During a recent interview on “Meet the Press,” Republican vice presidential candidate J.D. Vance set forth a brief, but troubling, agenda for reforming our health care system. As the parent of an adult child with cystic fibrosis, based on our family’s experience, his plan would be devastating to those with chronic or debilitating diseases.
For many years, the Republicans have argued that the Affordable Care Act (“Obamacare”) should be repealed, but never proposed a feasible replacement. This, of course, is ironic because the genesis of Obamacare (and in particular the individual mandate) originated with a 1989 paper written by Stuart Butler, then a health economist at The Heritage Foundation.
As a response to Hillary Clinton’s health care proposals during the Clinton Administration, four Republican senators devised an alternative to the Clinton plan based on Butler’s paper.
The Republican plan was built upon two fundamental components: an individual mandate and exchanges run by private insurers.
That plan was also the basis for a Massachusetts health care plan championed by former Gov. Mitt Romney. Obamacare was heavily based on the principles advocated by both Romney and the four Republican senators.
The individual mandate imposes a tax for failure to participate in the system. Imposing a tax that exceeds the cost of purchasing health insurance incentivizes participation. The tax was enacted because it is actuarially impossible to underwrite health insurance for those with pre-existing conditions unless everyone participates in the system.
In 2017, the individual mandate tax rate was reduced to zero under the guise of offering greater choice in choosing health care coverage. Subsequently, a substantial number of Americans chose to either be uninsured or to purchase insurance that did not meet the Obamacare coverage standards.
This removed from the Obamacare risk pools relatively healthy people who filed few insurance claims. Consequently, insurance premiums increased for those who remained in the risk pools. Many could no longer afford the higher premiums.
The problem was exacerbated during the pandemic when uninsured people unexpectedly required extensive hospitalization that they could not pay for. The hospitals had to either absorb those costs or pass them on to patients who are insured — thereby increasing insurance premiums.
When explaining his proposal, Vance stated, “What that will also do is allow people with similar health situations to be in the same risk pools.”
This defeats the premise of insurance where you spread the risk over a large number of individuals so that everyone can afford to participate. We should seek to consolidate, rather than disaggregate risk pools because smaller risk pools are less effective at spreading risk. Smaller risk pools also require more extensive underwriting standards to ensure that everyone is placed in an appropriate risk pool.
Before Obamacare, several states adopted health care plans similar to what Vance proposes. They placed people with preexisting conditions into separate risk pools that resulted in unaffordable premiums for those with serious health problems. Under Vance’s proposal, insurance for people in poor health would inevitably become exorbitant and would cause a de facto elimination of coverage for people with chronic conditions.
To explain the implications of Vance’s plan, consider a family like ours who has a child with a disease like cystic fibrosis. In our experience, cystic fibrosis treatment costs historically ranged between $500,000 and $1 million annually. Back in the 1990s, I had decent insurance coverage through my employer, but if I lost my job, we would also have permanently lost insurance coverage for our daughter.
We knew another family who had two children with cystic fibrosis. Unfortunately, their father lost his job and his job-related insurance coverage. Because their children’s cystic fibrosis was an uninsurable preexisting condition, the family had to bear enormous medical costs, which forced them into bankruptcy.
The Centers for Disease Control reports that about 129 million people in the U.S. have at least one major chronic disease, such as heart disease, cancer, diabetes, obesity, or hypertension. All of these are pre-existing conditions. Many of the people suffering from these chronic diseases are poor and are unable to pay the premiums that would result from being placed in a separate risk pool.
Vance also wants to “deregulate the insurance markets.” There are relatively few health care insurance alternatives, resulting in oligopolistic practices throughout the health care industry. Deregulating the industry will enhance the existing oligopoly.
Health care in America is more costly than elsewhere. The reasons are complex. Vance proposes simplistic solutions that not only will fail, but also are likely to exacerbate the problems we already face with our health care system.
Jim de Bree is Valencia resident.
