Coyote Blog

I like digging through the raw data in the Obamacare report rather than just accepting the bits the New York Times wants to report.  As a business guy, I was looking at the data from a sales-conversion perspective -- ie, who is buying and who is not?  And of course, why?

When I was in the marketing world, we used to call the process of sales conversion the sales funnel.  For the exchanges this means some percentage of the available market actually show up at the exchange, and then some percentage of those actually complete the arduous sign-up process, and some percentage of those actually select a policy, and presumably some percentage of those actually pay, though we don't know what that latter percentage is.  At each step, we ask ourselves what people are we converting from one step to the next, and why.

Here is the Obamacare exchange sales funnel through December (as has become tradition, it is a scavenger hunt to fill this in and the data locations move around from month to month).

As you can see, of the nearly 3.7 million people who have selected a private plan or been put in Medicaid or CHIP, fully 88% are on the government dole (subsidized or full Medicare).

The interesting new data is on the plan selection breakdown between subsidized and un-subsidized.   This leads to an interesting finding that is a bit non-obvious from the report itself because the data is spread all over the report.  But lets look at conversion of applicants to plan selection based on whether folks are subsidized or subsidized.

For the 2,383,131 applicants who find they are no going to be subsidized, only 436,603 have selected a plan, for a 18% conversion rate

For the 2,756,667 applicants who find they will get supported by the taxpayer, 1,646,237 selected a plan, far a 60% conversion rate.

In essence, applicants are more than 3 times more likely to sign up if they are getting taxpayer money.  The exchanges are not selling health care, they are selling subsidies.  People sign up, check to see if they have money coming, and go away if they don't and stay if they do.

The next really interesting piece of data would be the demographics and health status of the 18% who did sign up for an unsubsidized plan.  I would not be at all surprised if the demographics there were far, far worse than the average.  Emerging hypothesis:  People come to the exchange, and sign up if they get a subsidy, or if they have health problems or high risk.

Ross Douthat in the NYT quoting Patrick Brennan

About one-fourth of the people who have entered their income information on their applications were deemed eligible for subsidies on the exchanges (about 900,000 out of about 3.6 million), which is lower than the number we saw in October alone and remains really far from what was projected. The CBO projected that just 1 million out of the 7 million people to enroll in the exchanges in the first year would be ineligible for subsidies, so the ratio is way off from what was expected (15–75 vs. 75–25). I had some thoughts on that surprising fact a month ago, and I’ll add a couple now: Unsubsidized customers (basically, those above the national median income) are generally savvier and more likely to have the resources to enroll and make their payments ahead of time, so maybe this is understandable and doesn’t say anything about who will eventually enroll. On the other hand, it may demonstrate that the people to whom insurance was supposed to be expanded — the uninsured, who tend to be low-income and not well educated — aren’t getting to the exchanges at all, and covering them will be a much longer term project.

There is a huge, enormous analytical problem with this-- they are looking at entirely the wrong numbers.  Incredibly, Meghan McArdle makes this same mistake, and I generally respect her analysis of things.   I am going to pull out my summary chart of the Exchange numbers to try to make things clear (click to enlarge):

There are 3 major mistakes, each worse than the one before.

MISTAKE 1:  The 3.6 million total applicants number is in line 3 (3,692,599).  This is the wrong number.  The number he should use is line 4, the number of people who have had their eligibility processed.  So the denominator should be 3.1 million, not 3.6 million.

MISTAKE 2:  He leaves out the Medicaid piece.  Seriously, if we looking at numbers that are partially subsidized, why leave out numbers (Medicaid and CHIP) that are entirely subsidized?   This means the applicants eligible for subsidy are 803,077 + 944,531 or 1,747,608 which is 56% of the processed applicant pool.  The subsidy number may be lower than expected but I get the sense that the Medicaid percentage is higher than expected.

MISTAKE 3:  They are looking at the application pool, not the sign-up or enrollment pool.  That is understandable, because the Administration refuses to give the subsidy percentage breakdown of those who have selected a plan (a number which they certainly must have).  My guess is that people are putting in applications just to see if they are eligible for subsidies.  If not, they quit the exchange process and go back to their broker.   That is what I will probably do (out of curiosity, I would never accept taxpayer money for something I am willing to pay for myself).  The people who actually sign up for coverage are almost certainly going to skew more towards subsidized than does the applicant pool.

Making reasonable assumptions about the mix of subsidies in the "selected a plan" group, one actually gets numbers of 80-90% Medicare and CHIP and subsidies in the enrollment pool.

I do think McArdle is correct in saying that the uninsured numbers were both exaggerated and mis-characterized.  I have been saying that for years.

From the recent exchange activity report (I can't call it their enrollment report because they do not actually report enrollment numbers)

• Number of people added to Medicaid or CHIP:  803,077
• Number of people who have selected** a private plan:  364, 682

The Administration knows, but refuses to tell us what percentage of the 364,682 are eligible for subsidies.   By the unfailing rule of political life, this means the news is bad (ie the percentage subsidized is high).  We do know the percentage of applicants who were determined to be eligible for subsidies:  41%.  Since a lot of people who go through the process are doing it just to see if they get a subsidy, there is good reason to believe that applicants who actually are selecting policies will be subsidized at a higher rate, but certainly no less than 41%.  So using that number we come up with

• Medicaid or CHIP:  803,077
• Subsidized private:  153,166 (at least, probably more)
• Entirely private: 211,516 (probably less)

So, at best, only 18% of the people enrolling** in an exchange are doing so with their own money.  82% or more are doing so partially or entirely with taxpayer money.  Note that these are all people, by definition, who were paying for their own health care before, so the one thing the exchanges are definitely doing is converting independent citizens to government dependents at an 80% rate.

By the way, I am pretty sure the CBO did not score the PPACA as being "deficit neutral" based on more than double as many Medicaid applicants as private applicants and a less than 20% unsubisidized rate.

** These are not actual enrollments until the customer pays.  Essentially these are the number of people who have put a plan in their online shopping cart.