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The Concept of a Plan for the Trump health care plan that will (forever) be available in just two more weeks is risk rating with high cost risk pools.

Risk rating means insurers are allowed to charge individuals different premiums as a function of their predictable costs so that the insurance is truly “hit by a meteor” coverage instead of a payment club for predictable and anticipated expenses.  This means men between 18 and 40 will be charged a substantially lower premium than women of the same age and general health as women are capable of getting pregnant.  This means people with a family history of colon cancer will pay more than people whose family don’t have that nasty gene combination.  It means old people pay way more than young people.

It also means, without anything else, that people who have very high, recurring and very predictable costs are priced out of any competitive market.  The policy solution then would be high cost risk pools where state or federal funding covers a substantial portion of the premiums.

The policy concept is that healthcare spending is extremely skewed to the right and concentrated.  If the top 5-10-15% of spenders can be removed from the main risk pool, then the premiums collected in the main risk pool can be 40-50-60% lower.

If the high cost risk pool is funded well enough, then this could work where the private market is used to insure against one-off events, health savings accounts pay for medium size events and the high cost risk pools act as a pressure relief valve for costs after someone is diagnosed with cancer or has very predictable high cost diseases/conditions.  There could be generous subsidies involved depending on your value system.  And this could work.

It really depends on the high cost risk pool being very well funded.

Given that the Trump Administrations health policy plans were to dramatically reduce federal healthcare expenditures for anyone who would not benefit from generic Republican tax policies in 2017, that assumption that the high cost risk pool would be well funded is absurd.

But I want to make a very simple point. We already operate two high cost risk pools. We just don’t call them that and there are a few odd features in them that disguise the programmatic intent.

Medicare is a high cost risk pool. It covers two high cost groups.  First it covers almost everyone over Age 65 until death.  Secondly, it covers individuals with long term disabilities, end stage renal disease and ALS.  None of those groups are cheap.  There is some interesting gaming on optionality between Medicare, the ACA marketplaces  and kidney disease/dialysis companies but the fact is that Medicare pays for a very expensive portion of the population.

Medicaid is the other high cost risk pool.  It covers individuals with substantial developmental delays and disabilities, individuals needing substantial home health care and community supports, individuals who are on disability, and individuals who are in long term care/nursing homes.  Those are all expensive groups.  The two weird aspects of Medicaid in terms of eligibility is that it also covers a bunch of dirt cheap kids and pregnant women who may have an expensive event but quickly revert back to being relatively cheap again.

Medicare and Medicaid already suck up a good amount of the most predictably expensive people in the United States. The commercial markets are already fairly cherry picked markets where most of the bad risk is somewhere else.

High Cost Risk Pools already existPost + Comments (16)