This one unbelievably expensive Iowa patient makes the case for single-payer healthcare

By Michael Hiltzik
Los Angeles Times, April 24, 2017

Back in mid-2016, Iowa customers of Wellmark Blue Cross Blue Shield, the dominant company in the state’s individual insurance market, got a shock: Premium increases of 38% to 43% were in store for many of them for this year.

Three weeks ago they got a bigger shock: Wellmark was pulling out of Iowa’s individual market entirely, leaving the state with one company selling individual policies. Wellmark placed some of the blame on congressional Republicans’ failure to come up with a coherent repeal plan for the Affordable Care Act, leaving plans for 2018 in legislative limbo. With Wellmark’s departure, Iowa’s individual market may be down to a single insurer next year.

But Iowa has another problem that appears to be unique for a state its size: one single state resident whose care costs $1 million a month. That’s enough to all but destroy an individual insurance market that comprises about 30,000 customers. Indeed, that one patient’s care, according to Wellmark, was responsible for 10 percentage points of the 43% premium increase this year.

The important aspect of the Iowa case is what it tells us about the importance of spreading risk in the healthcare market, and the limitations of the Republican nostrum of segregating seriously ill patients into high-risk pools. The idea is to keep their costs from driving up everyone else’s premiums.

The case also points directly to the benefits of a single-payer healthcare system. “The idea of single-payer is that there’s just one risk pool,” says Steffie Woolhandler, a New York physician who is co-founder of Physicians for a National Health Program, the nation’s leading advocacy group for single-payer healthcare. “That’s what makes the care of very high-cost patients affordable.”

High-risk pools and reinsurance funds tend to be hopelessly underfunded. This was the case in most of the 35 states with high-risk pools prior to the Affordable Care Act, including California. Without sufficient public funding to cover all their high-cost residents adequately, most imposed waiting lists for coverage, time limits on eligibility, and premiums so high that many patients couldn’t afford them at all. The proposals for high-risk pools coming from congressional Republicans are similarly stingy.

“What high-risk pool could tolerate a patient costing a million dollars a month?” asks Woolhandler. “It would have to be a huge pool.”

The only fair and effective way to manage such patients, especially the few with truly stratospheric medical costs, is to make them part of a nationwide pool. A risk pool on that scale would represent the functional equivalent of single-payer healthcare. And that’s leaving aside some of the other virtues single-payer advocates cite, including the ability to negotiate prices on pharmaceuticals with the bargaining power of the entire country, and the virtual elimination of insurance company and provider billing office overhead.

The healthcare cost crisis is spreading nationwide, which makes it a national problem demanding a national — meaning a federal — solution.…

Perhaps the most fundamental principle of health insurance is to pool risk – the high costs of the few are distributed amongst all participants in the pool. Since health care has become so expensive, distributing costs has made each person’s share – the insurance premium – unaffordable for many.

The Republican proposal to establish high-risk pools is simply a proposal to break up the existing pools into larger pools of the healthy which would then make their insurance premiums more affordable, and small pools of individuals with higher medical costs – the high-risk pools. But these high costs spread amongst fewer individuals would require exorbitant premiums that only the wealthiest individuals could afford, if even them (covering a-million-dollar-a-month patients?).

So how do you pay for the care for individuals in the high risk pools? Well, we have experience with that in the form of state-level high-risk pools and the answer is that you don’t pay for them. These pools were tremendously underfunded, so much so that the states covered only about one-tenth of the otherwise-eligible high-risk population, and those who were covered had very spartan benefits leaving them exposed to much of the costs.

Would the Republicans get serious with their high-risk proposal and fund it adequately? The House Republican Study Committee proposed $50 billion seed money for the states with contributions to the state pools of $2.5 billion per year for ten years. For perspective, the care for the 20 percent of individuals who use 80 percent of our national health care – all of the high-risk individuals in the nation – costs about $2830 billion (national health expenditures for 2017: $3,539 billion), indicating the enormity of the high-risk problem. Of course, many high-risk patients are already covered in other risk pools – Medicare, Medicaid, the VA, employer-sponsored plans, etc. – but the residual who are covered by non-group plans is about 7 percent of the total, and 8o percent of that would be about $200 billion per year – almost 100 times what the Republicans propose. Basically, they are unwilling to fund the high-risk pools they tout.

The larger the risk pool, the greater and more assured is the dilution of risk. Of course, a national single payer system would use a single universal risk pool. As Michael Hiltzik says, it is a “a national problem demanding a national — meaning a federal — solution.” One risk pool for all.