Democrats favor broad-based pooling of health insurance risk, while Republicans prefer narrower pools and more individual responsibility for risk. That may sound like old news for health policy experts—and incomprehensible wonkery to the general public.
But Linda Blumberg and John Holahan, veteran health policy researchers at the Urban Institute, provided a valuable public service in their new Health Affairs blog post by explaining the centrality of risk pooling relative to understanding the presidential candidates' healthcare proposals. It's a highly useful way for voters to evaluate the candidates' plans.
“The health policies of the two political parties and their presidential candidates differentiate themselves clearly along the lines of pooling philosophies,” Blumberg and Holahan wrote. “These positions have dramatically different implications for individuals when they experience significant health problems, and they also have very different implications for low- and middle-income populations as compared to those with high incomes.”
While voters might think that the basic debate between the parties is whether to keep or repeal the Affordable Care Act, the underlying conflict is over what Europeans call social solidarity. In other words, how much should younger, healthier and wealthier people pay for the healthcare of older, sicker and poorer people? The ACA goes only part of the way toward sharing those costs.
“Deciding how much of total health care expenditures should be shared across the population and how to share it is the fundamental conundrum of health care policy,” the authors wrote. They should have said “U.S. healthcare policy,” because all other advanced countries made the political decision long ago to broadly share the burden of illness.
The tension arises from the fact that most people, at any given time, are healthy and prefer to minimize what they pay into the healthcare system until they need care. The vast bulk of costs comes from a tiny minority of very sick people.
But as the Health Affairs authors noted, the good fortune of a healthy young person can change quickly with a car crash or a cancer diagnosis. “We erroneously may discount the value of our future access to adequate and affordable health insurance coverage when we are young and feeling invincible,” they wrote.
Democratic candidate Bernie Sanders proposes the broadest risk pooling with his plan for a federal single-payer health insurance system. Everyone would receive government coverage, with no cost sharing and comprehensive benefits including long-term care. The system would be financed through new taxes on individuals and employers.
Democrat Hillary Clinton wants to build on the pooling mechanisms of Obamacare—including the individual mandate and the prohibition against insurers being able to judge health status. She would expand those features by reducing cost-sharing for medical services and prescription drugs. That would further shift costs from people who use healthcare most heavily to those who use fewer services, or none at all.
By contrast, Donald Trump, the leading Republican candidate, promotes the use of tax-sheltered health-savings accounts (HSAs), which conservative health policy experts want to greatly expand.
As Blumberg and Holahan pointed out, HSAs allow people to divert healthcare dollars from the general insurance pool to their own private accounts, reducing the money available to cover care for sicker and poorer people who can't afford to fund their own personal accounts.
Trump, his presidential campaign rival Ted Cruz, and other Republicans also propose other policies that would further divide healthier and sicker people into separate pools, thus pushing higher costs onto those with health conditions. The policies include tax changes to shift consumers from employer health plans to individual-market plans; eliminating minimum-benefit requirements; allowing interstate sales of health plans; letting insurers charge higher rates based on beneficiaries' age and health status; and offering tax-based premium subsidies that do not vary by income.
In addition, Republicans want to set up separate, tax-supported, high-risk health insurance pools for sicker people, which would reduce premiums for healthier people with standard insurance. But the Health Affairs authors noted that without hefty public spending, Americans in high-risk pools would face high premiums, stiff cost sharing, limited benefits and enrollment waiting lists, which was the experience in the past.
Advocates for separating those who are healthier from those who are ill into different pools use terms such as “individual responsibility,” “skin in the game,” “consumer choice” and “market competition,” Blumberg and Holahan wrote. “But make no mistake about it: It is all about the risk pool,” they stated.
The American public is torn on the risk-pooling issue, and that's reflected in numerous polls. A majority like some Affordable Care Act cost-spreading features such as the prohibition on insurers denying coverage to those with preexisting conditions, letting children stay on their parents' health plans until they turn 26, and expanding Medicaid to low-income adults. But most people don't like the requirement that nearly everyone has to have health insurance.
Politicians and pundits need to explain the tradeoffs. We can't have it both ways.