In the alternative, fund high risk pools?

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By Consumers Union on Wednesday, February 24th, 2010

Rather than try and insure everyone, perhaps we should just try and insure the sick people. That’s the gist of the GOP’s alternative approach to health reform.

Establishing Universal Access Programs to guarantee access to affordable healthcare for those with pre-existing conditions. The GOP plan creates Universal Access Programs that expand and reform high-risk pools and reinsurance programs to guarantee that all Americans, regardless of pre-existing conditions or past illnesses, have access to affordable care – while lowering costs for all Americans.

That sounds pretty good. Republican leaders propose putting $25 billion into high risk pool expansions over the next ten years, with a bit less in the early years and a bit more in the out years.

The problem is, this idea has been tried. A lot. Over decades. By both red states and blue states. And it doesn’t work very well at all.

In practice–and there are a lot of different versions tried across the country–insuring only sick people in one big pool is a sure way to run up a very, very high pricetag. So high, in fact, that most high risk pools have remained quite small. Most people just can’t pay the monthly premiums (more than $500 a month for a 50 year old in most states, much higher in some states) and can’t afford the high deductibles and coverage limits.

People who desperately need healthcare, can wait for it through the typical 6 to 12 month waiting period, and can come up with the money will enroll. Most people who are uninsured remain uninsured. Texas, for example, has had a high risk pool since 1998. Texas also enjoys, still, among the highest uninsured rates in the nation.

But can’t that problem be fixed with sufficient investment in subsidies to help people pay for high risk coverage? Perhaps. But how much would it take? While $25 billion might sound like a lot of money, it is neither enough to support a large expansion of access nor a significant reduction in the price for people who enroll. In fact, it is not a very large investment at all.

States already spend $900 million each year to subsidize the medical costs of the 200,000 people currently enrolled in high risk pools. That’s $9 billion over ten years. If the current $9 billion subsidizes just 200,000 people, then an additional $25 billion might allow these small programs to add another 600,000 or so people to the rolls–if that many new folks could afford the premium. That would mean covering 800,000 people in total. Out of 45 million uninsured.

And if we needed to use some of the new money to make those premiums more affordable, or improve the benefits (for example, eliminate annual and lifetime limits), then even fewer people would be covered by this investment.

Everyone else would still get sick, have no insurance, end up in the hospital, and the rest of us would pay the price. Just like today. After decades of experience, we already know that funneling some sick people into high risk pools has not resulted in lower costs for the rest of the people in those states. Insurance premiums keep climbing. Inexorably. And often in huge leaps (39% last month for hundreds of thousands of Californians).

That’s why there’s been so much discussion about the need for a system that encourages and supports personal responsibility–everyone can afford to buy in (thanks to the steep discounts in the current Congressional proposals) and eventually everyone must buy in. Only if everyone is “in” do we all finally see some cost relief. Proposals now under consideration already include a temporary high risk pool system designed to get insurance immediately to those most in need, while we set up that more comprehensive framework. That just makes a lot more sense.

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