Ailing Health Policies
Texas has more uninsured people than any other state. To make matters worse, health care is on a course to crowd out every other category of government spending in only a few decades. And even then, one in four Texans will still lack insurance.
So what do the candidates for governor promise to do about it? Their campaign platforms range from the trivial to the silly.
For starters, none of the candidates seems aware that politicians in Austin are the principle reason why so many are uninsured. State policies add to our problems in three ways.
First, state regulations raise the cost of health insurance. You cannot buy group insurance in Texas unless the plan covers services ranging from acupuncture to in vitro fertilization. It must cover providers ranging from dieticians and social workers to occupational therapists and marriage counselors. It must cover specific items ranging from birth control pills to hearing aids.
Adding all these bells and whistles to a barebones policy makes insurance cost a lot more. In fact, national studies estimate that as many as one in four of the uninsured lacks insurance precisely because of cost-increasing regulations. And Texas is one of the worst offenders.
We estimate that the uninsured get free care worth about $1,500 per person, per year – or about $6,000 for a family of four. If they buy private insurance, however, most will have to pay for it with after-tax dollars.
That means a middle-income family must earn $9,000 to be able to pay taxes and buy $6,000 worth of coverage with what's left over. But why do that if free care is available courtesy of the taxpayers?
A third aggravating factor is the expansion of Medicaid (for the poor) and State Children's Health Insurance Program (for the children of the near-poor). Economists estimate that for every additional dollar spent on Medicaid, private health insurance shrinks by about 50 to 75 cents nationwide. It's easy to see why. If employees are eligible for Medicaid, they will prefer cash wages to benefits that duplicate that coverage.
Why do we care if people are insured? A recent RAND Corp. study found that once people enter the system (see a doctor) they get roughly the same treatment regardless of whether they are insured.
Take the emergency room at Parkland Hospital. The insured and the uninsured all come through the same door, all see the same doctors, all get the same care.
The current system creates barriers to care for poor families (whether insured or uninsured) in the form of rationing by waiting; however, for the most part, Medicaid overpays hospitals and underpays doctors. That is why so many low-income patients get their care at hospital emergency rooms – where they can wait all day for treatment if they do not have a life-or-death emergency. Enrolling all these patients in Medicaid won't necessarily get them more care or better care, however.
The current system is highly regulated and highly bureaucratic. It is replete with inefficiencies and perverse incentives. It needs a complete overhaul. So how do the gubernatorial candidates propose to step up to the challenge?
Two candidates – Gov. Rick Perry and Carole Keeton Strayhorn – propose to expand Medicaid and CHIP to varying degrees. In the process, they would cost taxpayers more money, do little to reduce the number of uninsured and do next to nothing to improve the quality of care that poor families receive.
Kinky Friedman has a more substantial plan (even though it is similar in design and would have similar outcomes) that would spend more money on expanded government insurance and pay for it by imposing a 1 percent tax on health plans and health providers (i.e., he would tax the sick).
A fourth candidate, Chris Bell, has a silly solution – copy the Canadian system. And his method for achieving it – lobby Washington – is a red herring. Emergency rooms in Toronto look just like the emergency room at Parkland, with all the same problems. If Mr. Bell thinks this is what Texans want, he does not need Washington. Just let Texans vote on a ballot measure to impose a 15 percent payroll tax to provide everyone with free (rationed) health care.
What we really need is a radically new approach. As Gov. Mitt Romney has shown in Massachusetts, charity care funds can be used to subsidize the purchase of private insurance.
As Gov. Jeb Bush in Florida and Gov. Mark Sanford in South Carolina have shown, Medicaid funds can be used to encourage private coverage instead of discouraging it.
Texans cannot afford to lag behind while other states get their health care house in order.