The federal government's $5 billion plan for creating state-based high-risk insurance pools for uninsured patients could cost five times that amount, according to one healthcare analyst's calculations.
If it currently costs $2 billion annually to cover 200,000 individuals under similar plans already operating in 34 states, there's no way that $5 billion will be enough to cover the 2 million additional people required under healthcare reform between now and 2014, Thomas Tobin, healthcare analyst at Connecticut-based research firm Hedgeye, writes in the Forbes healthcare blog The Science Business.
"The real cost will be more like $40 billion," he writes. Similarly, the CMS chief actuary recently estimated that the $5 billion set aside for high-risk pools could be exhausted as early as 2011.
The high-risk pools are to be established by January 2014 and provide coverage for uninsured individuals with pre-existing conditions and are required to cover 65 percent of a patient's healthcare costs.
"The $5 billion allocation attached to the high risk-pool initiative appears to represent a number dictated more by political feasibility than a fair assessment of true program cost....While the potential for an additional $40 billion in stimulus is a welcome sight for healthcare stocks, the bigger question will be the consequences inflaming the political debate over costs," Tobin writes.
Eighteen states have decided against accepting money to create the temporary high-risk pools on their own, meaning the federal government will step in and create pools in those states. Utah and Rhode Island remain on the fence about implementing the pools, with Utah Gov. Gary Herbert leaning more in toward Tobin's notion that the federally allocated money won't be enough; Utah would receive $40 million should it opt in to the plan.
"I have strong concerns that the program is severely underfunded and will ultimately result in yet another unfunded mandate on our state," Herbert wrote in a letter to Department of Health and Human Services Secretary Kathleen Sebelius on Wednesday. "Please help me, as governor, assure Utahns that their federal government will be fiscally responsible for the costs associated with the laws it passes."