Last night on AMG, Republican Representative Jon McKane (R-Newcastle) published a lengthy, straight-forward defense of the new insurance regime enacted by the legislature.
It is well written and persuasive, as long as you don’t think too hard about the math.
Ready to enter Republican math land? Grab a handrail and hold on.
I’ll let Rep. McKane explain the quasi-high risk pool created by the new law. It is called the “Guaranteed Access Plan.”
Part B creates the Guaranteed Access Plan (GAP). This is similar to a “high-risk pool” but differs in some significant ways. First, those who need chronic care and are in the GAP will be offered the same policies as anyone else. Also, they will not be charged a higher premium. The difference for the cost of their care will be made up by the insurers and by a maximum $4 per month fee on enrollees. The addition of this new fee will be more than offset by the elimination of the 2.14% tax on claims that supports the Dirigo program.
The idea is this: people who are sick and have very high health care costs will be in the same plans as everyone else and pay the same premiums, as if by magic. How, you ask? There will be a tax (oh, excuse me Rep. McKane, a fee) of $4 per month per person to pay for the higher costs of these sick people.
But how much money does it actually cost to take care of the sickest people? Rep. McKane gives us some facts:
It is important to remember that 1% of those who have health insurance account for 40% of the claims paid. By moving this 1% out of the general insurance pool and continuing to cover their health care expenses, there will be less pressure to raise rates for healthier individuals.
As Rep. McKane says, one percent of insured persons require 40% of total claims paid because they have cancer, a chronic condition, high prescription costs, or some other serious malady.
Those people are the one percent that will be covered under the Guaranteed Access Plan, which will be funded by the $4 fee paid by everyone else.
But think about this: will $4 be enough? How do you pay 40% of claims with a $4 fee, all while not reducing coverage or increasing premiums?
Answer: You don’t. It doesn’t add up. I doubt you could even pay half a percent of claims with a $4 fee. If an extra $4 was all insurance companies needed, why didn’t they raise their rates by $4?
Answer: Because they were too busy raising them by hundreds of dollars just to keep up with health care costs.
Let me break it down: there is no free lunch. There is no clever scheme that can reduce health insurance cost without dealing with health care costs. Health care costs in Maine are higher than average because we, as a state, are one of the oldest in the nation. Older people need a lot of health care and it isn’t cheap.
No. Free. Lunch.
$4 is not going to change anything. It will not cover the costs, and Republicans will need to raise the fee dramatically or reduce coverage to balance the sheets. Which do you think they will choose?
Rep. McKane ends his essay with some reassuring talking points:
The concepts are not experimental or bold but have been used successfully around the country to create stable yet competitive health insurance markets. Over the next few years, Maine will be put back on the road to health insurance normalcy.
No, Rep. McKane. Other states have kept insurance costs a bit lower than in Maine by having a younger population and covering fewer peple. The sickest people drop out first. They just happen to be the most expensive to cover.
Maine covers much more of it’s population but it costs money, because there is no free lunch.
I can’t wait to see how Rep. McKane votes when the first bill comes forward to reduce coverage, raise deductibles, and reduce prescription reimbursements for the “Guaranteed Access Plan.”