The most important concept in health finance is simple; sick people are expensive to cover. Let’s keep that in mind for the rest of the post.
The Independent Journalism Review captures the reaction of Rep. Mark Meadows (R-NC), head of the House Freedom Caucus, to the CBO score.
When reporters pointed out the portion of the CBO report saying individuals with preexisting conditions in waiver states would be charged higher premiums and could even be priced out of the insurance market — destabilizing markets in those states — under AHCA, Meadows seemed surprised.
“Well, that’s not what I read,” Meadows said, putting on his reading glasses and peering at the paragraph on the phone of a nearby reporter.
The CBO predicted:
“…the waivers in those states would have another effect: Community-rated premiums would rise over time, and people who are less healthy (including those with preexisting or newly acquired medical conditions) would ultimately be unable to purchase comprehensive non-group health insurance at premiums comparable to those under current law, if they could purchase it at all — despite the additional funding that would be available under H.R. 1628 to help reduce premiums.”
The CBO analysis was likewise adamant that AHCA’s current high-risk pool funding isn’t enough to cover sick people if states use the mandate waivers.
After reading the paragraph, Meadows told reporters he would go through the CBO analysis more thoroughly and run the numbers, adding he would work to make sure the high-risk pools are properly funded.
Meadows, suddenly emotional, choked back tears and said, “Listen, I lost my sister to breast cancer. I lost my dad to lung cancer. If anybody is sensitive to preexisting conditions, it’s me. I’m not going to make a political decision today that affects somebody’s sister or father because I wouldn’t do it to myself.”
“In the end, we’ve got to make sure there’s enough funding there to handle preexisting conditions and drive down premiums. And if we can’t do those three things, then we will have failed.”
There is a plausible high cost risk pool design that could theoretically work. It just costs a lot of money. The Urban Institute provides an updated floor to that type of design.
Government costs for the coverage and assistance typical of traditional high-risk pools would range from $25 billion to $30 billion in 2020 and from $359 to $427 billion over 10 years. (Figure 2)
I think this is a decent lower bound as they don’t look at very high cost but uncommon conditions like hematological defects, cystic fibrosis, major gastro-intestinal conditions, slow progressing cancers or hundreds of other things. But Urban’s estimates points us in the right direction. Taking care of sick people costs somewhere between expensive and very expensive.
This is not new knowledge. Anyone of any ideological stripe who is actively trying to be a good faith broker of information on health care finance has been shouting this basic insight for months. And yet, the Senate just invited actuaries to talk with them for the first time this week. And yet, the House voted on this bill without waiting for expert opinion. The bill was written without a public hearing. The product is a consequence of a process that deliberately excluded even friendly experts who were having a nervous breakdown when they looked at the cash flows much less incorporating the criticism of unfriendly but knowledgeable experts.
Healthcare for people with high needs is expensive.