So the real question is: Is $138 billion enough to fund high-risk pools?
Answering the question precisely is difficult because the bill doesn’t explain exactly how these high-risk pools would work. We also don’t know how many states would choose to waive the Obamacare insurance regulations and set up high-risk pools instead. But several researchers have compiled estimates on what a well-run high-risk pool would cost, and $138 billion probably wouldn’t be enough.
High-risk pools have been tried before, so we have some sense of what they might cost.
Before the Affordable Care Act, 35 states had their own such pools, which were set up to offer coverage to people who had been denied a policy because they had a pre-existing medical condition such as diabetes, cancer or addiction.
The main complaint about these pools is that they were underfunded. They typically charged people much higher prices than the market rate for a policy, and many people could not afford the coverage. States also had waiting lists and imposed limits on how much they would pay per year or over a lifetime for care. California, for example, had an annual cap of $75,000 per person.
As a result, these pools covered just a fraction of people who had pre-existing conditions, according to an analysis by the Kaiser Family Foundation. The combined enrollment for the states at the end of 2011 was 230,000, and the states had net losses averaging $5,510 per enrollee, according to Kaiser.
In the early years of the Affordable Care Act, the federal government set up its own high-risk-pool program, and funded it at $5 billion over just under four years. That turned out to be too little money.
The program, which required applicants to be uninsured for at least six months before they could sign up, had to stop taking customers after three years because it was running out of money. The program was quite generous to its beneficiaries — it gave them comprehensive coverage and asked them to pay the same price as healthy customers in their area. But care for the high-risk population ended up costing about $32,000 per enrollee.
In 2010, two conservative health economists estimated costs for a well-run, national high-risk pool. Based on the cost of health care at the time, James Capretta and Thomas Miller, now both at the American Enterprise Institute, estimated that such a program would cost $15 billion to $20 billion a year. The program would cover around four million Americans at about $4,300 each, their estimate of historical risk pool spending.
Over a decade, the cost would be $150 billion to $200 billion. But that assumes a low price tag, with programs that included lifetime caps and waiting periods. More left-leaning researchers have arrived at far higher price tags, assuming that more Americans would be likely to qualify or that their health costs would be higher.
Of course, the $8 billion offered in the new amendment would go only to states that decide to waive the Obamacare rules and set up high-risk pools. If only one state waived those rules, $8 billion might be a very generous funding stream. If 30 states take up waivers, the money will be spread much more thinly.
But either way, the amendment is designed to offer the money for only five years. The rest of the state money is also scheduled to be discontinued at the end of a decade. What would happen to high-risk patients after that is unclear.
The new waivers are not the only way that the Republican bill might make it harder for people with prior health problems to get coverage. The waivers would allow states to eliminate rules requiring a basic set of benefits, which might mean that drug addiction treatment or prescription drugs would not always be covered.
There would be substantial cuts to the Medicaid program, which covers many frail patients. And financial assistance would be pulled back for many low-income people who need it to afford their policies. For some of them, even a well-funded high-risk pool may be out of their financial reach.