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Mccain's High Risk Health Plan--exposed

One of the more curiously named elements of John McCain's health care plan is something he calls the "Guaranteed Access Plan" (GAP).

According to McCain and his advisers, the GAP is there to make sure even people with pre-existing medical conditions can purchase an individual health insurance policy, something that's frequently impossible now. This is a particularly critical goal for McCain, since the other reforms he has put forward--which involve changing the tax treatment of group health insurance--would push even more people into the individual insurance market.

But would this "guaranteed" plan actually guarantee anything? Scholars (not to mention journalists like me) have been pretty skeptical. A new article by the Washington Post's Amy Goldstein shows why.

McCain has said the GAP would be modelled on high-risk pools that already operate in many states. In a high-risk pool, private insurers--or, in some cases, one private insurer--agree to make coverage available to people they might otherwise exclude for pre-existing conditions, as long as the state kicks in some money. McCain and his advisers have pointed to Minnesota's program as proof that these plans work. Goldstein decided to check it out.

On the surface, the news seems encouraging. Twenty-eight thousand people in Minnesota get insurance through the plan. And, for many of them, it is a real help. Goldstein interviews one of the beneficiaries, who says that without the Minnesota pool she'd never have been able to find insurance and, thus, run her own small business. Goldstein also quotes Lynn Gruber, president of the Minnesota plan, expressing a sincere commitment to helping people find affordable medical coverage: "We treat them like gold. It's all we do, focus on these chronically ill members, what their needs are."

Alas, the story isn't so simple. Insurers who agree to sell policies through high-risk pools reserve the right to offer sub-standard coverage. And they use it. That's why coverage through Minnesota's high-risk pools is still more expensive than average individual policy (which, in turn, is more expensive than the comparable employer policy). Partly as a result, many enrollees end up opting for coverage with extremely high deductibles (like $10,000). And the coverage of pre-existing conditions doesn't even kick in for six months, except for drugs.

But probably the most devastating indictment of high-risk pools is the fact that Minnesota's, for all of its flaws, is far and away the country's best.  As noted here previously, the programs in other states have even skimpier benefits, higher premiums, and longer exclusion periods. Many also have as lifetime benefit limits. Typically, only people with really serious medical problems hit those limits. But those are precisely the people who tend to enroll in these pools.

McCain's advisers insist their GAP won't have these shortcomings. But this claim isn't credible. The only reason Minnesota's pool works as well as it does--and, remember, it doesn't even work that well--is that it's benefitted from relatively generous funding in a traditionally progressive state. Are we supposed to believe that McCain, who famously disdains government spending and whose budget is already deep in the red from tax cuts, would put up enough money to make the GAP work?

And even if the money were there, would it be a smart way to spend it? There's no particular virtue, economically speaking, to breaking out high risks from the rest of the risk pool. But every time you add a new insurance program for a particular group of people, you're introducing new administrative work to sort out who's eligible -- which inevitably fosters waste, confusion, and fraud. Experts say it would cost around $100 billion to cover all of the medically uninsurable through a high-risk pool. But for the same amount of money, or just a little more, you could set up a truly universal health insurance system in which the medically uninsurable didn't end up with second-class benefits.

Don't take my word for it. In the Post article, even Gruber says high-risk pools are no "panacea" and calls for universal coverage: "Our federal government has failed us . . . if we are still here in five or 10 years."

Update: Over at Obsidian Wings, Publius illustrates this problem nicely by examining what it takes to qualify for the high-risk pool in Texas. For more background, see this Think Progress post from August.

--Jonathan Cohn