O’Neill Institute for National and Global Health Law O’Neill Institute for National and Global Health Law Legal Issues in Health Reform

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It’s The Sick, Stupid

Ending discrimination against the sick is a central goal in health reform; all of the major bills ban health insurers from denying enrollment based on health status. But discrimination against the sick does not end once the insurance card arrives in the mail. Insurers have a menu of options for curbing the use of necessary medical care among their members.

To be sure, considerable thought has been given to how health insurance coverage can help make preventive care more affordable. But a fundamental goal of reform is to make sure that good care is there for the children and adults who need it the most, whether as a result of a catastrophic illness or injury or as a result of a disability present from birth or infancy, such as cerebral palsy or autism.

If Congress and the White House are serious about building a health insurance system that does not discriminate against the sick, it is essential that the final measure rest on a risk pool that spreads the costs of illness across the largest group possible. In the world of insurance, it is this ability to spread risk – across both the young and the healthy and those with serious health problems – that allows cost containment through high quality and efficient care rather than through the use of tricks and fine print that are designed to shield the industry from having to pay claims.

For risk spreading to work on a large scale, two things need to happen. First policymakers must assure that coverage is affordable so that younger healthier individuals and families people will not opt out and pay a fine instead. Second, rather than seeking short-term savings, policymakers need to build a strong risk pool and avoid segmenting the market into weak groups that in turn induce insurers to engage in harsh cost-avoidance strategies.

The House bill goes a considerable way toward the goal of a large and robust risk pool. The House measure takes a national approach to pooling. This approach assures that even small states with disproportionately older populations can get the best deal, while the younger adults in those states and their children do not face the burden of supporting older residents alone. Other than extending Medicaid’s special protections to the poorest residents, the House bill pursues a unified approach to coverage to benefit all members of society.

The Senate bill, by contrast, depends on state exchanges, an approach that carries inherent risks for smaller states with older populations and for younger families and individuals in these states. Furthermore, the Senate Finance Committee made two changes to its plan during its recent markup, both of which may make a bad situation worse for the children and adults who will depend on coverage through exchanges. First, the Committee agreed to permit states that wish to do so to establish small, cut-rate public insurance programs, but just for the near poor. These programs would have none of Medicaid’s important protections for the poor, and states would receive only a portion of the subsidies that would have been spent on the same individuals had they enrolled in their states’ exchanges. Not only does this amendment expose lower income workers and their families to the threat of inadequate coverage, but it removes lower income persons from the state’s exchange. While that may sound like it really does not matter – after all, coverage is coverage – in fact, many of the people who are removed may be younger adults and their children. These are precisely the people whom a state should want to have in its exchange, in order to offset the cost of covering older adults whose incomes tend to be somewhat higher but whose health is potentially not as good.

Second, the Senate Finance Committee voted to retain the Children’s Health Insurance Program (CHIP) as a separate program, and removed it from the exchanges. Not only did this decision result in the loss of additional, enriched benefits for low and moderate income children enrolled in the exchange, as called for the in the original Finance Committee measure, but the change leaves CHIP children in limbo (CHIP expires in 2013) and removes millions of children from the risk pool, a move that is sure to have ramifications down the line for their parents and other adults who need a strong risk pool to be able to have affordable coverage themselves.

In both cases, the Finance Committee reaped short-term financial windfalls that were quickly snapped up and invested elsewhere (such as shielding certain politically sympathetic groups such as coal miners from higher taxes). But in the end, lower income workers and children without strong patrons got short-changed, while the exchange system lost the membership of young adults and children whose presence would have helped the uninsured aunts, uncles, grandparents, and community neighbors who will depend on a strong exchange.

What happens when coverage is balkanized in this way in order to achieve fast savings? Inevitably those who remain in the smaller pools face cut-rate coverage and the impact of harsh insurer tactics aimed at reducing cost exposure. These tactics span a wide range. For example, insurers can exclude certain types of conditions or treatments from coverage altogether; although the House and Senate bills require insurers to cover certain broad benefit classes, they do not prohibit condition-specific treatment exclusions. Today’s insurance products are pock-marked with condition-specific coverage and treatment exclusions aimed at insulating them from financial liability for serious and chronic health illnesses and health problems, including physical, mental, and developmental disabilities among children. (This is why the supplemental coverage for children in the original Finance Committee measure was so important and why its seeming loss is so tragic). To save money, insurers, also can be expected to pay low rates that attract few providers, run skimpy provider networks so that getting appointments will be nearly impossible, slow-walk prior approval requests, and drag their feet on appeals. All of these tactics have been chronicled over years of legal challenges to insurers’ failure to cover and pay for care. Indeed, Congress tried and failed to address many of these tactics in patients bill of rights legislation that died in 2001.

To be sure, both the House and Senate measures contain provisions that attempt to provide some level of safeguards and protections in order to stop insurance discrimination against people who need care. But in the end, all of the legal protections, even if adequately enforced, cannot overcome a basic reform approach that splits the world into small, weak groups vulnerable to endless efforts by insurers to stop the use of coverage. If the White House and Congress want to make sure that coverage will be there when we and our children really are depending on it, they will build a plan that first and foremost protects the sick.

One Comment

  1. Posted October 22, 2009 at 1:49 PM | Permalink

    I’m sure you’re right about CHIP but the way I understood what Sen. Rockefeller was saying had me thinking that kids would do better in CHIP than in the exchanges – or I guess it was the dopey co-op deal that Rockefeller was looking at since that’s what his committee came up with. A national exchange may be a different story.