I’m fascinated by dominated choices. A dominated choice occurs when there are two or more choices with a set of relevant characteristics. One of the choices has, on all relevant metrics, equal or better attributes than the other choice. The first choice dominates the second choice. No one should choose the second option.
Right now, there is a small but growing literature on dominated choices. A dominated choice is an inefficient choice. It destroys information value of a market based feedback mechanism. It is expensive as hell for an individual who made a dominated choice and it is profitable as hell for an insurer to have dominated plans purchased.
One of the limitations of all of this research, including and especially my own, is that these studies stay within only a single line of business. My California ACA work only looked at people making choices between different plans offered by the same insurer on the same network. The most cited papers in this field look at choices from a single employer or within Medicare Part D. We do this for analytical simplicity. My study design allowed us to waive away all sorts of complexity that would transfer a dominated choice set into a plausibly rational under certain valuation of various feature choice sets.
However, single lines of insurance are not the only choice set that people actually face. Many people are plausibly eligible for Medicaid and ACA at the same time or two very different choice menus of employer sponsored insurance, or employer sponsored insurance, COBRA and Medicare. The choice spaces are extremely messy and varied. Here choices are often not quite strictly and transparently dominated but the choice field is very heavily tilted one way or another towards one choice domain relative to another. I think that this is where the next round of research needs to go to help people figure out what stream of choice they need to get into first and then resolving the challenges of choice with a chosen stream.
PaulB
David, it seems as though most of this applies to the ACA but do you see something similar with respect to Medicare options/plans?
Speaking as someone who recently went through the struggle of figuring out whether to take Cobra or an ACA plan and, if the latter, selecting the right ACA plan from among dozens, I found the process to be absolutely maddening, as I just did not have the information or background that I needed to feel comfortable with my choices. Will I have a similar experience in a couple of years when it comes time to enroll in Medicare?
PaulB
Oh, and thank you for these analyses. I know your posts don’t always get the lengthy comment threads but I assure you that they are read and are very much appreciated.
Xantar
It took me reading this a few times before I realized that the dominated choice is the lesser choice, not the superior one. I guess I was mixing “dominated” with “dominant.”
Xantar
Ok so having read the summary of David Anderson’s paper, what I’m understanding is that some people ended up in dominated plans because of auto-enrollment or just inertia. My question is do we know how many people actively chose a dominated plan instead of being enrolled in it by the rules of the system? That would imply someone was given all the relevant information and still made the inferior choice.
Anonymous At Work
Worth noting that almost half of economists use models that deny the existence of stable dominated choices. They make Milton Friedman cry, after all.
David Anderson
@Xantar: We don’t know. We know that insurance is confusing as fuck and I suspect that there is a menu placement problem but this is where good qualitative work is highly valued. And I don’t have the capacity to do that (at this time).
Lobo
Always enjoy this. At this point, I think we have to admit choice is not the panacea it is made out to be according to traditional economic theory. Humans are not these rational computing automatons. Humans are messy. One reason for Costco is that choice is limited and of value. Many of the items are good enough. I think the work should switch from developing choices to working on a optimizing a few good choices. But what would be the profit in that?
Ruckus
As a person who has had to purchase health insurance for my employees, as well as for myself, I can guarantee that the choices have not gotten easier over the decades. I can also guarantee that sometime in the mid/late 90s the choices got a lot worse, and I think it’s because the insurance companies figured out that the more choices there were, the more chances they had to lose money, but if there were too few choices they had to bet their entire company every year. And that if they made few choices but all of them confusing, they stood a better chance of making money, regardless of the value of the insurance they sold. And after all they aren’t in the insurance business, they are in the money making business – selling insurance.
Ruckus
@Xantar:
If they gave every person all the relevant information, most people would spontaneously combust or their heads would explode. And no I’m not kidding. As I said above I used to have to pick policies for my company and there is no way I could run said business and read every policy available and try to find the one that fit every employee – even limiting that to just the employees I had at any one moment. I had to chose the best for the most, and that’s not taking cost into account. My business suffered every year when the time rolled around that I had to do this. And then I sold that company and took a job in professional sports and that company provided insurance. Except that none of the insurance companies would then write a policy that this company wanted – at any price. Because this company wanted actual, complete healthcare insurance. And no one would write that at any price. The company offered any price, was rejected. We got the best crappy insurance money could buy. It hasn’t gotten better in the last 25 yrs. Modern medicine can do more than healthcare insurance companies are willing to pay.
wetzel
Hello. I have had an incredible six month experience trying to get Bronze HMO Anthem in GA to fix my daughter’s status in their system (COB), where they had themselves as her secondary, when she has no other health insurance.
The reason I am posting with a question. The detailed history of my efforts to solve the problem and get them to reprocess the upwards of 50 claims they denied includes a half dozen examples where they appear to be solving the problem but it would go nowhere, and they could send me to the back of the line whenever they want (Solutions Specialist never materializes; 1st class mailed forms disappear; grievance fax machine is always busy; what was emailed now needs to be faxed; and on and on and on).
I am wondering if there has been a study of these types of processes being manipulated to go in endless loops so that the successful claims readjudication processes can approach zero simply by circular phone trees and long phone calls where they find another step for you every time at the end or let you know, Herr K_______, come back tomorrow.
Although I have no direct evidence, the entire method and manner I have encountered is suggestive of something programmatic. It’s almost as if an AI designed a system where as an individual you have the appearance of efficacy towards a solution but which extinguishes your hope until you give up.
So, first of all, I am wondering if this is a thing. Are exchange customer service systems becoming maliciously sophisticated in this way? It would make sense from an ROI perspective, but it is affecting their ability to provide good care (every doctor shakes us down about every claim every time we try to make a new appointment!). It seems like the system ought at least to be ethics adjacent to the doctor-patient relationship, so I hope it is just my own frustration and a long series of events which seems premised by the intention to just get me to give up and let these all go to collections. I’m a world class heavyweight at sharp-elbows in justifying claims in a clear way. I am not the average Joe at stuff like this. It’s gobsmacking, honestly.
Ambetter sucked in a more straightforward manner, in my opinion.
If anyone is interested in positive advice, use the message system in your account. Phone calls are worthless no matter who you talk to, except for the one poor Anthem lady who I had in conference with a woman at my daughter’s university (she couldn’t register because of denied claims at the university health center! lol! my life sucks!), and if you would believe it, I recognized the woman’s voice from talking to her three months before about the same problem so at least my daughter’s school gave her a twenty four hour reprieve so she could do drop-add.
Sorry for the TLDR and venting. Just wondering if it is showing up somewhere in the literature, David, of if anyone else shares this sense that exchange insurance companies are developing programmatic methods of denying claims through ‘mistakes’ and then Kafkaesque customer service that never does solve it for you. It might be because I contacted them first in November, because that would seem like the best time of the year to upset their expensive members.
Poor service may be a way do undo community rating internally as long as it is outwardly compliant, so the ROI is obvious. I will have a hard time believing this is not going on at Anthem for the rest of my life.
David Anderson
@wetzel: Excellent question — Miranda Yaver is the scholar who is bird dogging this issue pretty damn aggressively from a poli-sci/bureaucratic politics POV.
I can’t prove anything but yeah, I strongly suspect that there is some intentional sludge introduced into the system to produce rage quits. At the same time, I also think that most systems are not designed to be customer friendly, so when edge cases hit, no autonomy customer service reps and 1st and 2nd line management can’t be helpful. They don’t want to run you around for months as sooner or later the state AG gets involved and that is NOT FUN (TM) but the C-level won’t invest in systemic fixes and either hope people don’t complain or the price of not doing systemic fixes is greater than the price of a modest fine 3 years from now.