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Lessons from States with “Universal” Health Care - Pacific Research Institute

Lessons from States with “Universal” Health Care

Last January, governor Schwarzenegger’s expensive and unwieldy proposal for so-called “universal” health care finally gasped its last breath, after a long year of lobbying and coalition-building by the governor’s team. A year later, in 2009, legislators should attempt to learn from two states that have legislated “universal” care.

Hawaii imposed universal health care in 1974 by passing a law compelling employers to provide health insurance and forcing them to pay half the cost of a plan directly. Facing resistance from small businesses, the state has never been able to “close the deal.” As late as 1993, a supportive scholar described Hawaii’s efforts at “universal” coverage as “lodged somewhere in midstream.”

On the other hand, also in 1993, managers in the state’s health department managed to convince themselves that Hawaii had covered 95 percent of its population. As it turns out, in 1974, one in 50 Hawaii residents was uninsured. Today, after more than three decades of mandatory insurance, that number stands at one in 10. Of course, Hawaii is not immune to national trends, but scholars have concluded that the state’s pay-or-play mandate might have reduced the ranks of the uninsured by 5 to 8 percent at best. The plan fails to deliver, but Hawaiian advocates of government-dictated health care just won’t quit.

Last year they rolled out yet another program – “Keiki Care,” compulsory “free” health insurance for children without coverage, who are in families with incomes too high for Medicaid or other state programs. Republican governor Linda Lingle shuttered it in October, barely seven months after its launch, after learning that 85 percent of the kids enrolled had previously been covered by a private, non-profit plan for only $55 per month.

Republican governor Mitt Romney of Massachusetts collaborated with a Democrat-majority legislature to pass “universal” health insurance in April 2006. Although he tried to backpedal during the presidential primaries, he cannot avoid the plan’s legacy: budget-busting cost overruns and a state begging breathlessly for $21 billion more federal transfer payments to fund it for three more years.

Notwithstanding a bailout from the federal government, the state has had to raise taxes on businesses – a task the legislature delegated to the bureaucrats who run the program. While hospitals’ uncompensated care dropped from $166 million in the first quarter of 2007 down to $98 million in the first quarter of 2008, or $272 million annually, the budget for “universal” health care in Massachusetts is running at $869 million: $3.19 of taxpayers’ dollars spent for every dollar of uncompensated care avoided.

Californians can be grateful that governor Schwarzenegger failed to impose a similar regime but those who proposed it are more active than ever. Daniel Zingale, who spearheaded the governor’s initiative, has joined the California Endowment, a foundation with $3 billion in assets, to lobby for health reform in Sacramento. These folks mean business.

The California Endowment spent $10 million in advertising for health “reform” in 2007. But the Endowment is not a charity that has succeeded in raising money through voluntary philanthropic donations. Rather, it is sitting on a pot of gold that the state taxed from Blue Cross of California’s surplus back in 1996, as a cost of getting the state’s permission to convert to a for-profit health plan. And to what end?

Such conversions were necessary because non-profit health plans were increasingly poorly capitalized as health costs rose, and threatened with insolvency. For-profit conversions simply allow beneficiaries to transfer some of the risk of rising health costs to shareholders.

The California Endowment does conduct some valuable research. Nevertheless, by imposing a special tax on Blue Cross to found this unaccountable organization, California has actually reduced the amount of money available for private health care, and increased the amount of money “invested” in advertising campaigns supporting government-run health care.

That kind of government plan, the evidence from Hawaii and Massachusetts suggests, tends to promise more than it can deliver and introduce more problems than it solves. In 2009, California taxpayers should demand more freedom to purchase the health care that best meets their needs. Making Health Savings Accounts tax deductible would be a good place for legislators to start.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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