Opponents of the Affordable Care Act keep trying to chip away in court and at the state level at pieces of the whole -- Kentucky’s governor-elect, Matt Bevin, has pledged to roll back the state’s Medicaid expansion.
But a slew of recent attacks has taken aim at what one would think is the law’s most sacrosanct provision. That’s the protection of insurance customers with preexisting medical conditions, otherwise known as “guaranteed issue.”
The Affordable Care Act forbids insurers to refuse coverage, or charge higher premiums, to anyone for medical reasons, a practice known as medical underwriting. Insurers can charge higher rates to smokers or older applicants, within limits. The act’s counterbalance to guaranteed issue is its individual mandate, which aims to ensure that younger, healthy persons buy into the national health insurance pool to help cover the older, sicker buyers who don’t need any outside incentive.
Protection against preexisting-condition exclusions is a core guarantee of Obamacare, and one that consistently garners the greatest public approval. In a Kaiser Family Foundation tracking poll in March 2014, some 70% of respondents had a favorable view of the rule, a result that spanned political coloration -- even 69% of Republicans were in favor. (See chart below.)
Yet now the ACA’s solution to the “preexisting” problem is being seen as an Obamacare problem. The conservative market-oriented Mercatus Center at George Mason University has convened a group of conservative economists to address the issue, which it calls “America’s thorniest healthcare challenge.” Their papers, most of which are online, will be packaged into an ebook next week. More on their prescriptions in a moment.
Then there’s a recent op-ed by Kathy Hoekstra, a former spokesman for the Herman Cain presidential campaign of 2012. Describing herself as the mother of a child with diabetes, which means that in the pre-ACA era her child and possibly her entire family would have been uninsurable in the individual market, Hoekstra asserts that “the preexisting condition mandate of Obamacare actually makes our healthcare system worse.”
Disallowing pricing based on preexisting conditions is like mandating that Las Vegas has to accept bets on the Super Bowl after the game is over.
She continues, “disallowing pricing based on preexisting conditions is like mandating that Las Vegas has to accept bets on the Super Bowl after the game is over.” This is an utterly faulty comparison: The ACA doesn’t allow anyone to wait until after a diagnosis to buy insurance, but allows purchases only during the annual open enrollment period for coverage starting the following Jan. 1. Open enrollment for 2016 has just begun. Of course, the ACA’s individual mandate is designed to avoid the free-rider problem of people waiting until they’re sick to buy insurance.
The Mercatus economists, as it happens, almost all agree that some protection against medical underwriting is necessary. They struggle to find alternatives to the ACA system. Bradley Herring of Johns Hopkins University seems to favor lengthening the term of health coverage from a year to many years, so health insurance begins to resemble term life insurance. In the latter, you pay a flat or modestly rising annual premium for a 10- or 20-year plan (or any period you prefer). The idea is you’re overpaying in the early years, when your risk of death is lower, to subsidize your premium in the later years, when the risk is higher.
Nothing’s wrong in principle with this option for health insurance, except that life insurers have decades of actuarial experience helping them set premiums, and insuring against general mortality is a lot simpler than insurance against the cost of treatments for an untold number of medical conditions, some of which may require outlays for years, rather than a single payment for a single event (death). The cost of medical care, moreover, is tied to geography -- the price of treating a heart attack can be wildly different in Los Angeles and Omaha -- which makes it hard for any insurer to design a nationally portable long-term health plan.
Others at Mercatus favor a continuous coverage rule, similar to one proposed by Republicans in Congress during the last two sessions. The rule would guarantee protection for medical conditions assuming the applicant has maintained insurance with no more than a very brief break in coverage.
Such a rule offers less than it seems. Countless studies find that the main reason for individual or family lapses in coverage are financial -- people drop their insurance because they can’t meet the premiums. Without protections for people who fall between the financial cracks because they’ve lost their jobs or suffered some other catastrophic reversal, “continuous coverage” is a chimera.
Among the common flaws in these proposals is that little or nothing is said about what to do with uninsured persons who turn up with a severe injury or disease. Society’s unwillingness to let them decline or die without medical care is what motivated led to the Affordable Care Act in the first place, and that problem would remain unsolved.
The Mercatus papers tend to offer marginal tweaks to a problem that remains at the heart of healthcare reform, which is making sure that sick people aren’t priced out of coverage. The only truly radical proposal is offered by libertarian columnist Megan McArdle, who calls for a system in which the government simply pays 100% of catastrophic health expenses for everyone -- she suggests picking up everything over 15% to 20% of adjusted gross income. Insurance covering the gap would be “relatively cheap,” she asserts, since insurers’ exposure would be capped.
The big problem with this idea is McArdle’s magic asterisk: Where would government coverage begin? “The number would have to be negotiated through the political process,” she writes. Well, good luck with that. It took years and complex legislative maneuvering to pass the ACA, and we’re still arguing about it. How many lifetimes would it take to enact blanket coverage of the kind she advocates?
The other flaw in McArdle’s plan is that it doesn’t explain why the government shouldn’t go further. Why stop at 15% to 20%? If the gap below that is cheap to insure, let the government cover it too. What she’s really arguing for, in not so many words, is single-payer coverage. That may be the smartest reform of all, and McArdle, despite herself, seems to agree.
Short of that, no amount of tweaking can overcome the raw fact acknowledged by Mercatus at the top of its website: Preexisting conditions are a fact of medical life, and they have to be dealt with one way or another.