Healthcare Bill: Psychology Trumps

http://cnn.it/2m0TEnU CNN reports that Trump administration officials acknowledged to Republican senators at a White House meeting Tuesday that the House bill to repeal and replace the Affordable Care Act (ACA) is in serious jeopardy. http://politi.co/2mtb6wK Politico reports that “the Trump administration soon after taking office scaled back enrollment outreach during the critical final week of sign-ups. And yet “between Nov 1 and Jan 13 a total of 12.2 million people enrolled in Obamacare”. Why indeed?

The most palpable behavioral concept that makes Trumpare such a formidable legislation to champion is the Endowment Effect. People simply value stuff more because they own it. Indeed the very fact that ACA, however imperfect it may be,  exists and is owned and signed by millions, makes it such a formidable legislation to repeal. Millions are now emotionally invested in a crucial ambition: ambition to feel financially secure about their old age health. In the last seven years the healthcare has morphed from privilege to right. And aversion to losing  a right has has made ACA popular.

When champions of “repeal and replace” try to sell the insurance to the healthy millennials and make it more costly to aged baby boomers, their intentions become very apparent. They are practicing “Adverse Selection”, that is selling insurance to buyers who are least likely to demand large claims. While economics makes adverse selection a major profit and loss premise for insurance industry, it remains a political hardsell.

Champions of Trumpcare are trying to provide “choice” or “the opportunity to choose healthcare" as an advantage in comparison to ACA which offers a limited number of players. To an ambitious and (insecure) customer, the political cacophony around ACA is bad enough. Once the customer understands that he is expected to make a rational, cognitively complex choice in a confusing scenario, he inches towards status quo. This status-quo bias stipulates that most humans tend to maintain the current choice and change nothing. 

So as Trumpcare edges forward through the political process, psychology of the voters make the new legislation a risky political gamble.