THE LESSON OF STATE HEALTH CARE REFORMS

October 7, 2009

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, says Peter Suderman, an associate editor at Reason magazine.

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, explains Suderman.

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 percent of the nonelderly population.
  • This put New York roughly in line with the rest of the United States.
  • Today, that percentage has dropped to just 0.2 percent of the state's nonelderly.
  • In contrast, between 1994 and 2007, the total number of people insured in the individual market across the United States rose to 5.5 percent from 4.5 percent.

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.  Parente and Bragdon estimate that repeal of community rating and guaranteed issue could reduce the price of individual coverage by 42 percent.

Despite 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, says Suderman.

Source: Peter Suderman, "The Lesson of State Health Care Reforms," Wall Street Journal, October 6, 2009.

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