• The trouble with high risk pools as a “conservative alternative”

    A little lost amid the din of President Obama’s administrative fix was an op-ed by Ramesh Ponnuru and Yuval Levin setting forward a “conservative alternative” to Obamacare.

    [A] tax break would also be available—ideally as a refundable credit sufficient at least for the purchase of catastrophic coverage—to people who do not have access to employer coverage. This would enable people who now choose not to buy insurance to get catastrophic coverage with no premium costs. It also would give those who want more-comprehensive coverage in the individual market the same advantage that people with employer plans get. […]

    All those with continuous coverage, which everyone could afford thanks to the new tax treatment, would be protected from price spikes or plan cancellations if they got sick. This guarantee would provide a strong incentive to buy coverage, without the coercion of the individual mandate. People who have pre-existing conditions when the new rules take effect would be able to buy coverage through subsidized, high-risk pools.

    I’m unimpressed by hand-waving in the general direction of high-risk pools. The pools seem to be a necessary complement to reform plans built around catastrophic coverage—what good are high-deductible plans to those whose health needs require frequent episodes of care?—but such proposals rarely grapple with the problems that high-risk pools pose for their beneficiaries, the people who arguably need the most financial assistance with—and protection from—high health care costs.

    High risk pools aren’t new: they existed in 35 states prior to reform, and suffered from being underfunded and under-inclusive. That is, they cover too few people, and the people they do cover face high cost burdens. As Austin previously wrote:

    The main limitations to greater enrollment were enrollment caps and affordability. These are really two symptoms of the same thing: low levels of funding. Some states capped enrollment due to limitations of funding. And premium subsidies were, of course, subject to funding limitations.

    We estimated that high-risk pool premiums were above 25% of family income for 29% of the medically uninsurable population. That is, even when high-risk pool enrollment was possible, for a large minority of medically uninsurable individuals, it was unaffordable. We simulated the effect of lowering high-risk pool premiums to 125% of the individual market rate and found that doing so would increase enrollment by 33%.

    To overcome these issues, the pools would need to be incredibly well-funded—conservative health policy scholar James Capretta estimated that adequate funding would be on the scale of $15-20 billion a year to cover 4 million individuals. Remember that back in the real world, the GOP quashed a bill for $4 billion in  one-time high risk pool stopgap funding earlier this year.

    In the context of Ponnuru and Levin’s plan, high risk pool funding is in addition to their proposed tax credits, which would be sufficient  for individuals without employer-sponsored coverage to purchase catastrophic plans. Ponnuru and Levin argue that their plan is cheaper and would offer more coverage than the ACA, but the column is fuzzy on details, like the Capretta “repeal and replace” proposal it seems to be patterned on. It would be helpful if they had actually defined what a “catastrophic” plan might entail, for example, so it’s difficult to assess how the costs of this proposal would stack up against the ACA. How much different from a bronze plan would their model HDHP really look? Which benefits, specifically, are “wasteful” after a $6,000 deductible?

    Perhaps my reading of the op-ed is too careful, but it also seems to suggest that high-risk pools would only be available to those with pre-existing conditions at the time of reform. Where does that leave individuals who develop health issues that a catastrophic plan isn’t equipped to handle? The authors suggest that people who desire more generous benefits could purchase additional coverage to supplement catastrophic basics.  Okay, great—except the people who seek supplementary insurance would likely be high-utilizers, “bad risks” who are expensive to insure. That would drive up the costs of that coverage through the same adverse selection mechanism that fuels current fear of “death spirals” if exchange enrollees skew too old and sick.

    This is why the AEI-sponsored plan shines where other conservative reform efforts fall short. People on both sides of the aisle plenty to find fault with—the left will take exception to risk-rating individuals, while the right is likely to perceive the plan as being too reminiscent of Obamacare (Austin and Harold debated the plan’s merits a few month ago). But the AEI plan doesn’t stratify insurance based on whether or not you need it, and it provides additional subsidies to those who require more generous coverage. My issues with the AEI proposal are more pragmatic than ideological—it relies on consumers maintaining long-term coverage contracts, and insurers’ ability to accurately underwrite individuals over those long stretches. And medical underwriting itself is not frictionless; it poses a greater administrative burden than community rating. Still, the proposal deserves more discussion than it’s sparked so far.

    High risk pools may not be totally unworkable, but they pose concerns—possibly more concerns than they allay. It’s hard to seriously weigh any “conservative alternative” that glosses over their troubles.

    Adrianna (@onceuponA)

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    • Maybe the problems regarding high risk pools is the perception of what high risk pools are supposed to do and what they actually cost. I think you are basing the costs on an estimate made by some with some question as to how those costs are derived and how those costs need to be funded. Additionally I think many believe high risk pools should be similar to prepaid care which is a fallacy. Admittedly, high risk pools aren’t perfect, but what is? The ACA solution only enrolled just slightly over 100,000 uninsurable people while disenfranchising millions that presently wish to keep their insurance and physicians? I think it would have been easier and more cost effective to give cash to the 100,000+ people based upon need.

      The ACA has solved no problems, for if the number is correct the $15-20 billion has to be paid one way or another. But that type of problem need not perpetuate itself if our system of insurance made the determination of insurability a one time event. There are many ways of doing that.

      • It’s not really accurate or useful to say it’s enrolled “only” 100,000 while causing “millions” to lose their insurance. Enrollment is ongoing, and the early number is meaningless.

        • David, insuring the uninsurable was one of the first programs of the ACA that was implemented. It has been going on for a long time and those that are uninsurable and want insurance don’t wait years. I think your premise is entirely wrong.

          • Enrollment is ongoing. Every day the number who have enrolled increases. That process is going to continue throughout the open enrollment period. The total number enrolled in March 2014 matters, while the number who enrolled just in October is irrelevant.

            (The website troubles make the October enrollment numbers even less meaningful.)

      • You are missing the kind of patient that High risk pools are aimed at. People who have chronic, expensive, and long term care and are underestimating their number and expense.

        A typical example is Multiple Sclerosis. There are no known lifestyle risks for the condition so there isn’t any moral hazard to covering it. It causes gradual paralysis but it doesn’t kill. This process of paralysis can be slowed or even halted with treatment allowing people to live a normal life, but that treatment is very expensive. There are MRI’s (to track brain scarring,) an MS patient will tend to get several over their lifetime. ($$$) There are visits to neurologists and specialists. ($$$) Not to mention the cost of the drugs themselves. All MS drugs are treatments, not cures so an MS patient will be taking them every month for the rest of their lives. The drugs cost 1000’s of dollars a month. Gilenya will set you back 5700$ a month. Rebif, 4,000$. Avonex 4,000$ and this is common. (They used to be cheaper 3000$ but the introduction of Gilenya at 6,000$ caused the other manufacturers to raise their prices. Free market, meet patent monopoly.)

        If they are diagnosed at 32 and live to be 62 (not at all unlikely) and are taking Rebif, they will cost the insurance company 12 months x 4000$ x 30 years = 1,440,000 dollars. No insurance company wants to touch that, this isn’t a risk, it’s a guaranteed money sink. If health insurance was just like car or home insurance, an MS patient would be committing fraud everytime they tried to get insurance.

        But the subject was high risk pools. There are 400,000 MS patients in the country, let’s say half of them are on treatment so 200,000. Let’s say they take their drugs and pay a 600$ copay per month (what medicare patients pay for MS drugs now). How much would it cost to put these people in a high risk pool for a year?

        That’s 200,000 people x 12 months x (4000 dollars – 600 copay) = 8,160,000,000. That’s 8 billion dollars for one chronic disease for one year. .

        So in conclusion, there are a lot more people who need high risk pools than you think, and it would be vastly more expensive than you seem to believe.

        (Or we could just do what other countries do, which is buy the MS drugs in negotiated bulk purchases for a quarter of the price, but that would involve the government bullying drug companies. Can’t have that.)

        • Matthew, I don’t have the slightest idea what your point is or what you think I am missing. I know full well the costs of some diseases including MS. I also know how many of the uninsurable have signed up under the ACA. Insuring the uninsurable was a major selling point of the ACA and very few disagree with the idea that we have to do something to either help the uninsurable or prevent uninsurability. At least a month or so ago the number of uninsurable that the ACA took care of was about 107,000. The number of people threatened with loss of insurance is in the millions and the number of people that will lose their present insurance and physicians is in the tens of millions.

          Matthew, MS does kill and when it does it appears on the death certificate. The immediate cause might be something like pneumonia and the following line will list MS as the underlying cause. You talk about multiple MRI’s, but MRI’s do not cure, they only diagnose. MS patients can strive for a normal life, but generally it is not normal once the disease has progressed for they gradually become more and more disabled. There is no guarantee in the ACA that refib or any of the other medications used to control the progression of MS will be paid for everyone. In general the treatments aren’t that great and they lack sufficient scientific proof of efficacy though empirically they seem to offer benefit for some of those with MS.

          What makes you think other countries provide refib so easily? There are guidelines for the use of refib and the other medications. Guidelines are not just used for letting the physician know how to treat a patient. They are also used to ration expensive care.

          • “Insuring the uninsurable was a major selling point of the ACA and very few disagree with the idea that we have to do something to either help the uninsurable or prevent uninsurability.”

            So what are good ways to accomplish helping the uninsurable or preventing uninsurability?

            • “So what are good ways to accomplish helping the uninsurable or preventing uninsurability?”

              This leads to a longer discussion than permitted on the blog so let me make it brief.

              1)Though auto insurance is mandatory in many states 15% of them still don’t have auto insurance. That is approximately the same number as those not carrying health insurance.
              2)Self interest drives people to carry insurance
              3)A definition of who we are trying to help is needed. By my definition prior to 2008 maybe 8-10 million people requiring.
              a) changing the laws
              b) partial subsidization
              c) full subsidization
              4)The uninsured that require no assistance may not actually cost the taxpayer any more money than the insured. Many uninsured pay much higher fees than the insured and many insured don’t pay their full fee or are underinsured.
              5)Insurance can prevent uninsurability
              6)Changes in the laws can prevent uninsurability
              7)One of John Goodman’s plans
              8)Subsidies that do not substantially alter the market place. They occur as direct subsidies or in special pools that are in many states.

              This is off the top of my head and limited in scope intentionally and I believe there are many innovations possible.

          • Oh, Emily,

            First, it’s Rebif not refib. What I meant by MS doesn’t kill was in the actuarial sense. A person with MS will have their lifespan shortened by about 7 years, so if you get diagnosed at 22, you’ll probably still live well into your 50’s or 60’s. Compare this with other expensive conditions like various cancers. Those tend to be discovered and then kill the patient within the next few years and thus they cost the insurance company less.

            The thing about MS is that most countries are pretty generous about it. Are your eyes tracking funny and there’s nothing wrong according to the optometrist? Do you have weakness in the hands? Doctors in France or Japan or Taiwan will ask the same questions that you get in America. Then you’ll get an MRI, for cheap.

            If you have lesions on the brain and one of the other physical symptoms, the doctors will stamp “MS” and issue the drugs. But because their government insurers (unlike medicare) are allowed to negotiate on price with the drug companies the drugs cost the insurer about a third or a fourth as much.

            • Oh Matthew,

              You are right. I started writing it the wrong way and continued. Freud would probably say I latched onto Refib instead of Rebif because of the ‘fib’ contained in Refib instead of the correct Rebif. I thought you were terribly inaccurate and fib was closest to it. I still think that is true.

              “What I meant by MS doesn’t kill was in the actuarial sense.”

              How is it in the actuarial sense? MS is the killer for the person with MS wouldn’t have died of pneumonia at that time and fashion if it weren’t for MS. You must work in a neurologist’s office. That doesn’t make you a neurologist.

              Not paying for something doesn’t mean that the resources aren’t being used and in economic terms that is very important.

              Answer to the question that wasn’t asked, but should have been asked. I leave you with the answers and you can figure out the question.

              Investors invest where they thing the profit and risk make sense. I billion dollars to create a drug in the US market is a lot of money. Decrease profit and they move their money elsewhere and drugs that are needed are never created.

              Once a company knows that it has met its costs any profit above marginal costs is profit.

          • Emily, I don’t work in a neurologist’s office, but my point about the actuarial sense was that the time horizon for MS is different.

            When a house is insured against fire, it burns down once and the insurance is paid out and the market works.

            If there was a kind of house that would be perpetually burning for the next 20 years, requiring continuous infusions of cash to protect the family inside and rebuild, then that house wouldn’t be insured, There is no profitable way to insure it. But with medicine, there are lots of people with such situations and there has to be way to deal with it.

            For someone with MS, they are placed in a terrible position. They have to either get paralyzed or ask for care that they can’t pay for. If they are lucky, they get diagnosed after they are already in the workforce and thus have existing insurance. If, however, they are unlucky and get diagnosed in college than they have to choose to go untreated or commit insurance fraud by getting a faulty piece of equipment (their bodies) insured.

            Unfortunately, they can’t trade it in and get a new one. This is what’s called a “market distortion.”

            When I did my calculations, I unilaterally cut out half of the 400,000 population to cover the ones who are “cheap.” Whether or not they are insured under employer based insurance is less relevant. Any work based insurance for an MS patient is ephermal since the disease will probably render them unable to keep working after a few years.

            I can do your research for you. Hong Kong recently subsidized interferons for all residents of Hong Kong. If you have MS and have a Hong Kong ID, your drugs cost 25 dollars a month. In Taiwan, they are free. Most countries in Europe also give out the drugs for free.

            I have no doubt that the fact that MS drugs are priced like unicorn blood is the reason that there are so many on the market, but here’s the thing. They have really high margins. They aren’t losing money when they sell the drugs to Europe at 2000$ a pop instead of 6000, they just have 100 dollars of profit as opposed to 4000.

            Finally, MS patients are outliers, but they are ones that force society to ask itself questions about how much healthcare people in the society should get and what they should have to pay for it. It’s an act of God disease, so no moral hazard, but it’s also very expensive and there isn’t a chance of recovery.

            In a society where they believe that everyone has a right to healthcare, it’s not a big problem since no one sees anything wrong with paying for other people’s care. In the US, we like to pretend that everyone had a chance to decide whether or not to get insurance, but that’s not the case. People get diagnosed as children with parents who have no insurance, people get diagnosed before they enter the workforce.

            Our society has decided that we don’t want people dying in the streets so we made ER’s open to all, but even that minimum guarantee is not funded adequately. The idea that there would be public support for a program that handed 50,000$ of medical treatment every year for decades to an unemployed MS patient is laughable. High risk pools, by definition, concentrate those who are too sick to be able to work and then asks the public to pay for them specifically. These patients are too small to be electorally important, and they can’t offer politicians other forms of support. That means that even those high risk pools that are started with the best of intentions are always going to do die a slow death of a thousand legislative cuts because they are an isolated line item not connected to anything else. By contrast, the majority healthy people like insurance and have a stake in it working. Integrating the uninsurables into that system means that they won’t be left behind.

        • And what percentage of those 200,000 are covered by Medicaid or Medicare (or even possibly through an employer plan)? As for patent monopoly, most free market advocates would agree with reforming THAT system. (Instead Obamacare started with appeasing Big Pharma.)

    • what good are high-deductible plans to those whose health needs require frequent episodes of care?

      Many people can afford to spend $10,000+ each year on healthcare on top of there premiums so I would say plenty.

      $15-20 billion a year to cover 4 million individuals

      Unless my math is wrong that is only $5,000 per individual.

      • “Many people can afford to spend $10,000+ each year on healthcare on top of there premiums so I would say plenty.”

        What percent of people requiring frequent episodes of care can afford to spend $10,000+ each year?

        • I don’t have a source readily available, but about 75% of people in the top half of spenders stay there from one year to the next. That’s about 120 million people who spend at least 70% of our collective health care. Something like a quarter of people in the top percent of spenders stay there from one year to the next. That’s about 3 million people who spend $100,000 or more each year.

          • That calculation is exactly what torpedoes a couple of right wing talking points. Older people who had good individual insurance are seeing multi-thousand dollar premium hikes under the ACA. “Why do I have to pay for maternity coverage when I can’t get pregnant, and why is it so expensive? I shouldn’t have to pay for it,” they complain. But it’s not maternity that’s costing the big bucks, but the expensive people with MS and other pre-existing conditions, who couldn’t buy insurance at any cost, and now can.

            And then, if you take a look at Avik Roy’s Manhattan Institute study,

            http://www.forbes.com/sites/theapothecary/2013/11/04/49-state-analysis-obamacare-to-increase-individual-market-premiums-by-avg-of-41-subsidies-flow-to-elderly/

            that says premiums are going up an average of 41% under the ACA, you might wonder, as I did, how the average premium for the current situation is calculated, in a world where some people can’t buy insurance at any price. If you look at their methodology, you discover that they blandly assume that people denied insurance could have bought it at only three times the healthy-person rate. So they’re assuming that unhealthy people cost merely three times what healthy people cost. They don’t justify this assumption, but it’s the basis for the entire claim about premium rise, and the assumption seems unsupportable.

            • Wow. I hadn’t dug into the methodology of that study before now, and I’m glad I didn’t after that revelation. My opinion of Avik Roy and his statistical chops at this point is almost as low as it can go.

    • I finally looked through the AEI proposal – it’s laughable politically. I agree that it has some merits, but it includes things like insurance exchanges that look a lot like the ACA, means tested subsidies, and a $300 billion tax increase to pay for basic universal health insurance. There is no way that this would ever pass today’s congress.

      As far as high risk pools, I think that they provide a convenient way to say “we’re not just throwing the chronically sick under the bus”, but they only look affordable if you underfund them. At least AEI was honest, they state several times that their plan hits the “wealthy sick” the hardest.

    • What is the point of conservative health care proposals except for indicating complete subscription to the ideology of markets in healthcare. Emily, for example: what evidence do we have to believe that catastrophic coverage would work better and control costs better than the government run programs in literally every single other developed countries?

      • Simon, what evidence do you have ” to believe that catastrophic coverage would” not work better? You really don’t have good evidence. You have opinion. You have evidence that conflicts, but solid evidence is lacking. You also have a ton of misreported data out there.

        Where have the major advances been made? The market place.
        What countries have progressed to believe that catastrophic coverage would work better the furthest? Those with free markets.
        Can the US government build better and less expensive computers for the American family than the free market? No
        Look at the ACA website whose development was controlled by politicians and bureaucrats. Failure

        I’m not saying government doesn’t have a place in health care. I believe it does, but whatever its place is it should attempt the least bit of interference in the market place of health care.

        We need that intervention where health care is unaffordable to a group of people which includes the uninsurable.

      • I agree with you Simon

    • High risk pools ARE totally unworkable. Nathaniel Hendren showed why this happens in a study released last year. The problem is that sick people can predict better than anyone else how much money they will spend on health care, so that gives them the ability to assess whether spending $X on an insurance policy is a good deal or not. Your care costs $20,000 but the insurance will cap your total bill at $18,000? Sign me up, Scotty! Your care costs $15,000 but the insurance will cap your bill at $30,000? Whoa, nelly! In short, there’s no way to make a voluntary insurance plan for a sick person actuarially sound.

      http://www.slate.com/articles/business/the_dismal_science/2012/03/pre_existing_conditions_the_real_reason_insurers_won_t_cover_people_who_are_already_sick_.html

      • ,,,which is one of the many reasons that “insurance” is a fundamentally wrong mechanism for paying for most health care.

      • Mike, the idea of high risk pools is or should be to get the people out of those pools as soon as those people can stand on their own two feet. Members of high risk pools should be subsidized, not completely cared for, unless that is what is totally necessary. One doesn’t necessarily use caps for an individual patient.

        By the way caps are used in other western nations so that when the money runs out patients stop being treated until the following year when the money flow begins again.

        • Emily, to continue the conversation about MS. Do you know when MS patients come out of a high risk pool? When they die.

          Otherwise, they are going to be in the high risk pools for decades and no amount of capping or nudges is going to force them out., because the condition is incurable.

          Second, you also blindly assert that in other single payer nations, treatment for chronic diseases stops once the annual budget is used up, some citation on that would be nice.

          • “no amount of capping or nudges is going to force them out”

            So? Have you added into your equation all those MS patients that have standard insurance? Have you added in all those MS patients that don’t cost that much money?

            You are dealing with outliers and we should deal with them, but they need help of a different kind than the other 300 million Americans.

            “blindly assert that in other single payer nations, treatment for chronic diseases stops once the annual budget is used up, some citation on that would be nice.”

            You want people to do your work for you. This is a well known fact that you can research on your own.

    • It seems odd that people complaining that the ACA is a “government takeover” of healthcare, advocate for the “high risk pools” –another government program. And should the government underfund the high risk pools, the people depending on them will find themselves unable to find a doctor who will treat them for what the risk pool will pay or will be left out of the pool altogether.

      Their replacement of the “coercion” of the individual mandate with a “tax credit” usable for only health insurance purchase is totally cosmetic: in either case those who aren’t poor pay higher taxes if they go without health insurance.

      Furthermore, it is hard to see how the relatively high deductible plans allowed by Obamacare eliminate consumers incentive to shop for medical care.

    • Matthew hits the golf ball on the nose with his comments on uncontrolled drug prices as a driver of high risk costs.

      We would need at least $40 billion a year for high risk pools, not the lower number from Capretta that I do not understand.

      High risk persons are not a voting bloc in any way, so legislators have almost never approved much money for them. This is true even in liberal states, where legislators were loath to touch the general fund and resorted to budget gimmicks.

      • When making statements using public funds one must consider the tradeoffs. When privately making statements about one’s own checkbook prudent persons consider the tradeoffs.

    • Just for the actuarial heck of it:

      picture a pre-ACA plan in a red state with no regulation on insurance underwriting.

      This plan had 1,000 healthy persons paying $2,000 each per year for insurance.

      Now add in 100 high risk persons who use $12,000 of health care a year on average.

      The resulting base premium for 1,100 people will go from 2000 a year to about $2,900 a year — a 45% increase.

      It seems to be kind of a name your poison issue — either we raise premiums on everyone who buys this plan, or we let the government try to run high risk pools — which results in slightly higher taxes.

      If the choice is that stark — either $1000 a year to the insurance buyers (who run for the hills to new plans in a death spiral), or $100 a year in new taxes on everyone, including wealthy seniors and corporate execs,
      I have to vote for federal funding of risk pools.

      • The problem with federal funding of risk pools is that they will be underfunded and the government in the US has been told by congress repeatedly that they aren’t allowed to use their monopoly position to bargain for cheaper drug prices. (Which is what every other government in the world does.) Insurance companies can do that so putting high risk peoples into insurance will make them cheaper.

        Furthermore, it’s an issue of what’s fair. Imagine a game of blackjack with two tables. One table (table A) has the private insurers and the government sitting down. Each hand is one patient. The other table (table B) just has the government sitting by itself, watching the hands be dealt.

        At table A, the hands that look likely to win are snapped up by the private insurers, meanwhile the hands that come out that are likely to bust or already busted, are ignored and the government is obliged to play them. So after a couple rounds, the private insurers are making bank because they can choose what hands they want to play, while the government (or the taxpayer to be specific) is hemorrhaging cash, because they are only allowed to play the sick, the old, and the poor. Table A is the insured market pre ACA.

        At Table B, the uninsured market. The government just watches the hands be dealt. If a hand wins, nothing happens. If a hand loses, then the government has to pay to cover it. Table B is the uninsured market.

        What the ACA tries to do is two things. 1) tell the private insurers at Table A that if they want to keep making money by playing the good hands, they also have to play some of the bad ones, they can’t just fob them off on the public. 2) shrink the size of Table B by moving more people into the insured market (Table A.)

        High risk pools are the equivalent of leaving the system as is and just giving the government at table B a fat wad of cash and yelling “I hope it’s enough.”

        It’s better to tell the companies that are reaping the gains from insuring the healthy and low risk, that they also have to take on some of the liabilities of covering the high risk, rather than letting the burden fall entirely on the public.

    • This article is a balanced discussion of our ongoing healthcare debate. I have been a primary care physician and owner of a primary care practice for 30 years. As such I understand the delivery of healthcare as well as the complexities of purchasing and using healthcare products for myself and my employees. Your insightful yet complex article underscores how difficult it is for professionals to decide upon a rational plan for reform. These discussions vastly overestimate the ability of an average American to decide what is the best value and most strategic healthcare product for their future needs.
      This is the Achilles’ heel of he currently debated options for healthcare reform. I can’t go into Walmart and pick the best value paper towel for my family. Try this some time after you read or write your next article on healthcare reform.

    • Matthew, I liked your comments but disagree with your last paragraph above……where you say that insurance companies should take on the liability for sick persons.

      The trouble is that insurers in the end will pass on that liability to policy holders. Insurance company profits are not enough by themselves to cover all of the sick.

      • Bob, in a normal single payer system, the gains that come from insuring the healthy are folded directly back into insuring the sick. In our private system, the gains that come from insuring the healthy are skimmed off by the private insurers in the form of profits and the excess of logistics that they require (How much money could hospitals save if they didn’t have to have a “billing department” with dozens of people.) It’s the fact that they have medical loss ratios of 80% -85% when the standard for insurers around the world, public or private is 90%+

        That money is taken out of the system, and the country hasn’t decided on a good way to cover the shortfall for the sick. We already subsidize the insurers by taking on the patients they don’t want. Old people aren’t profitable? No problem, we’ll just put them on the public purse via medicare. Poor people not good actuarial bets, Don’t worry, John Q. taxpayer will cover them via Medicaid. Wait there are some people who are sick enough to be guaranteed losing bets? Oh, you poor dears. We’ll just go ask the public to finance some nice high risk pools.

    • Emily. Answer this simple question. Should those with chronic conditions pay significantly more out of pocket than their healthy peers?

      All your evasiveness is deflecting from the answer to this very simple question.

    • Matthew you are on the right track but the dollars may fall short.

      You suggest that insurers be held to 90+ ‘loss ratios’, and this would free up money to help the uninsured.

      Close to half of American workers are in self funded plans. I see no way of recapturing money from these plans.

      Meanwhile, the administration is having one heck of a time collecting $63 per insured from all other plans for the ACA reinsurance pool. Union plans have already been forgiven this puny tax.

      But thanks, I will think more on what you said.

    • Matthew,your last post on MS sufferers was terrific.

      You raise the same issue I have been raising for years — i.e. of course these people have health problems, but their problems do not cause a $50,000 annual claim in any other advanced nation.

      Americans expend tremendous energy in trying to find insurance for people who cost $50,000 per year.

      What we do not do as a nation is to analyze whether they really should cost this much at all.

      send me any writing at bob.hertz@frontiernet.net

      thanks

    • Adrianna, I left the following reply over and over again to Matthew yet it has not been posted. It is factual, responsive and not repetitive. It adds certain principles while replying to a subject that you posted. I don’t know why this hasn’t been posted.

      I will deal only with the principles involved:

      @Matthew: “the time horizon for MS is different.”

      We know the timeline horizon possibilities of MS and we know its frequency. It is a rare occurrence so insuring for MS is actuarially an uncomplicated problem. One doesn’t insure for the house after the fire nor does one insure for MS after the disease hits.

      “There is no profitable way to insure it.”

      There is no profitable way of insuring anything if the insuring is done after the fact.

      Your question regarding drug pricing.

      Investors invest where they see the best profit/risk scenario. If the profit/risk scenario falls they migrate their investments to other sectors of the economy and then no research for new MS drugs is undertaken.

      Costs of uninsured:

      There is a wide divergence of opinion as to how much the uninsured actually cost society. That is because the data used to create the numbers is different.

      1)The use of hospital losses data creates losses that never existed in the first place since their average receipt for the same service is frequently a lot lower. (Hospitals jack up their prices to the uninsured. I have seen multiples of up to 10 -20 times what the insured actually pays.

      2)It is not a taxpayer loss if the taxpayer’s choice is between paying for the insurance or the care. The latter is likely considerably less expensive.

      3)Frequently the uninsured being billed at higher rates end up putting more into the system than the insured.

      4)The insured frequently don’t pay their part of the bill. a)deductible b)copay c)underinsured (occurs even on Medicare)

      When we add up the true expenses of the uninsured the number is quite low and could even be a bit positive if based upon how the numbers are calculated.

      Should we strive for universal insurance coverage? Yes. Will we get there in the near future? I doubt it. Can the government intervene to help those in need. My opinion, yes, but it is best performed with the least interference of the market place.

    • Thanks for your thoughtful comments Emily. For years
      certain liberals have been asserting that the uninsured really cost
      each of us $1000 in our health premiums, so we would actually save
      money by insuring them. I never liked this reasoning. It assumed
      that if everyone was insured, then hospitals and doctors would
      automatically reduce their fees, which would be one ,miracle, and
      then insurance companies would see those fee reductions and
      automatically reduce their premiums — which is a second miracle.
      My own reform plan (in a book and several articles) would allow
      anyone to remain uninsured. Those who were uninsured would pay a
      small extra income tax. That tax money would be funneled to
      Medicare, which would pay catastrophic bills at Medicare rates for
      those uninsured persons. My program works best for episodic care
      like falling off a roof. My program does have a problem with the
      diseases discussed here that cost $40-$50K every year. For that
      group I also advocate first of all some price controls on expensive
      drugs with no substitutes. That will shrink the $40-$50K annual
      costs in many situations. Bob Hertz, The Health Care
      Crusade