• High-Risk Pools and Health Reform

    High-risk pools have received brief mention in the media lately. They were included in a bipartisan nod by Obama and are part of the Senate Finance Committee’s transitional plan toward universal coverage. Having participated in a study on high-risk pools and published a paper on it (Health Care Financing Review, Winter 2004-2005, with Steve Pizer and Marian Wrobel), I know a bit about them.

    Scott Hensley of NPR explains that that under the Senate Finance Committee’s plan, until 2013 insurance companies could still deny coverage based on pre-existing conditions. Individuals uninsured for six months for this reason would be eligible for coverage through state high-risk pools, which would be subsidized with $5 billion in federal funding. This is a transitional measure, and by 2013 pre-existing exclusion restrictions would be illegal. My interpretation of language in the Chairman’s Mark (bottom of page 2) is that plan premiums would be subsidized so that participants paid no more than a healthy individual would.

    At least in concept, if not in detail, this is a sensible plan. First, outlawing pre-existing exclusion restrictions is the right thing to do. But it can’t be done overnight. It will take time to implement this and other insurance reforms and to allow for the individual insurance market and exchanges to develop. Therefore, it is sensible to provide some transitional assistance for individuals who are in desperate need of health insurance coverage but who cannot obtain it (the medically uninsurable).

    Second, high risk pools already exist in 35 states and can be set up in the other states relatively quickly. Where they exist they’re already designed to accommodate individuals with substantial medical needs. Many, if not all, include participation of patient advocacy and consumer groups. In short, if one is looking to quickly assist the medically uninsurable, leveraging existing high-risk pool organizations is a good way to do it.

    Third, directing funds toward coverage of those otherwise medically uninsurable is an efficient use of taxpayers’ dollars. It steers the money and the benefits toward individuals who need it most.

    What about that six month waiting period? Presumably it is included to avoid crowd-out of unsubsidized plans. The concern, no doubt, is that people who aren’t really uninsurable will cause themselves to appear so in order to obtain subsidized coverage from the high-risk pool. Therefore, forcing individuals to be uninsured for six months before eligibility for high-risk pool coverage protects the pool from gaming, albeit at the expense of additional suffering by those who badly need the coverage.

    And what does my research say about high-risk pools? The paper made the following main contributions:

    In 2000, high-risk pool enrollment was a small proportion of the number of medically uninsurable individuals: 8% nationally, with state variation between 1% and 54%. So, high-risk pools were making a dent, but only a small one. Recent reports suggest not much has changed in this regard. 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%.

    The main policy conclusion was that an injection of federal funds, accompanied by appropriate regulation, could dramatically increase the affordability of high-risk pool plans and provide much needed assistance to medically uninsurable individuals. This appears to be exactly what the Senate Finance Committee intends to do.

    • My experience with the Texas High Risk Pool was that it was far more expensive than I could afford. The premium jumped a hefty percentage not long after I enrolled (it was almost $400 a month), too high for a struggling freelance web designer who had lost a full-time position with benefits. Much worse was the fact that it didn’t cover any preventive care, such as a mammogram or Pap smear. It basically “encouraged” ill health. I finally found another plan that, while it excluded my “pre-condition” (taking an antidepressant, again another disincentive for actually addressing my mental health) at least it covered everything else as well as preventive care. Given that I don’t drink, smoke, engage in dangerous behaviors and try to stay healthy, it seemed grossly absurd to be lumped into a group labeled “high risk.” I think the whole concept needs to be revisited completely.

      • @Deena Berg – Thanks for your comment. It is very important to hear some real-life stories about struggles with health, health care, and health insurance. This stuff really matters! To actual people! I hope that soon there will be better options for you and others for whom our system does not serve well.

    • Deena, I don’t know your individual circumstances so please don’t take this as personal criticism, but without intending to you’re pointing out exactly what is wrong with most people’s perception of health insurance. Health insurance should NOT pay for mammograms and pap smears. Those are routine, predictable, planned expenses. Insurance is meant to cover unexpected and catastrophic losses. This is an overused analogy, but fitting nonetheless: paying for a mammogram with health insurance is like paying for an oil change or a tune-up with auto insurance.

      Decades of our current system where people have been shielded from the true cost of medical care and ingrained with the idea that a $10 copay is all one should ever have to pay is a big part of the reason that care has become so expensive and our costs have grown astronomically.

      Sure, there are people for whom the cost of even routine health expenses are prohibitive, but this is the minority, and we can find solutions to help the most needy (we have one already in Medicaid). But for the majority of us it does not make any sense to have a third-party intermediary for all of the routine annual expenses that we know with relative certainty that we’ll incur.

      • @AB – It is worth noting that not all low income individuals or even sick or disabled ones qualify for Medicaid (or Medicare). That is, our system has a lot of holes in it. I have a publication pending on just this topic. Should be out in a few weeks. You’ll read about it here.

        Also, Deena was talking about preventative care. There is a growing notion that insurance should cover more, not less, of that type of care as it is the most efficient way to promote health. Isn’t that the point?

        I know the counter argument: No, it isn’t the whole point. Insurance is for financial protection against catastrophe. That’s valid and true. Health insurance should do that. But along the way we want to provide incentives for people and doctors to provide efficient care. Preventative care is hard to motivate since it occurs when people are symptom free. Adding substantial patient cost on top will discourage the timely use of appropriate care. That’s a valid public health issue that can and should be addressed. Why not do it through the insurance system?

    • I know that there are holes in the system. But the number of people who are too impoverished to pay for an annual mammogram/pap smear/checkup out of pocket is extremely small. Small enough that it’s not even worth being part of the discussion when it comes to reforming the health care system.

      As for the “growing notion that insurance should cover more, not less,” yes I am very aware of that notion, and I could not disagree with it more! That growing notion is a big part of the problem! It ceases to become insurance at that point. It is just third-party payment for predictable, planned expenses, which does nothing but add to the cost of those expenses due to the middleman taking a cut, encouraging over-utilization, and increasing the price since consumers are less price-sensitive. Doug Elmendorf at the CBO has already shown that preventive care increases cost, not lowers it. Paying for more preventive care does indeed “bend the curve”, but in the wrong direction.

      If you want to argue it from a purely public health standpoint, that is fine. I don’t disagree that people need motivation to take action to improve their health. But the problem facing us now is out of control cost growth; making that growth even worse in the name of public health is not the direction we should be headed.

      • @AB – There are valid points on both sides. It comes down to what you think is primary. If cost control is primary then one is motivated to achieve it with ways that may not be consistent with good public health. I’m not disagreeing with your argument though. It is, however (and perhaps unfortunately, depending on your point of view) politically untenable. Coverage, not cost, is really what health reform has become focused on. There will be little by way of cost control until later.

        Meanwhile, I personally consider it a national disgrace that we have so many uninsured. We can do better, but it will cost us more because of the way we do it. Many other countries have full coverage AND lower costs. It can’t be because they’re paying high copayments. They’re not.

    • I’m curious as to what the data source is for the number of people who can’t afford preventative care. Seems like it would be a hard number to pin down. I certainly know quite a few women who are in their 40’s, 50’s, and 60s who can’t afford health insurance. No country for old women, either.

      In terms of the higher costs reported by the CBO for preventative medicine (and the studies mentioned vary in their conclusions on which services are and are not effective in terms of cost), Elmendorf also says, ” Of course, just because a preventive service adds to total spending does not mean that it is a bad investment. Experts have concluded that a large fraction of preventive care adds to spending but should be deemed “cost-effective,” meaning that it provides clinical benefits that justify those added costs: Roughly 60 percent of the preventive services examined in the review cited above have additional costs that many in the health care community consider to be reasonable relative to their clinical benefits.”

      I think the cost analysis should be based not only on what additional medical expenses might have been avoided, but also the ultimate economic gain from better health. What isn’t quantified is the economic downside of lost work time (for both workers and employers), lost school time, and the other non-productive results of ill health. Of course keeping people alive and healthy longer will cost more: on the other hand, that also means they are more productive for a longer period of time. Will it cost more to treat a depressed unemployed person? Yes. Are they more likely to work and pay their taxes? Yes. Does it cost more to give a child speech therapy (another battle I had with my insurance company)? Yes. Will the child be more likely to succeed in school and have a better income in life? Probably yes. Other countries have figured this out, but we continue to look at health as a commodity instead of an essential economic necessity.

      My own experience behind the desk at a doctor’s office tells me that the waste is not in preventive care, but in the absurd amount of paperwork and red tape that processing insurance claims requires, but I don’t see the insurance industry going away anytime soon. In Switzerland they don’t have a public option, but everyone has at least basic insurance and care that the insurance companies must provide. Those below a certain income level are subsidized by the government (taxes). Makes sense to me.