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June 20, 2011

McKinsey Down in Flames as They Distance from Findings of Controversial Health Care Study

Posted in: Uncategorized

A few weeks ago, the consulting firm McKinsey released a controversial study claiming that employers would drop coverage in large quantities when the full Affordable Care Act is implemented. The Obama Administration immediately downplayed the study and then sought to get further information about it released. In the meantime, a separate study from Avalare Health came to the opposite conclusion, surmising that the employer market “will be fairly stable after 2014 when key ACA coverage provisions go into effect” and that “most employers will remain committed to providing coverage.” And now, McKinsey has released the full methodology for their findings, and they have basically walked away from the conclusions.

The report, which Republicans have been using to argue that American’s won’t be able to keep the coverage they have even if they like it, found that up to 30 percent of employers would stop offering insurance. But in the methodology summary just released, McKinsey stresses that the report “was not intended as a predictive economic analysis of the impact of the Affordable Care Act. Rather, it captured the attitudes of employers and provided an understanding of the factors that could influence decision making related to employee health benefits.”

This is pretty much a public relations disaster for McKinsey. They’re clearly trying to claim that their study wasn’t making a prediction about the employer market, when the initial results actually show a strong lean in that direction, particularly the line that “the shift away from employer-provided health insurance will be vastly greater than expected and will make sense for many companies and lower-income workers alike.”

But it’s worth mentioning that “fairly stable” does not mean that no employer will drop coverage in future years under the ACA. In fact, dropping coverage is the current trend, and while there’s a weak penalty that would have to be paid by employers under the ACA, it’s not likely to create a major deterrent if the numbers show a net benefit to a company. The Congressional Budget Office, more respected in these matters than McKinsey at this point, estimated that “the number of people obtaining coverage through their employer would be about 3 million lower in 2019 under the legislation.” The Centers for Medicare and Medicaid Services found a lower number, on the order of 1.4 million. These aren’t huge numbers, but they aren’t nothing either.

More importantly, the erosion of the employer market could be arrested in one of several ways. The first is through a real employer mandate with a legitimate “pay-or-play” mechanism. Another is by letting all employers into the exchanges. And finally, we could dismantle the entire inefficient employer-based system, with its fracturing of the risk pool, and instead move to a single-payer or all-payer system that would save money and provide more quality care.

Just because McKinsey messed up its survey doesn’t mean that the subject of the survey is worth preserving. The employer-based system was developed in the 1940s as an accident and just doesn’t work as well as other proven systems for health coverage. I don’t believe it’s worth defending, even from bad studies.


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