DEADPOOL: Shorter Paul Ryan to Cancer Patients: Die Quickly

Sorry, that's really the only headline which came to mind when I read this story:

Ryan wants to end Obamacare cost protections for sick consumers

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 Care Act also bars insurers from excluding coverage for pre-existing conditions.

The magic solution to the problem, according to Ryan and the GOP, is "high risk pools", which simply means separating out the sickest, most expensive people in the country and dumping them into a separate program.

With the "bad apples" (ie, human beings with terrible medical problems) safely tucked out of the way, the average cost of treating everyone else supposedly suddenly becomes less pricey.

This is the exact opposite of the entire point of health insurance in the first place...spreading the risk. In addition, as Jean P. Hall notes in this Commonwealth Fund analysis, it doesn't actually save anyone a dime, because:

In fact, the risk pools are suggested as a viable alternative to the ACA's ban on preexisting condition exclusions in the individual market and the marketplaces. My recent analysis of high-risk pools, however, explains why these entities simply are not a realistic alternative to coverage requirements under the ACA. In a nutshell, high-risk pools:

  • are prohibitively expensive to administer,
  • are prohibitively expensive for consumers to purchase, and
  • offer much less than optimal coverage, often with annual and lifetime limits, coverage gaps, and very high premiums and deductibles.

Recent proposals to replace ACA reforms with high-risk pools focus on using state-based programs, but historical experience with 35 state-based high-risk pools and more recent experience with the national Pre-Existing Condition Insurance Plan (PCIP) illustrate the problems with this approach. Even though state-based high-risk pools charged premiums of up to 250 percent of those charged to healthy beneficiaries in the individual insurance market, premium revenues paid just 53 percent, on average, of program costs. In addition to these high premiums, enrollees in state-based high-risk pools faced annual deductibles as high as $25,000 and annual coverage limits as low as $75,000. Past research indicated that high costs and limited benefits associated with high-risk pool coverage resulted in delayed or forgone care and adverse outcomes for enrollees. Many also accrued medical debt despite having insurance.

For these reasons, use of high-risk pools in lieu of marketplace and Medicaid expansion coverage would result in greater state and federal costs, fewer people with preexisting conditions able to obtain coverage, and coverage that fails to meet the often greater needs of people with chronic conditions.

The math behind this isn't really that complicated when you think about it. Here's a simplified version of what a false "solution" this is:

Let's suppose you currently have a risk pool of exactly 1,000 people, all of whom are covered via ACA exchange policies, paying an average of $300/month in premiums and $200/month in deductibles/co-pays/etc. That's $500,000 per month. Let's further suppose that the insurance carrier is precisely breaking even on this arrangement, paying out exactly $500K/month in claims.

However, let's say that just 50 of those people (5%) are accounting for 50% of the expenses (pre-existing conditions...cancer, diabetes, whatever). That's $250K/month in claims for just 50 people.

If you separate those folks out, the other 950 people now only have to come up with $250K/month for the carrier to break even, or just $263/month for premiums + deductibles combined...their costs just got slashed nearly in half!! HOORAY!!

Except...that the other 50 people have been shunted over to a High Risk Pool. Their total cost of treatment is around $5,000 per month apiece, or $60,000/year.

Now, the government presumably is heavily subsidizing these folks, but assuming the numbers in Ms. Hall's analysis are accurate, those 50 people would still be paying around $660/month in premiums while also having to pay an average of $2,000/month in dedutibles. The government subsidies apparently only cover around 48% of their cost, leaving them with a $2,600/month bill to pay, for crappy coverage with minimal caps. In other words, they've been very much thrown under the bus and are now screwed.

But wait, there's more! Remember, the other $2,400/month hasn't magically disappeared; that's being picked up by "the government"...aka, "the taxpayers"...aka, those same 950 people who are now saving $237/month are still paying at least some of that in the form of higher taxes.

In addition, the High Risk Pool program itself is a whole new agency which requires operational expenses/other overhead, so that increases the costs more. On top of that, repealing the ACA also means removing the 80/20 MLR cap on the carriers, which means they can go back to jacking up their premiums pretty much however much they like in many states, completely negating the whole point of the "High Risk Pool" program in the first place. Those 950 people would be back to paying $500/month or more in no time flat.

To his "credit", Ryan is actually taking a cue from Democrat Alan Grayson's description of the Republican healthcare plan from back in 2009:

Harold Pollack put it far more succinctly for the Twitter age:

@charlesornstein @LenMNichols @Reuters_Health high risk pools are among the very worst ideas in health policy.

— Harold Pollack (@haroldpollack) April 28, 2016