Friday, February 26, 2010

We can learn a lot from our mistakes, ....

But only if we let states make them.  Some of our most valuable experiments ended in failure:
Expanding public programs. In 1994, Tennessee started a massive Medicaid expansion (eventually covering 500,000 additional residents). A decade later, the state abandoned the experiment after costs more than tripled: from $2.5 billion in 1995 to $8 billion in 2004, consuming one-third of the state budget. When the experiment unraveled in 2005, 170,000 enrollees were dropped.

Imposing heavy-handed insurance regulations. Starting in April 1993, New York State imposed two new regulations, intended to make insurance more affordable for older and sicker residents. Instead, community rating (which forces insurers to charge one price regardless of age or health status) and guaranteed issue (which forces them to offer policies to all applicants) nearly obliterated the market for individual insurance. The regulations drove up prices for young and healthy applicants, pushing them out. Today New York’s individual insurance market is 4% of its size in 1994.

Creating a new “public option.” In 2003, Maine launched an ambitious plan to cover all its uninsured, in part by creating a government-run, “public option” insurance plan with taxpayer-subsidized premiums. An expensive train wreck, less than 10,000 residents have enrolled since it started in 2005 – at a cost of $155 million. Today, enrollment is capped, due to budget constraints.

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