on Medicaid. And how did all this restructuring and confusion help?
    I think not a whit.

  4. Thomas E. says:

    I think that the gravest part of all the discussion is that the insurance companies are removing lifesaving drugs from their formularies. I can pay for higher deductibles, I can settle receiving care in a different hospital, and I can even adjust to having a different doctor. What I cannot change is my drug prescription. If my body is used to take a drug that has worked, I shouldn’t be forced to change it just because my insurance is getting greedier. As people have the right to keep their doctor, I should have the right to keep my medicine.

  5. Lenny Z. says:

    Dr. Goodman, you concluded your WSJ editorial by stating that “at some point, politicians of both parties will realize that we can do better than this,” meaning that Obamacare has a lot to fix, and legislators have to do something. But, this will require compromise from both sides. Yet, recent actions by Congress show that they are incapable of doing so. Do you think that there will be an agreement in Congress to amend the Affordable Care Act? And if so, do you think President Obama will sign it?

    Thank you.

  6. Adrian M. says:

    Premiums will go up, thus people will have to spend more to get insurance. But, penalties for not being insured will not change. Meaning, that there will be a point in which it will be better for an uninsured individual to remain without insurance (paying the penalty or not receiving tax refund) than to buy an insurance. When we reach that point Obamacare will collapse.

  7. PJ says:

    “At some point, politicians of both parties will realize that we can do better than this.”

    I’ll believe it when I see it.

  8. Xinyuan Zou says:

    Healthy people may intend to quit insurance due to the increasing premiums. Consequently, the coverage of insurance may remain the same as before. Finally, it hurts the middle class.

  9. BHS says:

    “The law piles on benefits for which everyone must have coverage, whether they could ever use the benefits or not.”

    Yea…men with maternity coverage, for example.

  10. Mary says:

    The answer to health care isn’t confusing legislation no one understands. It’s giving people the choice to make their own decisions.

  11. Lacey says:

    If we could just put aside party squabbling, we could come up with a solution that would benefit everybody. But we can’t seem to do that.