Wednesday, March 17, 2010

Problems with high risk pools

Many states have high risk pools, programs that seek to help uninsured persons who are uncovered because they can't get coverage because of their health (pre-existing conditions). Within the current system, such efforts are laudable, and represent the rescue principle--the fact that many persons want to help the uninsured get care, because as much as people say they like markets, they necessarily create winners and losers. A many people don't want people to lose in this way. Here is a write up of the problems of one such effort in Pennsylvania, and the slide toward death spiral that seems to be taking place in this program. Most such programs have this and other problems.

The most fundamental problem with high risk pools is that they segment risk, and seek to provide help to make coverage affordable for a relatively small group of the least insurable persons. If we are going to worry about people being uninsured and seek to cover those who are sick, the correct approach is to spread risk as broadly as possible. The healthy will subsidize the sick one way or another, the question is how efficient and straightforward the subsidy will be.

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