qotd: Paul Ryan does not seem to understand high-risk pools

Reuters

April 27, 2016

Ryan wants to end Obamacare cost protections for sick consumers

By David Morgan

U.S. House of Representatives Speaker Paul Ryan called on Wednesday for an end to Obamacare's financial protections for people with serious medical conditions, saying these consumers should be placed in state high-risk pools.

In election-year remarks that could shed light on an expected Republican healthcare alternative, Ryan said existing federal policy that prevents insurers from charging sick people higher rates for health coverage has raised costs for healthy consumers while undermining choice and competition.

The rule, a cornerstone of President Barack Obama's Affordable Care Act, has been praised by patient advocates for providing access to medical care for people who previously could not afford private health insurance. The Affordable Car e Act also bars insurers from excluding coverage for pre-existing conditions.

"Less than 10 percent of people under 65 are what we call people with pre-existing conditions, who are really kind of uninsurable," Ryan, a Wisconsin Republican, told a student audience at Georgetown University.

"Let's fund risk pools at the state level to subsidize their coverage, so that they can get affordable coverage," he said. "You dramatically lower the price for everybody else. You make health insurance so much more affordable, so much more competitive and open up competition."

High-risk pools, which existed before the healthcare law, are state-level entities that guarantee coverage for people with health problems. Analysts say they can be prohibitively expensive and offer less than optimal health coverage.

http://www.reuters.com/article/us-usa-health-ryan-idUSKCN0XP00C

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Comment by Don McCanne

House Speaker Paul Ryan has promised to produce the Republican alternative to the Affordable car Act, likely before the Republican convention in July. In his comments at Georgetown University yesterday he discussed what would be the most important policy supposedly designed to control health care spending for the vast majority of Americans: Establish state level risk pools for the 10 percent of people with the greatest health care needs. Let's see what that means.

The top 10 percent of individuals in spending account for 65 percent of health care costs. By removing them from the standard insurance pools that means that the other 90 percent would have to pay insurance premiums that funded only 35 percent of total health care. Ryan says that this would lower insurance premiums through competition, but that is nonsense. Premiums would be much lower because two-thirds of health care costs are pulled out of the insurance plans in the marketplace. Surely most Americans would be happy with private insurance premiums that were one-third of what they would be if everyone were included. It would be a very popular program, and the Republicans would take credit for it.

But what about the 10 percent of people who account for two-thirds of our health care costs. Their premiums would have to be about 7 times what the premium would be if everyone were covered under a common risk pool, or about 20 times what everyone else is paying. As Paul Ryan says, they are "really kind of uninsurable." So he proposes high-risk pools at the state level, with subsidized premiums. Expecting the states to subsidize two-thirds of our health care costs is a non-starter. Without massive increases in taxes, which are opposed by the Republicans anyway, the states would not be able to fund those pools.

We already have considerable experience with state high-risk pools. In recent decades, thirty-five states established such pools, and overall they were a spectacular failure. Also, the Affordable Care Act authorized temporary Pre-Existing Condition Insurance Plans (PCIP) which were also high-risk pools. These plans proved to be prohibitively expensive to administer, prohibitively expensive for consumers to purchase, and offered much less than optimal coverage, often with annual and lifetime limits, coverage gaps, and very high premiums and deductibles.

It is so obvious on the face of it. Most of us might be happy with our low premiums, but we would be very unhappy with the massive increases in regressive state taxes that would be enacted to pay for this. Vermont's reform effort failed once the tax consequences were recognized, and that wasn't even for high-risk pools.

As I wrote in a previous Quote of the Day, "With a single payer system this problem disappears. Funding is based on ability to pay, through the tax system, and not on the basis of anticipated medical expenses. Everyone receives the care they need, regardless of their health status. The fragmented plans supported by the repeal and replace people cannot do that."