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The coming depression blog | November 24, 2017

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ObamaCare’s High-Risk Pools Cost Twice as Much Per Person As Projected

Enrollment in ObamaCare’s high-risk insurance plans—intended to provide immediate coverage for the especially difficult to insure until the law’s major insurance expansions start up in 2014—has so far been underwhelming: Fewer than 50,000 people are enrolled in the program, according to a new report from the Centers for Medicare and Medicaid Services. Initial estimates had projected that around 375,000 people would end up enrolled, possibly pushing it far over budget before 2014.

Overall, the program has so far spent just $600 million of the $5 billion it was allocated. But on an individual basis, patients have been far more expensive to treat than projected, costing quite a bit more than similar high-risk plans offered by states prior to ObamaCare.

The Washington Post’s Sarah Kliff reports:

Those who have enrolled in the program are projected to have significantly higher medical costs than the government initially expected. Each participant is expected to average $28,994 in medical costs in 2012, according to the report, more than double what government-contracted actuaries predicted in November 2010. Then, the analysts expected that the program would cost $13,026 per enrollee.

The costs also are significantly higher than those of similar high-risk pools that many states have operated for decades. States spent an average of $12,471 on enrollees in 2008, according to the National Association of State Comprehensive Health Insurance Plans.

Why is it so expensive? Because the plan’s design attracts the sickest and most expensive patients. So far, most of the money has gone to treatments for a few very costly conditions—cancer, heart disease, and so on. According to a CMS official quoted in the article, the regulated rates and plan designs make it possible for those with such conditions to start in on high-cost treatments immediately after enrolling:

“Once you’re enrolled you can begin chemotherapy the first day of your coverage,” said Richard Popper, deputy director of insurance programs at CCIIO. “We had individuals who enrolled and in their very first week went into surgery.”

No surprise there: Those most likely to enroll in a program like this are those who stand to gain the most from it.

Mostly what we learn from this story is that it’s unwise to put too much trust in the cost and enrollment projections made when the health care overhaul was passed. The law’s early retiree reinsurance program blew through its money far faster than expected. The long-term care program was passed on the promise that it could be made fiscally sustainable; the administration pulled the plug when it turned out that wasn’t true. The high-risk plans, meanwhile, are turning out to cost far more per-person than anyone guessed—but enrollment is far lower.

I’m not suggesting we should completely ignore projections for the Medicaid and exchange provisions that make up the bulk of ObamaCare’s insurance expansion. But this is what the Congressional Budget Office was warning about when it repeatedly noted that its ObamaCare cost projections were “subject to substantial uncertainty.” And we should expect more deviations from the projections as implementation continues.

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