Thousands of people with serious medical problems are in danger of losing coverage under President Barack Obama's healthcare overhaul because of cost overruns, state officials say.
At risk is the Pre-Existing Condition Insurance Plan, a transition program that's become a lifeline for the so-called "uninsurables" — people with serious medical conditions who can't get coverage elsewhere. The program helps bridge the gap for those people until next year, when under the new law insurance companies will be required to accept people regardless of their medical problems.
In a letter this week to Health and Human Services Secretary Kathleen Sebelius, state officials said they were "blindsided" and "very disappointed" by a federal proposal they contend would shift the risk for cost overruns to states in the waning days of the program. About 100,000 people are currently covered.
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"We are concerned about what will become of our high risk members' access to this decent and affordable coverage," wrote Michael Keough, chairman of the National Association of State Comprehensive Health Insurance Plans. States and local nonprofits administer the program in 21 states, and the federal government runs the remaining plans.
"Enrollees also appear to be at risk of increases in both premiums and out-of-pocket costs that may make continued enrollment cost prohibitive," added Keough, who runs North Carolina's program. He warned of "large-scale enrollee terminations at this critical transition time."
The crisis is surfacing at a politically awkward time for the Obama administration, which is trying to persuade states to embrace a major expansion of Medicaid under the healthcare law.
It may undercut one of the main arguments proponents of the expansion are making: that Washington is a reliable financial partner.
The root of the problem is that the federal healthcare law capped spending on the program at $5 billion, and the money is running out because the beneficiaries turned out to be costlier to care for than expected. Advanced heart disease and cancer are common diagnoses for the group.
Obama did not ask for any additional funding for the program in his latest budget, and a Republican bid to keep the program going by tapping other funds in the healthcare law failed to win support in the House last week.
There was no immediate response from HHS, which has given the state-based program until next Wednesday to respond to proposed contract terms for the program's remaining seven months.
Delivered last Friday, the new contract stipulated that states will be reimbursed "up to a ceiling."
"The 'ceiling' part is the issue for us," Keough said in an interview. "They are shifting the risk from the federal government, for a program that has experienced huge cost overruns on a per-member basis, to states. And that's a tall order."
At his news conference this week, Obama acknowledged the rollout of his healthcare law wouldn't be perfect. There will be "glitches and bumps" he said, and his team is committed to working through them. However, it's unclear how the program could get more money without the cooperation of Republicans in Congress.
The pre-existing conditions plan was intended only as a stopgap. The law's main push to cover the uninsured starts next year, with subsidized private insurance available through new state-based markets, as well as an expanded version of Medicaid for low-income people. At the same time, virtually all Americans will be required to carry a policy, or pay a fine.
States are free to accept or reject the Medicaid expansion, and the new problems with the stopgap insurance plan could well have a bearing on their decisions.
: ObamaCare Secrets Revealed
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