Spreading the risk

Risk-based subsidies are the answer to the question of how to make sure that high-risk patients are included in any health insurance reform.

Editorial. Jan. 7, 2008.

One of the greatest challenges in reforming the U.S. health system is how to make health insurance affordable and available for chronic-care patients, and anyone else who has expectedly high medical costs.

The current approach surely isn't working, given how it contributes to the rising number of people without health insurance.

In employer-based insurance, the low-risk patients subsidize high-risk patients; all pay similar premiums rather than being assessed charges based on their likelihood of using health services. That makes care more affordable and accessible for the high-risk patients.

But many low-risk patients, especially young adults and some lower-income workers, have joined the ranks of the uninsured rather than pay the high premiums insurers deem necessary to support all patients.

In the individual market, high-risk patients struggle to get any insurance at all. Insurers instead cherry-pick low-risk patients -- or, as recent cases in California have shown, kick some patients off the rolls the moment they are deemed to be high-risk.

The solution to solving both these problems is replacing the current market-regulation approach to high-risk patients.

Instead, risk-based subsidies -- paid out of general tax revenue -- should be used. Such an approach would ensure that high-risk patients get the care they need at an affordable price. At the same time, and equally welcome news, low-risk patients could see their insurance costs drop as their dollars are no longer required as a subsidy.