Our View: State’s cure is original cause of ills

Appeal-Democrat (Marysville, CA), February 17, 2009

California’s regulations on health care raise the costs for its citizens

Often government tries to fix what’s wrong by imposing more of what caused the problem in the first place. Nowhere is this more apparent than health care.

A new analysis by the advocacy group Small Business and Entrepreneurship Council ranks 50 states and the District of Columbia by the effect their polices have on health care costs. Sadly, California ranks 46th. Idaho ranks No. 1, the best of all.

States were judged on their regulations and laws that mandate costs on insurers and consumers, including whether employers are required to provide insurance coverage or pay into a fund if they don’t; whether insurers are required to cover everyone who applies; the degree to which insurers must charge the same rate regardless of health risk and finally, whether a jurisdiction permits untaxed Health Savings Accounts. The last criterion can hold down costs, as Sally C. Pipes, president of the Pacific Research Institute, wrote in a recent Orange County Register column. The others substantially drive up costs and result in restricting rather than expanding coverage.

Advances in health care technology contribute to higher costs, but so increasingly do “negative factors” in which costs are paid by third-party providers or the government, said the study. At the root of dilemma is consumer reliance on third-party payments, such as employer-provided insurance or government programs.

“When someone else picks up the tab, health care providers and consumers have few incentives to be concerned about costs or utilization,” wrote council chief economist Raymond J. Keating. “As a result, costs rise.”

States’ weighted scores range from a low of 1.08 for Idaho and a high of 4.81 for Massachusetts. California’s 3.83 resulted partly from its high ranking for imposing dozens of health mandates on insurers, including coverage for things like alcoholism, contraceptives and in vitro fertilization. California also does not permit tax-free health savings accounts.

Massachusetts three years ago initiated a “pay-or-play” system like Hawaii (ranked 35th) and Vermont (47th), which substantially increases health care costs. New York imposes a uniform cost for health care coverage statewide, irrespective of health-risk factors. It’s significant that California “reforms” proposed in recent years would have imposed similar pay-or-play regulations and leveling of costs, regardless of health risk.

“Unfortunately,” Mr. Keating told the Register,

Top-ranked Idaho allows tax-free Health Savings Accounts and imposes only 15 mandates in contrast to California, which doesn’t permit the tax-free accounts and imposes 50 mandated coverage requirements.

As Ms. Pipes observed recently, government heaping on regulations and mandates moves the nation ever closer to “a government-run health care system.” As humorist P.J. O’Rourke has predicted: “If you think health care is expensive now, wait until you see what it costs when it’s free.”

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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