A long time ago, when the first financial crisis hit around the savings and loan (S&L) industry in the 1980 I remember that there was a thread of conversation around using long term interest rates to make short-term bets. The idea was that by borrowing long term at a lower rate, you could seek to play with assets on a short-term and make money. That’s not a new concept, its just that this behavior promoted playing at the boundaries of the risk envelope.
An opinion article today in the Washington Post pointed out the same thing happening today in healthcare.
The article described how the Oregon Medicaid lottery system gave new insights because it was essentially run as a large-scale randomized controlled trial (RCT). They found that there was an improvement in health when Medicaid benefits were used. It also pointed out that the benefits were a bit different than expected. There was no change in acute or chronic issues like the big ones: diabetes, hypertension, etc. Instead, they found a decrease in mental health (around 30%) issues. There were other benefits as well.
Based on my own industry experience, I know that its hard to keep Medicaid members enrolled. Since Medicaid serves the lower income group and the lower income group typically exhibits higher rates of coming in an out of managed care due to moving, jobs, ability to get to healthcare facilities (access) and other factors. Hence, the benefits you obtain from the Medicaid benefit are probably more long term (which is part of what the study found). So even in a group that is highly transitory, long term benefits were observed.
With commercial experience, the groups are less transitory to some degree. But people still do switch plans and change jobs.
Either with commercial or Medicaid, or really any system, when access to something short-term provides long term benefits, how to people who put in the effort (in this case insurance companies who shoulder the risk) manage to match that against the long-term benefits. Of course, actuaries play with this equation all the time.
But imagine this essential tension playing out at the macro-scale. You have systematic and exceptional large and complex resource spent today that have a long-term pay-off. How do you run a business that way?
You can of course charge more today or you can hope that on average, even in face of all the churn, that the churn gives you a net neutral. But this type of risk calculus can lead to a policy of minimizing investments today perhaps to the point of depressing outcomes in the future.
It seems that incentives are out of whack and until the incentives change and come into alignment, there may not be alot of progress.