Source: STAT News
There is a deadly condition in the United States that has received almost no attention and is not being addressed. It is not a disease or sociodemographic characteristic. It is churn.
While it might sound like an unpleasant infection or embarrassing skin condition, churn is not a physical ailment at all. Rather, churn is a peculiar predicament that occurs because of the United States’ tremendously fragmented health insurance system. It is a major reason the U.S. has a sick care system instead of a true health care system. It is also the major reason there is little emphasis on wellness, prevention, and managing chronic illnesses like diabetes. Consequently, churn is deadly.
Churn occurs when people change health insurers either by their choice or, more frequently, because their employment or income situation changes and they are forced to change their health insurance plan. One day they are working for a company insured by a Blue Cross Blue Shield plan. They might lose their job and go onto Medicaid, or start working for a business that does not offer health insurance and buy coverage on their own. And then they might get a job with coverage and change their insurance plan again.
Churn is common. Every year about 20% of people covered by Medicaid churn out, with about 8% returning to Medicaid within a year. In the exchanges, about 26% of Americans switch insurers or leave the exchanges altogether each year. It is a bit harder to determine how often Americans who get employer-sponsored insurance change plans, but studies have measured the annual churn rate to be between 12% and 22%. Churn is also becoming common in Medicare. Among the 54% of Medicare beneficiaries who enroll in Medicare Advantage plans, 18% change plans each year, and 48% switch plans within five years. Altogether, 15%-20% of publicly and privately insured Americans churn out or experience disruptions in their coverage each year.
Churn creates many problems. It increases marketing costs, broker fees, and administrative costs for re-enrolling people. It also forces many people to seek new primary care and specialty care relationships because their physicians are no longer in network.
But the worst problem is that churn substantially reduces insurance companies’ incentive to invest in prevention for healthy people as well as in the diagnosis and careful management of chronic illnesses such as high blood pressure and diabetes — so-called secondary and tertiary prevention.
Some preventive tests and treatments produce cost-savings over the long run. For instance, the measles, mumps, and rubella vaccine saves the U.S. health care system about $13.50 to $26 for every dollar spent. Many other prevention strategies, such as mammograms, are cost-effective but not necessarily cost-saving because they extend people’s lives. Cost-effective prevention gives people higher quality-of-life and provides the U.S. economy with healthier and more productive workers. Both are surely worth paying for.
Churn creates a problem because prevention and managing chronic illnesses requires an outlay of money now with the payout in terms of better health and savings in the future. For instance, doing mammograms to catch breast cancer early, when it is small, requires money now for the test and, if a woman has cancer, maybe surgery and radiation with the hope of saving a life and avoiding the costs of chemotherapy and other treatments for a deadly metastatic cancer. Similarly, giving a patient a shingles vaccine is done in the hope of avoiding treatments if a person is afflicted with that painful illness and reducing the risk of dementia. Treating hypertension for years may avoid heart attacks, strokes, kidney complications, and other expensive future health problems.
But if a patient leaves an insurer in a few years, the insurer is unlikely to reap any financial reward for all that spending on prevention. The new insurer — or maybe the fourth or fifth insurer down the line — gets the financial payout without expending any money.
Thus, churn significantly shortens the time horizon for investments by insurance companies. For a patient, the most important time horizon is their life. But for an insurance company, the time horizon is how long the patient will be with the company, which is much, much shorter. In the technical language of economists: “insurers’ preventive investments [are low] because insurers cannot internalize all investment cost savings as consumers may leave the insurer in the future.”
Churn creates underinvestment in keeping Americans healthy. Insurers are not required to disclose how much they spend on prevention, but researchers estimate that it is a measly 2% or less of health insurance premiums collected by companies in the ACA exchanges. Is it any surprise Americans underutilize prevention and don’t have chronic illnesses well managed? Data suggests 20-25% of women do not have up-to-date mammograms and up to 30% do not have up-to-date cervical cancer screening. Or, take the shingles vaccine: Fewer than 20% of eligible adults over the age of 50 have had both shots. Consider that only about one-third of people infected with hepatitis C receive the treatment which forestalls liver disease, cancer, the need for transplants, and is cost-effective.
The diagnosis and treatment of high blood pressure is another example of severe underperformance. Nearly half of American adults (approximately 120 million people) have high blood pressure. Astonishingly, more than 48 million of them do not even know it. In 2021-22, about 15% of adults with diagnosed high blood pressure received no medical treatment for it. Sadly, less than 25% of those with high blood pressure have it under control today. Appalling. Similarly, fully 8 million Americans with diabetes are undiagnosed, and fewer than 25% have the three main markers of good care: hemoglobin A1c — a measure of how well controlled the blood sugars have been — and blood pressure under control, and a statin for low cholesterol.
One consequence of this underinvestment in prevention is that Americans die unnecessarily. For instance, despite cervical cancer being almost entirely preventable with Pap smears and a vaccine, 13,360 women are diagnosed with cervical cancer and more than 4,300 die of it each year. Similarly, if the tens of millions of diabetic patients had their disease well controlled each would gain an average of three years of additional life by reducing their risk of heart disease and stroke.
There are ways to change the incentives for insurance companies so that they will assiduously ensure prevention and management of chronic conditions despite churn.
One is to mandate they provide certain prevention services to patients for free. But when Obamacare required this, there was only modest improvement in use of preventive services or management of chronic conditions.
A second is to link prevention to quality assessments with bonuses or penalties for low rates. This was recently done in the California exchange, and one year after implementation, patients participating private insurers averaged a 12% improvement in blood pressure control. The problem with the bonus approach is that there can only be a few quality metrics to really focus attention and the bonuses need to be substantial, costing a lot of money.
Our favored approach is to establish five-year enrollment periods for all insurers — Medicare, Medicaid, and private insurance plans in the exchanges — rather than annual contracts. (Eventually, employers should also adopt this longer enrollment period.) This would substantially increase the time horizon for insurers, and their financial incentive to invest in prevention and managing chronic conditions to avoid complications that require ER visits, surgery, hospitalization, and other expensive medical services. Indeed, CEOs of some Medicare Advantage plans have begun advocating for multiyear enrollment to “drive positive patient health outcomes.” And the country might even save more money with lower administrative and health care spending. This seems like a no-lose proposition — more prevention and cost savings.
Tragically, Trump’s 2025 tax bill includes $1.1 trillion in cuts to Medicaid and ACA marketplaces will exacerbate churn. The bill will cause about 15 million Americans to lose health coverage by 2034. The cuts and additional red tape will push many who lose insurance to stay uninsured. Others who lose will struggle to get re-enrolled with what they had or find other coverage. This represents a supercharging of churn for health insurance coverage in the U.S. for the next decade.
That deadly ailment churn must stop disincentivizing prevention and killing Americans.
