The Customer

Pool Fools

Republicans are right: Obamacare’s high-risk pools were a dumb idea. But it was their dumb idea.

House Majority Leader Eric Cantor

Of all the arguments Republicans have been waging against Obamacare as the House of Representatives prepares to vote for its repeal, none is harder to take than their criticism of the federally subsidized high-risk pools the law created to provide immediate relief to the uninsured. In May, the House Republican Conference complained that these high-risk pools would be unfair to people currently enrolled in existing state-run risk pools because the latter group was paying higher premiums. In July, the House Republican Conference complained that implementation of this unfair federal program was being delayed. By January, the House Republican leadership was grousing (in a report titled Obamacare: A Budget-Busting, Job-Killing Health Care Law) that costs for this unfair-but-wrongly-delayed program were higher than expected even as participation in this unfair-but-wrongly-delayed-but-too-costly program was lower than it should be.

Republican attacks on Obamacare’s high-risk pools sound a lot like the old joke about the restaurant where the food is terrible—and such small portions! But the contradictory nature of the GOP’s complaints doesn’t rankle half so much as their fundamental hypocrisy. High-risk pools are, in fact, a terrible solution to the health-care crisis. But they happen to be the terrible solution Republicans most favor (along with tax breaks) whenever they’re forced to state their preferred alternative to last year’s Patient Protection and Affordable Care Act. They were the central idea in the health plan proposed by Republican presidential nominee Sen. John McCain, R-Ariz., during the 2008 election. They were the central idea in the House leadership’s proposed substitute for the Democratic plan in 2009, and they played a major role in the alternative plan set forth that year by Sen. Tom Coburn, R-Okla., a medical doctor who became the GOP’s lead opponent to Obamacare. They were the central idea in a 2010 repeal bill introduced in May by Rep. Wally Herger, R-Calif., that would have replaced the health reform bill that became law with the 2009 House leadership bill. They’re absent from the current leadership repeal bill, introduced Jan. 5 by House Majority Leader Eric Cantor, R-Va., but only because Cantor’s bill proposes no substitute at all.

Republican health care policies, I noted not quite one year ago (“Pool Party“), typically segregate the healthy majority from the unhealthy minority in order to lower insurance premiums for the healthy. Never mind that that raises insurance premiums sky-high for the unhealthy. High-risk pools are the most efficient way to achieve such segregation and about the least efficient way to pay medical bills here on planet Earth. A health insurance pool consisting entirely of people too sick to qualify for private insurance is like a fire-insurance pool consisting entirely of pyromaniacs. The best that can be said for such groupings is that the hospitalizations (or the fires) probably won’t all happen in the same month. Health insurance high-risk-pool premiums are typically 125 percent to 200 percent above normal premiums, but even so, a government subsidy is typically required to cover costs.

Obamacare introduced new high-risk pools (it calls them the “Pre-Existing Condition Insurance Plan“) as a temporary bridge to the federally subsidized state insurance exchanges to be created in 2014. Premiums are indeed set below those for existing state-run risk pools and are intended to match what buyers would pay for health insurance in the non-group market (assuming non-group insurers were willing to sign them up, which in many instances they wouldn’t be because of the buyers’ pre-existing conditions). Even so, enrollment has not been high. Medicare’s chief actuary predicted that 375,000 people would sign up in 2010, but as of Nov. 1 only about 8,000 had, including only four in West Virginia, only one in North Dakota, and none at all in the District of Columbia and Vermont. That’s partly because 27 states declined to participate in the program, relying instead on their own risk pools (apparently they worry they’ll get stuck with the higher cost); partly because even Obamacare’s more-highly-subsidized high-risk premiums were relatively expensive (non-group insurance doesn’t come cheap for people with pre-existing conditions); partly because potential customers worried that Congress would eliminate the new high-risk pools by repealing Obamacare; and partly because the Obama administration, no doubt wrestling with the high-risk pools’ fundamental unworkability, didn’t start signing people up until summer.

Conservatives claim the problem is not the inherent contradiction in insurance pools consisting entirely of people who need lots and lots of health care, but rather in poor management by the Obama administration. The American Enterprise Institute’s Thomas P. Miller and the Ethics and Public Policy Center’s James Capretta have argued that the administration ought to narrow eligibility; increase the subsidy; and introduce “more effective incentives and tools for both patients and providers to make higher-value health care decisions,” i.e., pressure doctors and hospitals to lower costs and eliminate unnecessary procedures. But the first solution is preposterous in light of weak enrollment (in fairness, Miller and Capretta wrote before that became apparent); the second solution is perhaps necessary but expensive; and the third is a laudable goal that’s much more difficult to achieve with a sick population than with a healthy one. Taken together, these three solutions betray an extreme myopia about the inherent limitations on high-risk pools to begin with.

The poor performance of Obamacare’s high-risk pools aren’t an argument against Obamacare. They’re an argument in favor of it. High-risk pools are a Band-Aid to stanch a hemorrhage. Democrats don’t kid themselves that the Band-Aid will do much to stop the bleeding, which is why they don’t embrace it as a long-term solution. Republicans ought to stop pretending it can be one.