Peter Suderman, associate editor for Reason Magazine, has an op-ed in the Wall Street Journal on the track record of Obamacare like reforms at the state level. The full article is posted below and as an added service we found all the studies mentioned and provided links to view them:
Supreme Court Justice Louis Brandeis famously envisioned the states serving as laboratories, trying “novel social and economic experiments without risk to the rest of the country.” And on health care, that’s just what they’ve done.
Like participants in a national science fair, state governments have tested variants on most of the major components of the health-care reform plans currently being considered in Congress. The results have been dramatically increased premiums in the individual market, spiraling public health-care costs, and reduced access to care. In other words: The reforms have failed.
New York is exhibit A. In 1993, the state prohibited insurers from declining to cover individuals with pre-existing health conditions (”guaranteed issue”). New York also required insurers to charge those enrolled in their plans the same premium, regardless of health status, age or sex (”community rating”). The goal was to reduce the number of uninsured by making health insurance more accessible, particularly to those who don’t have employer-provided insurance.
It hasn’t worked out very well, according to a Manhattan Institute study released last month by Stephen T. Parente, a professor of finance at the University of Minnesota and Tarren Bragdon, CEO of the Maine Heritage Policy Center. In 1994, there were just under 752,000 individuals enrolled in individual insurance plans, or about 4.7% of the nonelderly population. This put New York roughly in line with the rest of the U.S. Today, that percentage has dropped to just 0.2% of the state’s nonelderly. In contrast, between 1994 and 2007, the total number of people insured in the individual market across the U.S. rose to 5.5% from 4.5%.
The decline in the number of people enrolled in individual insurance plans, the authors say, is “attributable largely to a steep increase in premiums” because of the state’s regulations. Messrs. Parente and Bragdon estimate that repeal of community rating and guaranteed issue could reduce the price of individual coverage by 42%.
New York’s experience with guaranteed issue and community rating is not unique. In 1996, similar reforms in Washington state preceded massive premium spikes in the individual market. Some premiums increased as much as 78% in the first three years of the reforms—or 10 times medical inflation—according to a study presented at the annual meeting of the Association for Health Services Research in 1999. Other results included a 25% drop in enrollment in the individual market, and a reduction in services offered. Within four years, for example, none of the state’s major carriers offered individual insurance plans that included maternity coverage.
A 2008 analysis by Kaiser Permanente’s Patricia Lynch published by Health Affairs noted that in addition to Washington and New York, the individual insurance markets in Kentucky, Maine, Massachusetts, New Hampshire, New Jersey and Vermont “deteriorated” after the enactment of guaranteed issue. Individual insurance became significantly more expensive and there was no significant decrease in the number of uninsured.
Supporters of federal health-care reform argue that the problems associated with these regulations can be addressed with the addition of an individual mandate, which is part of every ObamaCare bill in Congress. This would require every individual to purchase health insurance.
Guaranteed issue alone, the argument goes, results in slightly more expensive premiums, which drives healthier individuals out of the risk pool, which in turn further drives up premiums. The end result is that many healthy people opt out, leaving a small pool of sick individuals with very high premiums. An individual mandate, however, would spread those premium costs across a larger, healthier population, thus keeping premium costs down.
The experience of Massachusetts, which implemented an individual mandate in 2007, suggests otherwise. Health-insurance premiums in the Bay State have risen significantly faster than the national average, according to the Commonwealth Fund, a nonprofit health foundation. At an average of $13,788, the state’s family plans are now the nation’s most expensive. Meanwhile, insurance companies are planning additional double-digit hikes, “prompting many employers to reduce benefits and shift additional costs to workers” according to the Boston Globe.
And health-care costs have continued to grow rapidly. According to a Rand Corporation study this year, the growth now exceeds state GDP by 8%. The Boston Globe recently reported that state health-insurance commissioners are now worried that medical spending could push both employers and patients into bankruptcy, and may even threaten the system’s continued existence.
Meanwhile, survey data from the Massachusetts Medical Society indicate that the state’s primary-care providers are being squeezed. Family doctors report taking fewer new patients and increases in wait time.
Reform measures in other states have proven to be expensive duds. Maine’s 2003 reform plan, Dirigo Health, included a government insurance option resembling the public option included in the House health-care bill. This public plan, “DirigoChoice,” was supposed to expand care to all 128,000 of Maine’s uninsured by 2009. But according to the U.S. Census Bureau, the 2007 uninsured rate remained roughly 10%—essentially unchanged. DirigoChoice’s individual insurance premiums increased by 74% over its first four years—to $499 a month from $287 a month—according to an analysis of Dirigo data by the Maine Heritage Policy Center. The cost of DirigoHealth to taxpayers so far has been $155 million.
Tennessee’s plan for universal coverage, dubbed TennCare, fared even worse in the 1990s. The goal of the state-run public insurance plan was to expand coverage to the uninsured by reducing waste. But the costs of expanding coverage quickly ballooned. In 2005, facing bankruptcy, the state was forced to cut 170,000 individuals from its insurance rolls.
Despite these state-level failures, President Barack Obama and congressional Democrats are pushing forward a slate of similar reforms. Unlike most high-school science fair participants, they seem unaware that the point of doing experiments is to identify what actually works. Instead, they’ve identified what doesn’t—and decided to do it again.
Margaret Barr currently is a member of the Young Leaders Program at the Heritage Foundation. Her views do not necessarily reflect the views of the Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm
On Thursday, October 1, the Senate Finance Committee heard the last of amendments to the America’s Healthy Choices Act of 2009. Senators continued to hammer out the details of health policy, even as they continued to openly contradict many of the President’s high profile promises on health reform, including his promise to refrain from imposing more taxes on America’s middle class.
A State-Based Government Run Health Plan (Cantwell Amendment C15)
Following the failure of the Rockefeller and Schumer amendments to creates a national government run health plan to compete against private health plans, Senator Maria Cantwell (D-WA) introduced an amendment to create a state-run, federally-funded public health care plan that the states can choose whether or not to adopt.
Sen. Cantwell’s amendment would give states the “choice” of operating within the insurance rules of the Baucus’ bill or of using federal funds to create a government-run “Basic Health Plan” in their state. Sen. Cantwell’s amendment would allow states to use federal funds to create a non-Medicaid state plan. Individuals eligible for the Basic Health Plan would include all uninsured citizens under the age of 65 who are not offered health insurance through their employer, and whose income falls between 133% and 200% of the Federal Poverty Level (FPL). This means that any family of four making under $44,100 that does not qualify for Medicare, Medicaid, or SCHIP would be eligible for enrollment in the government –run health plan. According to Sen. Cantwell, a special government-run plan for lower-income Americans would prevent them from being “limited to independent negotiating through the Exchange with individual tax-credit subsidies”.
Within the framework of the Baucus bill, Sen. Cantwell’s amendment has curious consequences. Under the Chairman’s mark, all uninsured individuals under 400 percent of the federal poverty line, who do not receive employer-sponsored insurance would be offered a tax credit to buy health insurance. In opting to establish the Basic Health Plan, states would withhold the individual and family tax credits allocated to those persons with annual incomes between 133% and 200% of FPL. Instead of letting persons have the tax credits to buy health insurance, the states would use the money otherwise allocated for tax credits to pay the premiums of the state’s Basic Health Plan. Consequently, anyone making above 200 percent of FPL would have the personal freedom to choose their health plan, while lower income individuals, making below 200% of FPL, would not. In other words, if lower income persons wished to get any government assistance for insurance, they would have no choice but to enroll in the state’s government-run health plan. With the Cantwell amendment, then, personal freedom becomes a class phenomenon: available to middle and upper income individuals and unavailable to lower income persons.
The inspiration for Sen. Cantwell’s proposal comes from the Basic Health Plan in her home state of Washington. In Washington state, however, the program’s costs have soared. Nonetheless, Sen. Cantwell’s amendment passed with a vote of 12-11, with Senator Blanche Lincoln (D-AR) voting with Senate Republicans.
Middle Class Tax Increases. (Crapo Amendment F1, Ensign Amendment F2, Bunning Amendments F1 and F2)
During the 2008 presidential campaign, then candidate Barack Obama promised repeatedly that he would not raise taxes on middle class Americans: “If you’re a family that’s making $250,000 a year or less, you will see no increase in your taxes.” The Senate Finance Committee “mark” includes several fees and taxes that would affect Americans of all incomes. Some are imposed directly on consumers, such as the penalty for not carrying congressionally - approved insurance. Others, such as taxes on health insurance providers and manufacturers of health products, would be passed on to consumers. In effect, these additional “fees” would serve as tax increases on lower and middle income classes, in direct contradiction to the President’s promise to increase taxes only on America’s upper income families.
Senator Mike Crapo (R-ID) introduced an amendment that would ensure that no tax, fee, or penalty included in the bill could be applied to any individual making less than $200,000 or any couple making less than $250,000. This amendment failed with a vote of 11-12, with Senator Blanche Lincoln (D-AR) voting with Republicans.
Senator John Ensign (R-NV) offered an amendment to exempt persons in the same income bracket as Sen. Crapo’s amendment from the tax penalties of the individual mandate. Sen. Ensign’s amendment also failed with a vote of 11-12, with Sen. Lincoln voting again with Senate Republicans.
Senator Jim Bunning (R-KY) introduced two amendments. Both of Sen. Bunning’s amendments would have imposed a “sunset” on any tax that increased the health care costs of Americans or any tax provision that would encourage employers to invade the privacy of their employees. The sunset date would have been December 31, 2019. If Congress wanted to insist on any such tax increase, it would have to vote to increase it.
Included on Sen. Bunning’s list of applicable taxes were: the excise tax penalty on uninsured Americans, the excise tax penalty on business with low-income workers receiving subsidy for Exchange-bought health insurance, the excise tax penalty on high-cost insurance plans, the excise tax on drug manufacturers, the excise tax on health insurance providers, the excise tax on medical device manufacturers, and the excise tax on clinical laboratories. Both of Bunning’s amendments failed.
The Senate Finance Committee’s mark-up of the America’s Healthy Choices Act of 2009 was thus completed. The amended version of the “mark” is to be scored by the Congressional Budget Office. The Committee is expected to vote on the mark next week.
The Senate Finance Committee sessions have given ordinary American an excellent insight into the way in which members of the Senate are addressing crucial issues in health care policy. While member of the Senate have often used words like “affordability” and “choice and “competition”, and even invoked the name of Adam Smith, the greatest of free market economists , to justify an expansion of government control, the reality has been very different. Amendments which would have increased the choice, affordability, and portability of Americans’ health care were turned down. Provisions to increases taxes and limit personal freedom were sustained.
Kathryn Nix, Heritage Intern, provided the research for this blog.