One factor in the debate over health care reform involves the difficulty some people face in obtaining insurance when a pre-existing condition is involved. Two years ago, the state of North Carolina dealt with this issue by passing legislation creating a “High-Risk Pool.” The law went into effect earlier this year. Joseph Coletti, fiscal and health care policy analyst for the John Locke Foundation, discussed the issue with Donna Martinez for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Martinez: Let’s talk about exactly what this state program is. It’s called Inclusive Health. Explain who’s eligible.
Coletti: The main people who are eligible for Inclusive Health — the high-risk pool — are folks who have been denied health insurance coverage or have faced riders on their health care, meaning that the insurance company says, “We won’t cover this or that.” Or they face extremely high insurance premiums; seven times what a typical person would pay is one of the numbers that was thrown around when the debate was happening. So the idea of the high-risk pool is to offer less expensive care for people in those situations so that they can be able to access the care that they need for their situations. It’s allowed to charge about 50 percent more, and there are some other rules with it to make sure that people aren’t trying to game the system. But, for the most part, that’s who’s eligible.
Martinez: It sounds like it’s a last-resort situation.
Coletti: That’s the idea of it, yes.
Martinez: If you tried to get insurance, and you can’t because of your health situation, this is your final option.
Coletti: Yes. That’s the idea of it — just as a backstop for the private market — again, if it’s too expensive or anything else. So that’s one of the reasons why, when the debate was happening, why we [the John Locke Foundation] were actually supporters of the high-risk pool. It’s something that makes the consumer market a little easier to adapt to, and to shift into, rather than relying on employers or things like that. If you have a backstop for an individual market, then it makes it easier for everybody else to go along and say, you know, I can purchase insurance, and if something happens to me and I can’t purchase insurance again, there’s a backstop. And so there are a number of ways that you can address that without this program, but this is a good transition tool to get to a consumer-driven market.
Martinez: And these are some pretty serious conditions. If you go to the Web site, InclusiveHealth.org, you’ll find a list there of some of the things that qualify a person — things like Alzheimer’s disease, cerebral palsy, cystic fibrosis, emphysema, cancer, things like that. So these are folks who have been in serious situations.
Coletti: And that’s actually one of the arguments related to the high-risk pool — that once you are in one of those situations, you have Alzheimer’s disease, you have a cancer — you don’t need insurance anymore, you need care. And that’s why the insurance premiums are so high in the market, and so this is a way to subsidize that care, by subsidizing insurance.
Martinez: So it sounds as if, Joe, you believe this is a pretty good approach for the state to take.
Coletti: Yes. Like I said, as a transitional approach, until we get to a fully consumer-driven system and we can have health status insurance, or we can do other methods where you purchase health insurance like you do life insurance —you know, for 20-year periods of time, so that you’re subsidizing yourself — you’re not relying on other people to subsidize you. In the meantime, though, given the system that we have, given the way health insurance works, this is a good approach.
Martinez: You use the phrase consumer-driven care. Let’s talk about that because we’ve heard that phrase bandied about a lot. The Locke Foundation supports consumer-driven care. Exactly what is it? What are the characteristics?
Coletti: The easiest way to describe it is that you pay for the care that you get. It turns health care into a market just like anything else — cars, houses, anything else. Just like with cars and houses, you have things that are expensive, and you have insurance to cover you in an extreme emergency. But for a lot of the other things that you pay for, whether it’s knee surgery or otherwise, then you may cover that with insurance, or you may find other ways to finance that. But when the consumer is the person who’s making the decision, instead of an insurance company, or instead of the government, the consumer all of a sudden has a lot more control over what the doctor does and what the pharmacist does and the care that they get. And they pay a lot more attention to the cost and the quality of the care that they receive.
Martinez: So are you talking about more of a direct relationship between paying for a service and deciding whether or not you want to have it?
Coletti: Yes, that’s a large portion of it. The existing products that are out there right now — the main ones that are closest to this — are the high-deductible health policies tied to health savings accounts. You have a high deductible, you no longer have copays, and you put aside some money into a health savings account. You put the money in tax-free. It earns interest tax-free, and you take it out tax-free to pay for health expenses.
Martinez: So you have a high deductible, but you also have a low premium.
Coletti: You have a much lower premium, yes.
Martinez: So that’s one of the reasons that people say consumer-driven care is less expensive.
Coletti: That’s one of the reasons. The other reason is that, as we’ve seen, and as I’ve seen in my own experience, and as numerous reports bear out, when people switch to a health savings account and they start paying for things on their own, they ask a lot more questions. They’re more likely to use generic drugs instead of brand-name drugs. They’re more cautious about the care that they receive. They reduce the amount [of care]. Instead of an insurance company denying them, and instead of them just saying, “Well, the insurance company is going to pay for it, [so] I’ll take the test, I’ll take this,” they start to become actual consumers of care instead of just recipients of it.
Martinez: We’re obviously in the middle of a very spirited debate in this country over health care reform — some people say health insurance reform. Let’s talk about how the idea of consumer-driven care, which you’ve just described, how that matches up with some of the federal, the congressional, proposals that we’re hearing a lot about these days. Are they in the same ballpark at all?
Coletti: They’re pretty much diametrically opposed.
Martinez: Why is that? What’s different about what’s being proposed?
Coletti: Everything that’s being proposed now is taking the status quo where the insurance companies and the government make decisions for individuals — because right now the government covers half of our health care costs and then insurance companies cover about 37 percent more, so we as patients and consumers only spend about $1 out of every $8 on our own care — every aspect of what’s being discussed at the federal level and at the state level puts more control into government’s hands and into insurance companies, and less power into the consumer or the patient’s hands and the doctor’s hands.
Martinez: Fair to say that’s your biggest concern over what you’re hearing coming out of the U.S. Congress?
Coletti: Yes, that is my greatest concern — that the further we go, the further we remove the consumer from the relationship with the doctor and from being able to take care of their own health, the more health problems we’re going to have. Because if you can take a heart-disease drug, you’re not going to worry about all the contributing factors that lead to the heart disease. You’re not going to pay attention to those things. And it’s going to become more expensive — the health insurance that we purchase is going to become more expensive, and the deficits that we face at the national level and at the state level, in government, are going to become even greater.
Martinez: So that’s your biggest concern with the proposals coming out of Congress and the White House. What is your No. 1 advocacy for consumer-driven care?
Coletti: The easiest thing to do to make consumer-driven care more realistic and easier to achieve is to equalize the tax treatment for people who purchase insurance and care on their own, versus those who get it through their employer. You take care of that, and it becomes much more like a market.