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@BarackObama: Isn't it great that people can wait until they are sick to buy health insurance?

Here’s a story touted yesterday by @BarackObama on Twitter as evidence that Obamacare is working out really well:

“A year ago, my father visited the emergency room of a small, rural hospital in California’s Central Valley. His medications for severe back pain had ceased to provide relief. He was suffering immensely and could no longer care for himself. Further testing revealed something far worse than a pinched nerve or herniated disc: metastasized prostate cancer.

“The pain of hearing that my 59-year-old father had stage 4 cancer was worsened by the realization that his lack of insurance would likely determine the level of care he would receive—and thus the length of his life. After moving him into our home in Oregon, I researched the options to prevent this: putting him on our insurance plan (parents can’t be covered as dependents); buying independent coverage (his pre-existing condition disqualified him); and enrolling him in Medicare (too young). When none of these proved possible, I resigned myself to the fact that we would have to exhaust his savings and eventually sell the farmland that has been part of our family for generations—and is his only source of income—in order to qualify him for Medicaid.

“Luckily, we didn’t have to resort to this scenario. The passage of the health care reform bill enabled the Oregon Health Authority to establish a federally funded high-risk insurance pool for people like my father. As managed through the Oregon Medical Insurance Pool and a third-party administrator, the Federal Medical Insurance Pool has provided my father with insurance coverage that quite literally saved his life.

“My dad has a fantastic oncology team and access to the medications and treatments he has needed to fight his cancer. A year ago, our family was told that my dad would likely die within weeks or, if we were lucky, a few months. As we prepare to celebrate his 60th birthday—and more than six months in remission—I thank you, the OHA, and the legislators who supported health care reform for this crucial lifeline for my family and many others.

“Thank you for putting the interests of people—not insurance companies—first. Thank you for caring more about Americans fighting for their lives than approval ratings. Thank you for giving me this time with my dad.”


The man (and/or his family) highlighted by Team Obama apparently has some financial resources. We know this because (a) the father had too much money and/or income to qualify for Medicaid and (b) he now has enough money to pay the rather high premiums charged by Oregon’s high-risk pool: at least $574 per month.

In spite of his financial resources, the man chose not to purchase a private health insurance plan available to him through Oregon’s individual market until after he was diagnosed with cancer. A $10,000-deductible individual policy offered by Regence BlueCross BlueShield of Oregon costs about $160 per month for a 59-year old non-smoker in the Portland area.

As Mario Loyola, Richard A. Epstein and Ilya Shapiro note, the guaranteed-issue provision touted by Team Obama creates a strong incentive for people to wait until they are sick to obtain coverage:

The ACA’s guaranteed issue provision does nothing to encourage healthy people to pay for “insurance”; on the contrary, it is a powerful incentive for people to wait until they are sick to buy it. That behavior leads to the “adverse selection spiral” under which people buy health care insurance only when they know it is worth more to them than what they pay for it. As healthy people leave the rolls, the per-unit cost of insuring the remaining (riskier) insured rises, which pushes premiums up, which in turn drives more healthy people off the rolls. In the end, the only people who enroll are those with known medical conditions, such that premiums approach the actual cost of health care, and the insurance industry collapses.


Imagine what would happen to the market for private homeowner’s insurance if people could obtain retroactively-applicable homeowner’s insurance through a government-subsidized program after their home burned to the ground.  Clearly, the market for private homeowner’s insurance would dry up and the cost of the government-backed program would explode.

All of which helps explain why the costs of Obamacare’s high-risk pool subsidies are much higher than originally anticipated.

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