Pig in a Poke Health Reform

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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18 replies »

  1. “That community rating, essential benefits, and guarantee issue have shifted cost to small group–healthy, unsubsidized purchasers in the individual market. That under ACA, a healthy purchaser in the individual market earning $65,000 is paying for the cost of avoidable chronic conditions for people earning $300,000.”

    For sure the benefits under the ACA increased the cost of insurance, but those benefits were/are “essential” to many needing the ACA. ACA benefits are benefits we should all have. The fact is ACA groups are risk groups separate from the larger more inclusive groups, and the cost is spread over less insured. I’m a single pay supporter, how about a group of 300 million spreading the risk.

    You don’t want to pay for other peoples sickness, but when will you be glad others are paying for your sickness? A stronger mandate would have brought more healthy young into the groups and lowered the cost – even for you.

    We can’t continue to toss the sick overboard so the healthy can get cheaper insurance. The solution (other than needed cost control) is to expand the size of the groups, not segregate them into better profit margins. As well, self-employed people can at least deduct the cost of insurance from their income tax, unlike me, who has never been able to get a tax break on buying insurance or paying for health care.

  2. I imagine it’s quite comfortable to stand behind lofty principles when one is safely removed from the reality of such principles by a kind and generous University who shields you from the inconvenient truths. Do you actually have an experience with purchasing an ACA policy in the individual market? Or, do you just sign up for your annual benefit plan with an employer who is conveniently exempt from ACA? Are you aware that under ACA, for some self-employed people who actually need to manage their own health insurance purchases, premiums tripled in the individual market? That policies that cost $8,000 annually pre-ACA can cost $25,000 annually under ACA. That this cost is the same whether you earn $65,000 or $650,000. That community rating, essential benefits, and guarantee issue have shifted cost to small group–healthy, unsubsidized purchasers in the individual market. That under ACA, a healthy purchaser in the individual market earning $65,000 is paying for the cost of avoidable chronic conditions for people earning $300,000.

    I think you need to leave your insular University and learn a bit about life.

  3. Contribution also needs to be made into HSA in addition to HDHP and DPC membership. Common for HDHP + HSA + DPC to see cost savings from 20-60% with higher patient satisfaction for most. Patients vote for quality by signing on to the DPC practices that deliver value to them. The DPC practices are then able to assist them in better use of non-primary care services so that less of the HSA funds need to be taken out to meet donut holes.

  4. Just reporting the facts on the ground because you see unable to absorb what has happened and what is happening. We all have to live with the next President yet some have to learn to restrain their violence against his administration.

    Since Trump has been a Liberal as well as a conservative I don’t know where he stands on the issues. Most people are not pure ideologues though those on the far left are a noticeable exception. I will repeat that I am certain I won’t approve of everything he does, but I have hopes that he will do better than the scandal ridden President on his way out. So far Trump is better than I expected so I am somewhat pleased.

  5. Can’t see what your gloating answer has to do do with my post. Actually I’m pretty relaxed as I think people should have to live with who they vote for.

    Given the percentage of Medicaid and Obamacare (still uninsured) in each state, no improvement in health care for those who voted for Trump will bring the chickens home to roost. His approval numbers are already pretty bad.

    I’m patient.

  6. Petey, I hear the lefties are drinking themselves sick over Trump’s soon to be inauguration. In fact some have been caught conspiring to fiddle around with sprinkler systems and air vents planning stink bombs and if that failed to make the sprinklers go off. Lately you have begun to sound a bit more tipsy so I hope you take a few breaths and start to think a bit more clearly.

    [ http://projectveritas.com/video/part-i-hidden-camera-investigation-exposes-groups-plotting-violence-at-trump-inauguration/ ] start 1:40

    and to disrupt transportation [ http://projectveritas.com/video/part-ii-new-investigation-uncovers-plots-to-chain-the-trains-and-shut-down-dc-during-trump-inauguration/ ]

    Obamacare was an immense failure and has to be replaced or revised to the point that it would be unrecognizable. Hopefully the Democrats will approve Trump’s nominees to his cabinet so that our government can function efficiently. When his cabinet is approved I am sure Trump’s plan will be revealed so that we can cheer it or criticize it while the details are thrashed around in the legislature. Perhaps, you should relax a bit until then.

  7. “right-wing think tank”


    Why is it Repugs always want to “reform” the poorest and most vulnerable while deregulating their wealthy supporters. There’s been some reporting about Price doing some politically engineered insider trading, seems about right for the swamp – which Trump said he’d drain.

  8. I heard a rumor on another blog that Trump does have a replacement plan. It would have low deductibles and catastrophic insurance, but with a big donut hole. The scuttle butt is that Trump will let Price release this when and if he is confirmed….

    An Atlanta Journal and Constitution columnist, Kyle Wingfield, has long been a cheerleader for, confidante of, and conniver with Tom Price. A few weeks ago, with the help of a Georgia-based right-wing think tank, he trotted out this column flogging a revision of Medicaid comprising, for each beneficiary, a “true catastrophic” insurance plan coupled to membership in a “direct primary care” (DPC) practice. The total cost per beneficiary was pegged at $2500 per year, $1750 for the high deductible insurance premium and $750 for an annual membership in the DPC practice.

    DPC practices presumably assure easy to get , guaranteed, unlimited access to pre-paid primary care, and typically include labs and basic generic drugs at the cost to the practice. There are only a small number of such practices and no bona fide evidence that they adequately deliver even primary care. At a capitation of $750 per patient, success and unlimited access would seem unlikely.

    What seems clear, however, is that even if DPCs were a sound vehicle for delivering primary care, a scheme of “DPC + catastrophic” would leave a giant coverage cap between the point where primary care gives out and the deductibles of a catastrophic plan kick in. Even with discounting for a DPC patient, I estimate, a catastrophic plan with a premium of $1750 would have an individual deductible of well over $5000 (and even more if Trumpcare dispenses with minimum AV requirements).

    Shades of the Bush Medicare drug plan, a Republican’s dream: catastrophic coverage, the cash value of which increases with personal wealth; a regressive donut hole whose successful navigation depends heavily on personal wealth; and a basic benefit providing just enough value to just enough people to create a constituency and support a talking point.

  9. “Republican lawmakers are in the dark about President-elect Donald Trump’s plan to repeal Obamacare and are frustrated he is emphasizing “insurance for everybody,” three senior GOP sources told CNN on Tuesday.”

    If only it was just “foolishness”.

  10. Peter, that is the Democratic way of handling things. We don’t yet know whether the Republicans will repeat that type of foolishness. If you recall, the Democrat plan wasn’t completed at the time of passage, another foolishness. Maybe this proves the shallowness of the Democratic legislators.

  11. “Why complain now unless you have a detailed plan to fix or replace the ACA that would have traction with those in power.”

    I guess we’ll have to pass the plan so we can find out what’s in it.

  12. Yes, they have had many years to prepare a plan. No, they don’t have one because it just isn’t that important to them. One of the reasons we ended up with Obamacare is that high risk pools failed. Now we will bring them back? What will be different this time? High deductibles? That is the “skin in the game” for which conservatives have long advocated. Look at the emphasis on HSAs in some of the plans being floated.

    But really, it is a pig in a poke because health care is such a low priority issue for the GOP. It is talked about when they have to counter Democrat plans. Otherwise, they are pretty happy to just ignore it. Not being serious about it they have no serious plan available. So who knows what they will actually come up with. Some things are pretty predictable, like big cuts to Medicaid (called block grants), but beyond that we can’t know because they don’t.


  13. “Technically, what Americans have been offered so far in this regard might be called a pig in a poke.”

    Uwe, the PPACA as written is unsustainable. I can’t predict the future or whether or not I will like the ACA replacement plan, but the President elect still has a few days before he takes office. Why complain now unless you have a detailed plan to fix or replace the ACA that would have traction with those in power.

    I wonder if you considered the PPACA a pig in a poke? It passed without one Republican vote and what was Nancy Pelosi’s comment? “we have to pass the bill so that you can find out what’s in it”

  14. The main challenge in replacing the ACA without significantly reducing the number of people who have health insurance is to figure out how best to finance coverage for sick people and for low income people who can’t afford health insurance even if they are healthy enough to pass medical underwriting but make too much to qualify for Medicaid.

    High risk pools have been around since the late 1970’s. Thirty-five states plus D.C. had them though coverage was often spotty with low maximum benefit limits. Cumulatively they never covered more than 200,000 people at any one time even though at least 4-5 million people probably needed the coverage. To finance coverage comparable to an ACA silver plan for high risk individuals and families and to cover the cost of subsidies for low income people who can’t afford health insurance would cost a lot of money probably exceeding what is already being spent for ACA exchange subsidies plus expanded Medicaid. It seems unlikely that neither federal or state legislators will be willing to commit the resources it would take to do the job especially if it means having to raise taxes which would likely be necessary.

    Alternatively, Avik Roy suggests that insurers, at least in theory, can price any risk. So, a very sick person with Cystic Fibrosis or Gaucher’s Disease, for example, may be quoted a premium of well into six figures annually. If the individual’s own contribution toward the premium were capped at a maximum of 10% of income with the rest covered by subsidies financed by taxpayers, it could work but that would be very expensive too.

    Covering healthy people at low cost, especially young people, if they can pass medical underwriting is easy. Financing insurance for sick people and low income people is hard. It also looks unseemly if we just tell insurers to cover healthy people and taxpayers will pay to cover sick folks. Another option is to expand Medicaid even further up the income scale but that would be a non-starter for most states unless the feds agreed to pick up the incremental cost forever.

    There are numerous potential strategies to reduce the cost of actual medical care as opposed to health insurance which merely reflects the cost of healthcare but that’s a whole separate discussion and debate.

  15. One way to plan for unexpected cost risks is to distribute it among the managers of the risk pool. So for our nation’s cost of healthcare: who has a stake in the common-pool resource for cost of healthcare identifiable by its portion of our national economy?
    A. The ‘common good’ for all citizens is compromised by the increasingly larger cost of healthcare and its compromise of competing needs within our national economy. The effect over time will decrease our nation’s autonomy within the world-wide market places of its ‘resources,’ ‘knowledge,’ and ‘human dignity.’ The excess, not the total cost, was likely $800 Billion in 2015. This would have represented the cost of fighting 7 Iraqi/Afghanistan Wars SIMULTANEOUSLY in 2005.
    B. Payer of last resource for re-insurance as a result of the Federal government’s involvement in Social Security, Medicare, Medicaid, Veterans Administration, Community Health Centers, Native American Health Care, Dialysis for End-stage renal disease, Orphan Drugs, and childhood immunizations. So what is the ultimate value of a person’s survival? And, if there was uniform opinion on how to estimate a number, how much would of that would be a maximum benefit for healthcare during a person’s life time? I am aware that someone has estimated its value as more than $10 Million.
    C. The Insurance company in its role to ‘certify’ the covered events and the basis for its financial support. The reinsurance process inherent for this is then spread out over larger populations.
    D. The person and their level of priorities for keeping their human capabilities in a state of stability to withstand the disruptive events occurring during a life-time. Depending on a change in health that initiates contact with medical TRIAGE, the person with access to disposable income is freer to participate in the allocation of the appropriate resources for any healthcare. The percent of citizens who are in a position to allocate disposable income for healthcare is small, probably less than 10-15% of our citizens. For the other citizens, the person’s perception of uncontrollable expenses leads to less initiative for self-care and all sorts of denial tactics that worsen its eventual cost.
    E. Primary Physicians and their associated healthcare team by their ability to improve a person’s overall self-care through trust, acceptance, warmth and empathy expressed responsively with each visit. This connection achieves responsive accessibility to reduce the cost of any required healthcare. There is no means to assess, community by community, the equitable availability of its Primary Healthcare that is also connected with a community action process empowered by community stakeholders.
    F. Specialist Physician to stabilize the health conditions requiring Complex Healthcare with patterns of healthcare that are not unduly affected by Parkinson’s Law.
    G. Hospitals create the innate problems within its own excessive costs through problems with Governance and their need to be resilient to the unexpected problems occurring almost daily requiring poorly definable solutions.
    H. Community Disturbances from the expected and unexpected events affecting many citizens. There is no community by community process to evaluate each community’s Risk Management Plan. Many elements within each community operate some what independently to asses their portion of a Risk Management Plan. Most of these eventual affect healthcare. Eventually, the quality and mitigation capacity of a community’s Risk Management Plan is its best means to produce the adaptability to unexpected disasters…and its eventual cost.
    OK, its a bit over done. But… There is no combination of payers, providers, or benefit systems that will solve the above. Paradigm Paralysis of the healthcare industry has become fossilized. The excess cost of healthcare will continue to dominate our Nation’s annual deficit spending, and our nation’s maternal mortality ratio will continue to worsen.

  16. High risk pools should change their definition of high risk people to include healthy risks
    You base the definition not on current health but on future expenses
    Define a future expense of $50,000 or more as a high risk person
    Provide coverage starting at $50,000 and sold in $500,000 increments
    Fully community rate the premiums to age 65
    Premiums would cost around $100 a month per person and $250 a month per family
    Then create plans that fund the first $50,000
    These should build coverage over time less claims paid – starting at zero
    There is a plan available today for $605 a month that builds to $50,000 over 35 months – paying $21,175 to accumulate $50,000

  17. “At this time, it was in such a state that it could not be understood easily or explained.”

    Apparently for the 15-20 million insured under ACA it is working, and I guess understood enough. When did Repugs ever, I mean EVER, offer to help “fix” the ACA? Yes, it needs fixing, but given that those now insured could not have afforded coverage before, it seems it’s a better fix than the earlier status quo.

    Why are all the screaming “repeal it” mob in a position of not needing Obamacare? What do they want to fix that would better help those who need it?

    If Repugs though that the ACA was passed in hast, what are we to think of the repeal/replace onslaught, wanting it done in the first month of Trumpland? Where is the plan for details/comments/feedback period for those now insured by the ACA?

  18. Uwe, this is not fair. No one wants to leave it as is.

    You have the same obligation to fix it rapidly as you demand in our intent to replace it. Where are your plans to fix it?

    You worked on it for at least two years before it was passed into law. At this time, it was in such a state that it could not be understood easily or explained. People learned of it as it was implemented. It is complex and to ask us to have off-the-shelf plans for its replacement is not symmetrical to the history of the difficulties its creators had in putting it together. The astonishing thing is that now the creators seem quiet about their ideas to fix it, as if they subconsciously want to allow this work of repair or replacement to be by another party.

    Personally, I don’t care whether it is fixed or reset or done over. It mainly needs, IMO, a device or gimmick that gives everyone a push, a vector, to save money. It never had these or this. There was no shopping/competition or monopsonic purchasing. These are the only two ways to lower prices. You have to add one of these, someplace. There was also nothing that restrained Pharma. You have to add something here. Drug firms have to either face monopsonic purchasing or some shopping by patients or PBMs or plans. You can’t just allow them to charge what they dream about on their pillow! I realize that you had to do this to get them to agree to the ACA in the first place….but come on…we are moving on.