Pollack: Is that because they've just run out of money?
Swartz: Yes. And they've been closed for a long time. So, any idea of using HRPs in a major way to cover many of the uninsured people even if you just wanted to cover people that you think are going to have very high costs, that's a lot more than 200,000 people. And we need to restructure and refinance how those pools would be run. I think that's part of why the Senate Finance Committee put $5 billion in there. But I agree with you. I don't think $5 billion is enough money.
Pollack: If you ask how many people these risk-pools can realistically serve, the numbers get very small. That was something that came up in the campaign with McCain's proposal, which was also underfunded.
Swartz: Yes. I coauthored a piece with Sherry Glied, Thomas Buchmueller, and Anne Royalty where we argued that HRPs won’t work without a lot of money.
Pollack: The Baucus proposal requires people to be uninsured for six months before they can gain access to it. What happens to people? If you think about this prospectively, it means that we are requiring that people lose their insurance or not have insurance and go six months with potentially costly and deadly diagnoses before we are willing to address their needs.
Swartz: There's so much evidence that when people don't have health insurance, they are not getting the same level of care as people who have health insurance. Suppose somebody has liver cancer, or let's say she had ovarian cancer 20 years ago. There are a lot of women who if they were diagnosed with ovarian cancer starting about 20 years ago, are lucky because we really changed how we treat it and many are now survivors. But, for the last 19 or 20 years, they are viewed as very high risk people. And if they were suddenly to lose their insurance coverage for whatever reason, and then have to wait six months, but during that time, a lump was discovered or some other evidence that maybe there's a new cancer, they are in trouble.
Pollack: Are there any positive lessons from the states about things that have worked well that we can learn from? If you could design this thing and make it as well crafted at least as feasible in the current structure, are there any lessons that we should draw from this from states?
Swartz: We learned a lot in Massachusetts from the requirement that people have to show evidence of coverage and working through how we define “affordable” and who would get exempted from the requirement. I think there are lots of good lessons out of what's happened in Massachusetts. It's gotten a bad press. In fact, the Massachusetts Taxpayers Foundation came out with a report in June saying that it's working pretty well, actually – the medical inflation in Massachusetts are not due to the increased number of people with coverage…. If you are going to get rid of adverse selection in this marketplace, you do have to have this type of personal responsibility requirement in place.
I think Vermont is another state where there are good discussions going on between representatives of different stakeholder groups. I don't know a lot of the other states quite as well, in terms of what they have been able to do in the last couple of years. I think people are much more thoughtful now about the risks that are involved in health insurance. For example, how do you share risk among everybody, rather than having one or two insurers end up with a lot of adverse selection.
I also think the other lesson that has come out, chiefly from Massachusetts and from Vermont… thinking through what is a minimal benefits package everybody should have. We’re trying to balance out the fact that if you add more required services to it, it's going to cost a lot more. What is it that we are really trying to insure? I think we are working our way towards coverage against catastrophe, where catastrophe is defined relative to somebody's disposable income, along with some cost-effective primary care services basically.
Pollack: How about specific lessons of state risk pools?
Swartz: Minnesota and Oregon are the only two that have large enough numbers of people that have been covered, but again, I don't think that the current structure of the risk pools is what we should be looking at if we are going to greatly expand them. They weren't set up for this. They were set up, really, to take very small numbers of people out of the insurance market. They weren't meant to be a substitute for public or private insurance.
Pollack: How about the reinsurance provisions in the various leading bills? I take it you believe that reinsurance would be useful in a state insurance exchange to address the really extreme cases that are going to come up.
Swartz: I think reinsurance is a way of more fairly and widely spreading the burdens of people who have extraordinarily high costs. It’s pretty random who lands in that top one or two percent in the population in terms of healthcare costs in any given year. So, having a broadbased population paying most of their costs makes a lot more sense to me than placing the burden on others who happen to be covered by that person's particular insurer or insurance policy.
Pollack: I was going to say there's a tension in that. People affected by reinsurance are, of course, the really high cost people. How do we manage the costs of their care without either having them dumped from the insurers or creating other unwanted incentives. I don't really know of a good answer to do that.
Swartz: Reinsurance offers some real advantages in managing the care of people who have clearly crossed some tripwire heading down the road to requiring very expensive care. You really do want somebody being the quarterback about what's happening with a person's medical care. I can tell you this from personal experience, watching what's going on with my parents.
For example, suppose you have someone with Parkinson's disease who has shortness of breath (a common issue with Parkinson’s). A 911 call causes the person to be taken by an ambulance to a hospital emergency room. Hospitals are generally terrible for people with neurological illnesses. Most of the ER people have little experience with their special needs or problems, and they respond to an older person coming in with shortness of breath by assuming it could be a heart attack. As a result, many expensive tests can be run during the first 12 hours to determine if the person had a heart attack or stroke. Meanwhile, hospital pharmacies generally don't stock all the meds that somebody with Parkinson's or other neurological diseases have. If the family or the person has forgotten to bring along his meds, the person just starts sliding downhill – and then the hospital is even more likely to suspect a stroke and to keep the person there for observation and more tests. Unless someone is alert to the Parkinson’s issues, a lot of money can be quickly spent on what I would argue are unnecessary tests.
I think when you have a reinsurance program--and you put that together with effective electronic medical records—there are better incentives to manage the care. Instead of calling 911, the family can be urged to call a nurse who knows the specifics of the case and can respond more effectively. That sort of thing could make a big difference in controlling costs.
