States Are Right to Shun ObamaCare’s High-Risk Pools
By John R. Graham, director of Health Care Studies
One of ObamaCare’s first major cash flows was scheduled to start on July 1: $5 billion to bail out states’ so-called “high-risk pools” until January 1, 2014. A full 22 states want nothing to do with it, a drastic choice in times of broken budgets but nevertheless the right choice.
In 2014 ObamaCare launches its major takeover of health insurance, previously regulated by state law. As of that date ObamaCare will make it illegal for health plans to use factors other than age, and that only in a limited fashion, to calculate premiums. Obamacare will conscript Americans into health plans chosen by the federal government.
Premiums will rise substantially. ObamaCare attempts to compensate through a massive program of taxation and subsidization. Unfortunately, ObamaCare’s long-term spending will require significantly higher revenues than will be harvested by its cutbacks to Medicare benefits and tax hikes on employers, individuals, and enterprises in the health sector. Because Americans are increasingly concerned about the fiscal situation, the Congressional majority had to dupe the media into believing that ObamaCare would reduce the deficit.
The media view the Congressional Budget Office (CBO) as the official “scorekeeper” of anticipated federal taxing and spending. The CBO forecasts legislation’s fiscal consequences for 10 years in the future, so it had to “score” ObamaCare for 2010 through 2019. By scheduling ObamaCare’s main event to start in 2014, President Obama and the Congressional majority were able to get away with pretending that six years of ObamaCare, already costing more than a trillion dollars, was actually 10 years. They successfully fooled the media into believing it was fiscally responsible.
While this delay satisfied naïve deficit-watchers, it failed to harvest low-hanging political fruit immediately—the promise that everyone would be able to get health insurance, no matter what expensive medical conditions they already have. ObamaCare attempts this “on the cheap” by throwing a relatively small amount of money at so-called “high-risk pools” for four years. But it’s not enough: The CBO does not believe that the funding will last longer than three years, and estimates that the plan would need $10 to $15 billion through 2013.
“High-risk” pools is misleading because the patients who need them are actually high cost, which explains why the programs are so difficult to manage. Patients, insurers, and governments all know that the costs of high-risk pools are extremely high, which is why 35 states already have trouble managing them.
In the latest National Affairs journal, James Capretta of the Ethics and Public Policy Center and Tom Miller of the American Enterprise Institute figure that two to four million uninsured Americans with pre-existing conditions cannot get health insurance at reasonable premiums, but that only about 200,000 are currently enrolled in high-risk pools. They note that the Chief Actuary for the Centers for Medicare and Medicaid Services estimates that only 375,000 more will obtain coverage through ObamaCare’s $5 billion. Outbidding even the CBO, Capretta and Miller call for $15 to $20 billion per year, as well as further restrictions on insurers’ increasing premiums for people who leave the employer-based market and seek individual coverage. The latter would reduce the demand for high-risk pools, they assert.
By seeking to socialize the costs of patients with expensive conditions, however, Capretta and Miller surely invite a mechanism whereby insurers, employers, and individuals would crawl out of the woodwork to lobby continuously for more federal money and expanded eligibility for high-risk pools—just like Medicaid over the last four and a half decades. A far simpler and more effective reform would be to eliminate employers’ monopoly control of Americans’ health dollars, so that individuals and families could buy their own health insurance that is portable from job to job and state to state.
ObamaCare’s $5 billion bailout for high-risk pools is not the first step in solving America’s health crisis. Rather, it is merely the “gateway drug” to a complete federal takeover of our access to medical services. The 22 states that said “no” to federal funding of high-risk pools have made a wise first response to ObamaCare.