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June 2012
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NOT EASY Obamacare a disaster, but fix won't be painless


We have noted on this page the similarities between Obamacare and Kentucky's own failed health insurance "reform" law of 1994. Both laws promised to bring competition to the insurance market. Instead they destroyed it, and premiums soared.

Kentucky repealed its law entirely 10 years after it was enacted. Obamacare -- officially the Patient Protection and Affordable Care Act -- appears headed for the same fate over an even shorter period. Republicans who control both chambers of Congress have made repeal of Obamacare their top priority in the weeks ahead.

This is not without handwringing by some GOP lawmakers who worry about the optics. A rational case could be made that Congress should just repeal the law and start over. Kentucky did that with little controversy. Obamacare won't die so quietly, however.

The bulk of people who obtained coverage under Obamacare will still be covered if it is repealed. That's because most who gained coverage did so through expanded Medicaid programs in the states. In Kentucky more than 400,000 people were added to the Medicaid rolls under the ACA compared to about 85,000 people who bought coverage.

But repeal of Obamacare would be disruptive for the 11.5 million people who have signed up for coverage on national exchanges. Many in Congress recognize that media organizations are salivating over the individual hardship stories they will be able to report as proof that repeal of the failed law is greedy and cold-hearted. Some Republicans believe a replacement for Obamacare must be offered up simultaneously. This is not without risk. Republicans could end up owning something as bad or worse than the original.

One oft-mentioned Republican idea is to allow people to buy health policies across state lines. It is a flawed concept; akin to reimporting prescription drugs from countries where prices are lower. Some people would benefit for a time but in the end there is no free lunch.

Health insurance rates are all about numbers. Actuaries look at costs associated with demographics of a given population. That drives up rates in Kentucky, one of the the worst states for smoking, obesity, low education attainment and other factors associated with higher costs

Colorado is much the opposite. Its population is younger, more health conscious, and better educated. If Kentuckians could buy insurance in Colorado they might find lower rates. But premiums would quickly adjust as actuaries calculate the change in demographics of the buyer pool.

The biggest problem with health coverage is and always has been the question of how to insure people with pre-existing conditions without bankrupting them. There are only two solutions.

One is to spread the costs of care over the entire population by requiring everyone to have insurance. Failure to achieve that while requiring people with health problems to be insured at normal rates is the precise reason Kentucky's reform and Obamacare failed.

The other solution is to put sick individuals in a high-risk pool and heavily subsidize it. Kentucky made a failed stab at that. Doing it nationally would be very expensive. But it is probably the best alternative.

Our nation does need to find a way to assure seriously ill people can get the care they need without being bankrupted. Obamacare and Kentucky's failed attempt show that financing that by raising the cost of coverage for everyone else doesn't work politically. A targeted approach to help those most at risk is the better of the painful alternatives.

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