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health insurance

Paul Ryan actually said this yesterday (link with video):

The fatal conceit of Obamacare is that we’re just gonna make everybody buy our health insurance at the Federal government level. Young and healthy people are gonna pay for older, sicker people. So the young, healthy person is gonna be made to buy health care, and they’re gonna pay for the person, you know, who gets breast cancer in her forties, or gets heart disease in his fifties.

So take a look at this chart. The red slice here are what I would call “people with pre-existing conditions” — people who have real health care problems. The blue is the rest of the people in the individual market — that’s the market where people don’t get health insurance with their jobs, or they buy it themselves. The whole idea of Obamacare is the people in the blue side pay for the people in the red side. The people who are healthy pay for the people who are sick. It’s not working and that’s why it’s in a death spiral.

Here’s how we propose to tackle this problem. We want to have a system where we encourage states, with Federal funding, to set up risk pools and reinsurance mechanisms. For example, in Wisconsin, we had a great risk pool that actually worked, so that people with real high health costs and diseases, and pre-existing conditions, could still get affordable health care. Well, Obamacare repealed that. They had a great risk pool reinsurance system in Utah, a good one in Washington State… all those are gone under Obamacare.

Here’s how they work, and here’s how our system would work. We would directly support the people with pre-existing conditions. [Red slice removed from pie graph] Let me give you a sense of this. 1% of the people in these insurance markets drive 23% of the costs. 1% of the people in the individual insurance market drive 23% of the costs. So a reinsurance program is to cover more than just the 1%, to cover the people who have high health care costs. So by having state innovation funds to go to the states to set up these reinsurance programs, we would directly subsidize the people who have pre-existing conditions. Direct support for the people with pre-existing conditions so that everybody else has cheaper health insurance.

What you do when you do this is, the individual market, the people who don’t have pre-existing conditions, they have much more stable prices.

Oh. My. Gawd. As lots of people on Twitter have pointed out, "the people who are healthy pay for the people who are sick" is literally the definition of health insurance. More generally, "the people who are lucky pay for the people who are unlucky" is the definition of insurance -- fire, flood, burglary, health, life, etc. We've been discussing Obamacare and alternatives for eight years now, and the Republican Party's anointed policy wonk doesn't pretends not to know how insurance works.

Anyway, let's consider his alternative. We'll take the high-risk people out of the pool, leaving the low-risk majority of people buying their own cheaper health insurance -- and that's probably true. So what do we do with the rest? The Federal government gives the states money to set up "high-risk pools" and "reinsurance programs" that subsidize insurance companies to get them to cover those high-risk people without astronomical premiums. In other words, the money to cover the high-risk people, which was coming from low-risk people in the market, will now come from... Federal taxpayers! The leader of the anti-Federal-government, anti-tax Republicans in the House of Representatives is proposing that instead of paying for something through the free market, we pay for it with Federal taxes.

Mind you, nobody expects Ryan to raise Federal taxes to pay for this added expense -- indeed, the bill in the House cuts Federal taxes. Which leaves several alternatives:

(a) the Federal budget deficit goes through the roof (which is OK when Republicans do it), or

(b) high-risk people will get much less health care, die, and decrease the surplus population, or

(c) total costs will magically drop sharply because the money goes from Federal government to State governments to insurance companies to providers, rather than from Federal government to individuals to insurance companies to providers, or

(d) the Federal government will provide less money than it does now, and State governments will be expected to make up the difference by substantially raising their own taxes. Which California, New York, and Massachusetts might be willing and able to do, while high-risk people in Kansas and Utah (and pretty much any state that voted for Trump) are back to option (b).

I'm betting on (a) and (d).