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The Republican guarantee about pre-existing conditions is not a guarantee

by Matt Phillips
May 4 2017, 3:37pm

Everybody needs health care.

But sick people need the most health care. And treating sick people costs a lot. That’s why in any given year the sickest 10 percent of Americans account for roughly two-thirds of health spending.

Those are the simple facts at the heart of what has become a deeply polarized debate about the U.S. health care system.

Now, just over 100 days into the Trump administration, that system — which accounts for roughly 18 percent of the U.S. economy — is about to get its second major revamp in less than a decade.

House Republicans passed their version of the American Health Care Act on Thursday, beginning the process of repealing the Obama-era Affordable Care Act. It was a second try for the bill, and this time Speaker Paul Ryan was able to win over moderate, swing-state Republicans with the addition of $8 billion in funds (proposed by Michigan Rep. Fred Upton) over the next five years to help with the coverage of people with pre-existing conditions.

Requiring health insurance companies to provide coverage to people with pre-existing health issues is one of the most popular provisions of Obamacare, and Republicans are eager to claim that their replacement bill will continue to provide coverage to people with pre-existing conditions, even if it allows insurers to charge more or not cover them at all.

President Trump, in an interview with CBS News’ John Dickerson, even offered what sounded like a guarantee of coverage for those people, but upon review, he never actually told Dickerson what precisely is guaranteed. Here’s the exchange, from a transcript.

Dickerson: So I’m not hearing you, Mr. President, say there’s a guarantee of pre-existing conditions.

So can you believe that coverage is guaranteed because the president kind of, sort of, said so? No, you can’t.

Per the Republican bill, states can request a waiver to federal rules to allow insurers to charge higher rates to people with pre-existing conditions as long as they have some sort of alternative system in place, such as a “high-risk” pool — a pot of money set aside to cover sicker patients. (Charging higher rates to those with pre-existing conditions wasn’t allowed under Obamacare.)

Sounds good, except for one thing: all those sick people. Because sick people are so expensive to cover — remember, 10 percent of sick Americans account for two-thirds of spending — those pools of money have to be very big, or they don’t end up covering very many people at all.

So, is the addition of $8 billion in funds over five years — which swayed some moderates to the bill — on top of the previously included $130 billion over 10 years enough money?

It doesn’t look like it. For one thing, the $138 billion in federal money is supposed to be used for a bunch of different things besides high-risk pools, including helping people pay for high premiums and direct payments to health care providers.

Analysts at the center-left Center for American Progress say that even if all that money were used to pay for high risk pools of uninsured sick people, it would still be about $20 billion below the roughly $33 billion the government spends to help cover costs right now. A separate 2010 analysis by conservative-leaning economists found that a well-funded high-risk pool program for the U.S. as a whole would cost between $15 billion and $20 billion a year. (That’s more like $17 billion to $22 billion, adjusted for inflation.) So that’s below the roughly $15 billion that would be available for such pools for the first five years. (The $8 billion from the Upton amendment only covers five years.)

Of course, how long the money lasts also depends on how many states apply for waivers. In theory, if just one tiny state applies for a waiver, it could be more than enough money. But that’s just a possibility, which is the opposite of a guarantee.

Here’s the big picture: $138 billion sounds like a lot of money. But it’s actually tiny compared to the amount of federal spending that would be cut by the bill, roughly $1.2 trillion by 2026, according to a Congressional Budget Office analysis of the earlier version of the bill. And it’s even tinier compared to the entire health care sector, which amounted to roughly 3.2 trillion in 2015.

The bottom line is you can’t get $1.2 trillion worth of health care for $138 billion. And that means some people won’t get health care.

“You can’t fix all of it,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation, who has analyzed the Republican legislation. “It’s not enough.”

Donald Trump
health care
paul ryan
american health care act
preexisting conditions
republican health plan