Pig in a Poke Health Reform

John Irvine / 21 Jan, 17 /

Uwe ReinhardtFrom a political perspective, House Speaker Paul Ryan’s trashing of ObamaCare (a.k.a. the Affordable Care Act or ACC) during CNN’s recent town hall meeting probably was quite effective. One would, of course, not expect a staunch political opponent of ObamaCare to render a “fair and balanced” picture of the program, to plagiarize a Fox News mantra. Not surprisingly, the Speaker dwelt solely on some serious shortcomings of ObamaCare that are by now well known among the cognoscenti.

The question now is precisely what would replace ObamaCare, as Republicans fall over one another in their haste to repeal it. Enumerating principles, as has been done in sundry tracts in recent years and is done once again in the House of Representatives’  “A Better Way”, is no longer enough. Yet even at this time of imminent repeal of ObamaCare, the crucial details of any replacement plan remain a mystery. Surely the time has come to let the cat out of the bag.

During the town hall meeting, for example, Speaker Ryan proposed the general outline of a system that would rely on high risk pools for Americans with pre-existing medical conditions, coupled with a market for individually purchased insurance policies whose modus operandi was largely unspecified. What would be the parameters of the high risk pools? Granted, it would have been difficult to be much more specific on this point than the Speaker was in a town hall meeting. But it would certainly have been helpful had there been a website to which he could have directed his audience for the specifics of a replacement plan built on a Republican consensus.  To my knowledge, there is no such website.

Risk pools have long been the workhorse of Republican rhetoric on health reform. One can think of such a pool as just another health insurance company selling insurance in the individual market for such policies to relatively sick applicants for insurance. To assess the merits of the coverage it sells, one surely would want to know: 

  1. What would be the benefit package being offered? Would it have exclusions? Would it have tight upper dollar limits on coverage? What deductibles would patients have to pay, what coinsurance, and what would be their maximum annual risk exposure in dollar term? In this regard, the history of high risk pools in this country is hardly reassuring, as can be inferred from a recent analysis by Jean P. Hall. Would it not be utterly ironic if, after trashing ObamaCare for six years over its high deductibles — a point the Speaker drove home once again during the town hall meeting – the coverage sold by the high risk pools he now proposes had similarly high deductibles or even higher ones? Yet one cannot rule that out, and so it certainly is a point worth watching.
  1. What would be the criteria for eligibility to purchase insurance from the high risk pool? Precisely how would “high risk” be defined operationally?
  1. What premiums, net of any public subsidy toward that premium, would entrants of into the pool have to pay? Would these premiums related to the disposable income of applicants? If so, how?

One would also want to know, of course, precisely how the individual market for Americans not in the high risk pools would be structured. Would premiums for that segment of the population once again be medically underwritten, as they were pre-ACA? Could insurers structure the benefit package of policies as they saw fit, given the market demand for insurance they face?

And what would happen if an insured had chosen a cheap but shallow health insurance policy and then fall seriously ill? Who would pay for critically needed medical services or products—e.g. an expensive specialty drug — not covered by that cheap policy, if the patient’s own resources were inadequate? Would we go back to the pin-the-tail-on-the-donkey financing by which hospitals sought to recover their cost of uncompensated care from paying patients in pre-ACA days? Or would patients just be denied these services and products altogether, at the risk of avoidable death?

To my knowledge, all of these crucial details have yet to be fleshed out if the ACA is to be repealed and instantly replaced with an alternative.  Technically, what Americans have been offered so far in this regard might be called a pig in a poke.

Frankly, I find it remarkable and sad that after six years of trashing ObamaCare Republicans now find themselves without a consensus on a clearly specified replacement to which voters and policy analysts could react. Where have their policy wonks and the politicians they advise been in the meantime? Why had they not long ago agreed on a “replace” and given voters the courtesy of some details, to assess its merits?  It is an odd approach to public policy and one not meriting much respect.

Now it turns out that if premiums in the ACA markets continue to rise at double digit rates, and if more and more relatively healthier individuals are thus dissuaded from purchasing insurance on those markets, then the remaining risk pools in those marketplaces will slouch more and more toward high risk pools. Here, however, we would know the benefit package, we would know eligibility criteria and we would know on what financial terms individuals could in these high risk pools, because all of it has been completely specified in the ACA legislation. One certainly could work with this set up and just rename it.

The question then is what then would happen with Americans who eschewed purchasing insurance or bought it outside the ACA market places? Would they remain uninsured and have access to a market structured as it was pre-ACA, with medical underwriting, frequent denial of coverage, and highly variable benefit packages?

For high income people who can afford any health insurance policy, or for those who are securely covered at their place of work, the forthcoming “repeal and replace” drama in Congress will be just that – a basically incomprehensible spectacle played out on cable TV news that luckily does not touch their own lives. The drama will be incomprehensible, because the task of health reform is technical and the television media are just not intellectually equipped to translate such detail into language the viewing public can understand, even though that could be done with some thought.

For the still uninsured or those now covered on the ACA market places, however, the coming year will be a time of high anxiety, with a quite uncertain impact on their own lives. They will learn precisely what is meant by the word “terrific,” the attribute President-elect Trump had ascribed to the insurance coverage by which he had planned to replace ObamaCare. It remains to be seen how pleased these Americans will be by that “terrific” replacement.

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