Categories
Health Care

First, Do No Harm: Improving Health Care

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Health care reform is Gov. Bill Richardson’s top agenda item in the 2008 legislative session. And, with his campaign for the White House concluded, it looks like the governor may be able to give the issue his full attention. Unfortunately, while focusing on expanding coverage, Richardson’s plan relies heavily on government power to achieve its goals.

There are many problems with Richardson’s plan, but the tremendous power given to an entity called the New Mexico Health Care Authority is the biggest. This entity would be in charge of implementing the plan and regulating nearly every health care-related activity in the state including doctor pay. New Mexico already struggles to keep doctors practicing in rural areas throughout the state. Allowing an all-powerful new bureaucracy to cut costs on the backs of doctors as Medicare and Medicaid do will exacerbate the problem.

If large numbers of doctors leave the state, New Mexicans will quickly learn that having insurance and receiving quality health care in a reasonable amount of time are not the same thing.

Rather than adding more government mandates and bureaucracy on top of an already overregulated and over-taxed area of the economy, policy makers should first explore ways to undo the harm done by existing policies.

Health care reform in New Mexico must start by ending the taxation of co-payments, deductibles, fee-for-service health care (including dentists), and over-the-counter medicine under New Mexico’s Gross Receipts Tax. Most health care plans now ask patients to pay part of their bill in the form of co-payments and deductibles; there is no reason to demand New Mexicans pay up to nearly 8 percent in taxes to the state on top of those burdens.

While state and local governments would see revenues reduced by $14.7 million for ending the tax on dental care alone, this is a drop in the bucket when compared to Richardson’s health care plan, the real costs of which are unknown and impossible to accurately calculate.

Almost no other state in the nation and none of New Mexico’s neighbors taxes the range of everyday health care costs that are taxed here. Wouldn’t it make more sense to cut health care costs by as much as 8 percent right away than to embark on a convoluted and bureaucratic proposal that has never actually succeeded in states where similar plans have been implemented (Massachusetts being the most recent example)?

Taxes are only one way in which health care prices in New Mexico are artificially inflated, but they are by no means the only one. Regulations also distort the health care market. For example, New Mexico now mandates that all insurance plans sold in the state cover 49 specific treatments. All states mandate some treatments, but most states have far fewer mandates.

Unfortunately, healthy New Mexicans, many of whom are young and healthy and would prefer a bare-bones insurance policy, cannot access such a policy in this state. While reducing the number of mandates would be politically difficult, New Mexico should allow health care companies to sell policies here under the regulatory regimes of other states. Simply put, regulations should be set up for the benefit of New Mexicans rather than as a means of stifling their choices. Maine is currently considering a similar reform.

While advocates of single-payer health care often claim the mantle of efficiency, history has shown that no government-run bureaucracy can ever be as efficient as allowing individuals to operate in the marketplace free of unnecessary government intervention.

If Gov. Richardson’s Health Solutions New Mexico plan is adopted, the state will ultimately lose doctors and see the quality of health care reduced as price controls take hold. The ideals of the Hippocratic Oath taken by all doctors are “Do no Harm.” The Legislature should consider that in its discussions of health care reform this year.

Paul Gessing is the president of New Mexico’s Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization.

Categories
Health Care

How We Pay Doctors Makes All the Difference

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A few weeks ago, the Journal’s health care reporter, Winthrop Quigley, argued in a column that how we pay for doctors is irrelevant. I could not disagree more. In fact, it is the incentives created by government that have created the current system.

Once upon a time in this country, the doctor-patient relationship was direct. Patients paid their doctors directly and if they could not pay, doctors were often flexible in accepting installments or alternative means of payment.

During World War II the federal government placed price controls on businesses, thus limiting their ability to hire scarce labor and ushering in the era of tax-advantaged “fringe benefits.” Unfortunately, while tax incentives for employer-provided health care may have seemed like a fine idea at the time, this was the first break in the doctor-patient relationship.

Over time, employers grew frustrated with spiraling health care costs (employees, after all, were paying little or nothing for their health care and thus had no reason to spend wisely). This spurred the introduction of HMOs and other cost-control measures, further separating doctors from their patients.

After all, doctors no longer answered to their patients but to insurance companies. Whereas a patient has strong incentives to get the best care for his or her money, HMOs care more about cutting costs, sometimes in ways that patients find objectionable.

According to a recent Boston ABC-TV news story, thousands of patients who were prescribed a brand-name cholesterol drug were being switched to a generic by their doctors. Doctors were paid $100, per patient, by the insurance company for making the switch. There were 2,400 patients switched by their doctors with no disclosure that the doctor was being paid to do so. If doctors treated their patients (not the insurance companies) as their customers, this would probably not happen.

Even avowed socialists like Michael Moore understand (to a point) that how we pay doctors is important. Insurance companies are taken to task in Moore’s movie “Sicko” for denying patients necessary care. What Moore and other advocates for government-run health care fail to see is that replacing insurance companies with government bureaucrats will only make the current situation worse.

After all, someone has to control costs and that means making decisions about who receives treatment and who doesn’t. Even in countries where the tolerance for high taxes is much higher than it is here, governments have imposed waiting periods and other mechanisms to deny care, thus keeping a lid on costs to taxpayers. (Of course, Michael Moore conveniently left these stories out of his movie.)

There are really only three cost-control options: individuals, insurance companies or the government. It only makes sense that individuals, particularly if they are armed with adequate information by their doctors, can obtain the best care for themselves for the lowest cost. After all, in a world of scarce resources where trade-offs are inevitable, wouldn’t you rather decide how those trade-offs are made instead of having someone else decide for you?

That is the thinking behind Health Savings Accounts (HSAs). Rather than giving insurance companies or the government the final call over my health care needs, as the proud owner of an HSA, I am building money in a savings account and can use that money on the care I need. This includes “alternative” forms of medicine that are not always covered by traditional insurance policies.

HSAs or, better still, simply giving individuals the tax advantages that are now given to employers to pay for health care, will improve the quality of our health care while saving money at the same time. Any scheme that purports to “reform” health care without empowering patients must rely on someone else to contain costs and will only worsen the problems we now face.

How we pay doctors drives the incentives in the health care system. Restoring the relationship between doctors and their patients can only be done by returning patients to the rightful role of owning their own health care.

Categories
Health Care Research

The Health Security Act: New Mexico’s Coming Single-Payer Health Care Disaster?

This Rio Grande Foundation study, “The Health Security Act:  New Mexico’s Coming Single-Payer Health Care Disaster?” explains how the single-payer health care system that has been proposed in New Mexico would work in practice and compares it with existing international examples. Special attention is paid to cost estimates which the author believes have been underestimated.

Click here to download the study in PDF format.

Categories
Health Care

Bill Richardson’s Health Care Boondoggle: Market Democrat, Think Again

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Bill Richardson has often claimed to be a “market Democrat.” Indeed, he has cut both income taxes and capital-gains taxes as governor of New Mexico, much to the delight of folks at the Cato Institute and the Wall Street Journal. Unfortunately, Richardson has not avoided the siren song of “universal” health care that has charmed all the Democratic challengers for president.

Richardson assures voters that his plan for universal coverage “does not believe in creating new bureaucracies.” That is basically true; he would simply expand existing ones. The Richardson plan would extend Medicare to include those in the 55 to 64 age group. It would further expand Medicaid and SCHIP to include even more lower-income families. It would mandate that existing family coverage include young adults up to age 25. And it would create something called a “Heroes Health Card” for veterans.

The bill for taxpayers, meanwhile, is an estimated $110 billion. Thus, Richardson has managed to lay out a plan with costs similar to the plans of Barack Obama and John Edwards that relies on many of the same inefficient and frustrating bureaucracies (Medicaid, Medicare, SCHIP, and the Veterans administration) that doctors and patients know and hate.

While Richardson’s plan may not create any “new” bureaucracies, it is anything but “market-based.” Adding beneficiaries to broken programs will do nothing for the long-term prospects of those programs — especially Medicare, which is under-funded by as much as $28 trillion. Indeed, the Titanic that is Medicare is already sinking; Richardson’s plan would only submerge it faster.

Richardson appears blind to all this, and he also seems not to realize that certain parts of his plan are at odds with other parts.

Richardson claims that by covering all Americans, his plan will “save the average family up to 10 percent off their private coverage.” Yet by expanding Medicare, Medicaid, and SCHIP, Richardson will add to the phenomenon known as “cost shifting.” Cost shifting occurs when hospitals and doctors charge more to private insurance companies to compensate for the low reimbursement rates of Medicare, Medicaid, and SCHIP. That makes private insurance more expensive. An expansion of those government programs will only worsen cost shifting, making Richardson’s goal of reducing private health insurance bills by 10 percent unachievable.

Even if the Richardson plan didn’t expand Medicare, Medicaid, and SCHIP, the 10 percent claim would remain dubious. This claim is based on getting the uninsured covered, and thereby reducing the amount of uncompensated care they receive:

Moreover, though uninsured people often delay or skip the care they need, the care they do get — which is often in more expensive settings — amounts to nearly $100 billion annually, and much of the cost is covered by health care providers, taxpayers, and insured individuals via higher premiums. In fact, if we don’t act to cover all Americans, the average family will be paying an extra $1,502 for their own health insurance by 2010 in order to pay for the cost of the uninsured.

That $1,502 figure, which comes from a Families USA study, is an overstatement, and Richardson isn’t alone in making it. When California governor Arnold Schwarzenegger unveiled his health care plan last year, he made a similar claim about the burdens of uncompensated care on private insurers. Based on a study from the New American Foundation, Schwarzenegger maintained that uncompensated care in California raised premiums for private insurance by an average of $1,186 annually. Yet a later study by the California Chamber of Commerce put the amount much closer to $166.

Importantly, the Chamber of Commerce study accounts for the cost shifting of Medicare and Medicaid, while the New America and Families USA studies do not. Using the Chamber of Commerce estimates, Richardson’s plan would roughly save only 2 percent on private insurance premiums. And that still doesn’t account for the effects of expanding Medicare, Medicaid, and SCHIP.

Richardson’s universal health-coverage plan is a mess, which puts him in good company with Democrats on the presidential campaign trail. In fact, if there is one thing all the Democratic contenders can agree on, a massive, taxpayer-funded takeover of the nation’s health-care system is it. But we’d come to expect more from a man the Cato Institute called “Bar none, the best Democratic governor in the nation and among the best new governors (as of 2004) of either party.”

— David Hogberg is an adjunct scholar with, and Paul Gessing is president of, the Rio Grande Foundation.

Categories
Health Care

Should Medicare be Means-Tested, Quite Simply, Yes.

Should Medicare be means-tested? Quite simply, I say “yes.” This solution to the well-documented problem of out-of-control entitlement spending may not be “fair,” assuming that further changes are not made and that high-income people will continue to contribute disproportionately to the program, but government programs are never “fair.”

That’s why, when I’m presented with the opportunity to shrink a major government program, I can’t help myself but to say “yes.”

After all, today’s productive workers are footing the bill for Medicare and Social Security programs that are far beyond what will benefit them. That is not fair, either.According to a New York Times article outlining concerns about means-testing provisions contained in the 2003 expansion of Medicare, the two major objections to means-testing are (1) wealthy retirees will abandon the program and rely on private insurance instead, leaving poorer, sicker people in Medicare; and (2) higher premiums could drive people with higher incomes out of Medicare, thus making Medicare a welfare program rather than a universal social insurance program.

The second point is the key, because it follows directly from the first. Many supporters of means testing will quibble with these facts and attempt to gloss over the very real political issues associated with transforming Medicare into a welfare program, but I do not.

Calling Medicare “welfare” only articulates what has always been true about it: Any entitlement program that annually transfers $418 billion from one group of people to another (as Medicare did in 2006) must be considered “welfare.” The only difference is that one welfare program (the current version of Medicare) essentially buys the support of higher-income Americans by giving them access to basically the same welfare as low income recipients.

Taking money from productive taxpayers and arbitrarily allocating it to another group, no matter how wealthy, is still welfare. We see this regularly with “corporate welfare” that is given to multi-billion-dollar corporations. All of this is not to say that people who oppose Medicare means-testing are being disingenuous. They really do have the right to be afraid that if welfare were means-tested, political pressure might build to alter or even eliminate the program.

Of course, the end of Medicare in its current form is exactly what I (and presumably most advocates of limited government) want. Many conservatives and nearly all libertarians believe that Medicare is a deeply flawed program and even a regrettable mistake. That said, if we simply move forward under the assumption that some kind of health care program for seniors will always be with us, then means testing could help open the door for other reforms. These include the adoption of more market-based insurance mechanisms such as health savings accounts, which allow patients to plan for medical expenses and retirement as a whole, or some form of block-granting of Medicare money, as was done in 1996 with welfare reform.

Empowering patients would be a major positive step in reducing the burden of this program on taxpayers and, along with means-testing, would serve the very people who need help without shoe-horning everyone into the same unsustainable government program. Means testing may not be the silver bullet needed to put Medicare on a path to sustainability, but by altering political calculations, needed reforms may be in the offing.

Paul Gessing is president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico, based on principles of limited government, economic freedom, and individual responsibility (www.riograndefoundation.org).

 

The full symposium document can be found at:http://www.americanexperiment.org/uploaded/files/should_medicare_be_meanstested.pdf

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Health Care

Beware of Health Care Cure-All

I had the opportunity to attend the recent New Mexico First event on health care. I was pleased to see so many concerned citizens take time out of their busy lives to get together and work out solutions to one of our state’s most pressing problems, but amazed at how complicated and convoluted the health care issue has become.

Much of the blame must be placed at the feet of Congress and the federal government that has created the misguided and bizarre incentives under which all states must operate. Health Savings Accounts, which give individuals greater control over their health care needs, were a necessary first step. But these somewhat complicated accounts would be unnecessary if Congress would heed President Bush’s call to offer to individuals the same tax incentives now given only to companies.

The fact that these tax incentives are given to employers is a historical anachronism that does nothing but place health insurance companies between health care consumers and their providers. Whereas socialized medicine and other “universal” models simply replace health care companies with government bureaucrats as our health care gatekeepers, giving individuals control over their health care dollars would restore that patient-doctor relationship. Unfortunately, corporate and union interests have teamed up to strangle this needed reform in the cradle.

Another change that Congress needs to make is to bring federalism to health care. One of the great strokes of genius made by the Founding Fathers, federalism forces states to compete with each other.

Unfortunately, in the area of health insurance, this concept has been lost as insurance companies have successfully walled off each state, thus protecting themselves from competition and subjecting consumers to costly mandates and regulations imposed by the individual states.

New Mexico, for example, has 45 mandates covering everything from alcoholism and acupuncture to TMJ Disorders. While such coverage may be nice to have, they add significantly to the cost of health insurance. The costs associated with New Mexico’s large number of mandates contribute to our having the second-highest rate of uninsured.

Legislation that would have allowed individuals to purchase insurance across state lines was proposed by Rep. John Shadegg, R-Ariz., and then-speaker Dennis Hastert, R-Ill., last year, but died. Absent congressional action, New Mexico can and should allow residents to purchase health insurance from out-of-state.

Any discussion of health care in New Mexico would be incomplete without an analysis of the perverse incentives created by Medicaid. Due in part to the generous federal subsidy the federal government gives New Mexico (a 3-1 match depending on the specific program), many of our elected leaders view Medicaid as a means of generating economic growth at the expense of taxpayers in other states.

This rationale was among the justifications for successful efforts to raise from $4,000 to $10,200, the earnings threshold for low-income adults under which they can still qualify for Medicaid. The change is expected to add an additional 18,000 adults to the program, costing the state “only” $11 million— and costing taxpayers in other states probably three times as much.

While the incentives are certainly there for New Mexico to expand Medicaid to the greatest extent possible, this is not going to lift the poor out of poverty or improve health care coverage. Instead, Gov. Bill Richardson and the Legislature should request that the federal government allow New Mexico to follow the successful welfare reform model developed in the 1990s by receiving its Medicaid money in the form of a block grant and developing unique, New Mexico-centric solutions to our health care mess.

Unfortunately, while each reform I have outlined above would simplify and restore some logic to the health care system we all know and despise, each faces strong opposition from certain entrenched interests. Nevertheless, there are sensible free-market solutions to our health care problems that will expand coverage dramatically while also enhancing the patient-doctor relationship and cutting costs.

It may seem easier to throw up our hands and demand “universal coverage” with the government in charge, but government policies created many of these problems in the first place. We should hardly expect the government, the insurance companies, and other special interests to give up their power under a “socialized” scheme.

Paul Gessing is president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

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Health Care

The Mental Health Parity Act is All Wrong

Although Sen. Domenici’s role in the ongoing flap over the fired U.S. Attorneys has garnered New Mexico’s senior senator a good deal of unwanted attention recently, another more substantive policy matter should be of greater concern to conservatives. Polls indicate that health care is one of the most important issues on voters’ minds. To this end, the concept of making health care more affordable is a mantra that has been adopted by politicians of both parties.

Domenici — working in conjunction with the usually conservative Mike Enzi (R.-Wyo.) and the reliably left-wing Ted Kennedy (D.-Mass.) — is now leading an effort that would ultimately drive up the costs of health insurance and may even inflict harm on the very people the senators are trying to help.

The legislation, which has already passed out of one Senate committee, is known as the “Mental Health Parity Act.”

While the desire to help those with mental illness is noble, the senators’ proposal will inevitably, if inadvertently, harm both the mentally ill and the uninsured.

This bill would require health insurance policies that provide coverage for mental illness provide it in the same way that they provide benefits for other conditions. Thus, if the co-pay to see a family doctor is $20, then the co-pay to see a psychiatrist must also be $20.

In a free market, the decision of how to cover mental health benefits is left to the insurer and the insured. A mandate to require that mental health coverage be given parity eliminates that freedom. Proponents of the mandate claim that it adds little to no extra cost to health insurance. They point to a study showing that there was no costs increase in mental health benefits when mental health parity was enacted in the Federal Employee Health Benefits (FEHB) program.

The reason costs didn’t increase is that the use of mental health benefits didn’t increase either. Most of the plans in the FEHB used managed care organizations to manage the mental health benefits, suggesting that use didn’t increase because the insurance programs restricted access to benefits.

Other research, which examines programs that didn’t restrict access, suggests that mental health parity is one of the most costly of benefit mandates. Using actuarial data, the Council for Affordable Health Insurance, an insurance industry group, estimates that it can add between five and ten percent to the cost of a health insurance policy.

More expensive health insurance means that means more businesses will increase their insurance premiums or drop their insurance altogether, resulting in an increase in the number of uninsured. Another route that businesses might pursue is simply dropping their mental illness coverage from their insurance policies, meaning that employees will have less access to mental health benefits.

A reading of the Mental Health Parity Act suggests that its supporters recognize that it will lead to higher costs. The bill tries to shield small businesses from rising health insurance costs by exempting any business with fewer than fifty employees. It also exempts any business whose health insurance costs rise more than 2% due to the mental health parity mandate.

Attempts to ask any of the three Senators what they thought about the cost of the bill proved fruitless. All three Senate offices responded to our calls, made over a two-week period, by saying the staff members who could address our questions were out of the office.

Thus far, only four benefit mandates exist at federal level.

Unfortunately, benefit mandates are extremely common among the states, as most states have dozens, mandating everything from hair prostheses to massage therapists.  New Mexico, for example, has 45 such mandates while Maryland has the most in the nation with 60 and Idaho has the least with only 14.

State level mandates have become such a problem that one of the most promising — albeit unsuccessful — efforts to reform health care in recent years was led by then-House Speaker Dennis Hastert (R-IL) and Rep. John Shadegg (R-AZ), both of whom wanted to change federal law to allow individuals to purchase insurance across state lines. This effort essentially would have forced insurance companies to compete across state lines.  That, in turn, would have pressured states to tailor their health care regulations in order to compete against each other.

Costs aside, what makes federal mental health parity legislation so troubling is that it could start a trend that shifts mandates from the state to the federal level, thus closing off a potential route to reform and future cost reductions. Instead of creating new mandates, Congress should be working to cut health care costs by allowing consumers to purchase health insurance — including mental health insurance — across state lines.

Mr. Gessing is the president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Mr. Hogberg, formerly with Capital Research Center, is a senior policy analyst at the National Center for Public Policy Research.

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Health Care

Senators’ Health Care Plans are Misguided

Outside of the Iraq War, the debate over health care reform is one of the most contentious issues in politics today. With ongoing debate in Washington and a flurry of activity in the states, the need to make health care more affordable is a mantra being adopted by politicians of both parties.

Unfortunately, despite the high-minded rhetoric, political intervention more often results in higher medical costs. One of New Mexico’s own senators, Republican Senator Pete Domenici – in conjunction with Senators Mike Enzi (R-WY) and Ted Kennedy (D-MA) – is now leading an effort that would ultimately drive up the costs of health insurance and may even inflict harm on the very people the Senators are trying to help.

The legislation, which has already passed out of one Senate committee, is known as the “Mental Health Parity Act.”

Although, Domenici’s desire to help those with mental illness is noble, it has led him to support a proposal that inevitably, if inadvertently, will harm both the mentally ill and the uninsured.

This bill would require that health insurance policies that provide coverage for mental illness must provide it in the same way that they provide benefits for other conditions. Thus, if the co-pay to see a family doctor is $20, then the co-pay to see a psychiatrist must also be $20.

In a free market, the decision of how to cover mental health benefits is left to the insurer and the insured. A mandate to require that mental health coverage be given parity eliminates that freedom.  Furthermore, mental health parity is one of the most costly of benefit mandates. Using actuarial data, the Council for Affordable Health Insurance, an insurance industry group, estimates that it can add between five and ten percent to the cost of a health insurance policy.

Few of the likely consequences of imposing a mental health parity mandate are good for employees. Forcing insurance programs to cover mental health the same way they cover physical illnesses and conditions will result in more expensive health insurance. That means more businesses will increase their insurance premiums or drop their insurance altogether, resulting in an increase in the number of uninsured. Another route that businesses might pursue is simply dropping their mental illness coverage from their insurance policies, meaning that employees will have less access to mental health benefits.

A reading of the Mental Health Parity Act suggests that Domenici recognizes that it will lead to higher costs. The bill tries to shield small businesses from rising health insurance costs by exempting any business with fewer than fifty employees. It also exempts any business whose health insurance costs rise more than 2% due to the mental health parity mandate.

Attempts to ask any of the three Senators what they thought about the cost of the bill proved fruitless. All three Senate offices responded to our calls, made over a two-week period, by saying the staff members who could address our questions were out of the office.

Thus far, only four benefit mandates exist at federal level. Unfortunately, benefit mandates are extremely common among the states, as most states have dozens, mandating everything from hair prostheses to massage therapists.  New Mexico, for example, has 45 such mandates.

Health care mandates at the state level have become such a problem that one of the most promising – albeit unsuccessful – efforts to reform health care in recent years was led by then-House Speaker Dennis Hastert (R-IL) and Rep. John Shadegg (R-AZ), both of whom wanted to change federal law to allow individuals to purchase insurance across state lines. This effort essentially would have forced insurance companies to compete across state lines.  That, in turn, would have pressured states to tailor their health care regulations in order to compete against each other.

Aside from the inherent cost, what makes federal mental health parity legislation so troubling is that it could start a trend that shifts mandates from the state to the federal level, thus closing off a potential route to reform and future cost reductions. Instead of raising costs by creating new mandates, Domenici, Enzi, and Kennedy and others should be working to cut health care costs by allowing consumers to purchase health insurance –including mental health insurance – across state lines.

Paul Gessing is the president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

David Hogberg is a Senior Policy Analyst for the National Center for Public Policy Research, a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems.

Categories
Health Care

NM Governor Proposes Massive Medicaid Expansion, Universal Coverage

Editor’s note: The following article appeared in the October, 2006 edition of Health Care News which is published by the Heartland Institute www.heartland.org. The publication is distributed to state legislators and policymakers in all 50 states.

In a clear sign that health care and the uninsured remain hot-button issues on which many politicians intend to be proactive, New Mexico Gov. Bill Richardson (D) on July 20 proposed significant changes to the state’s Medicaid system.

Depending on the findings of the commission he appointed to explore universal insurance coverage options, expected next year, New Mexico may embark on a scheme to provide universal health care by 2008.

“Uninsured New Mexicans are a tremendous risk, and the effect of uncompensated care on our health care system is profound,” Richardson told the Santa Fe New Mexican on July 21. “We can’t wait for the federal government to solve this issue.”
Master Plan

In addition to appointing the task force, Richardson’s proposal included four other major elements:

  • Phasing in a requirement for companies doing business with the state to begin offering health insurance benefits to their New Mexico employees if they do not do so already.
  • Determining the number of state government employees who lack health coverage. Currently, if an employee declines enrollment, the state doesn’t check to see if he or she has coverage through a spouse or other entity. This full accounting will help create an accurate picture of coverage gaps and help the state target outreach efforts to get as many state government employees covered as possible, the governor said.
  • “Maximizing” Medicaid coverage. For fiscal year 2008, Richardson will seek funding to increase coverage for adults through a two-year, phased-in approach. The initiative will be specifically designed to help low-income adults earning up to 100 percent of the federal poverty level. “Medicaid currently covers only adults with children whose incomes are below 30 percent of the poverty level, or $4,700 per year for a family of three,” explained Pam Hyde, secretary of the state Department of Human Services. “Covering all adults to 100 percent of the poverty level, or $16,600 a year for an equivalent family, would bring another 42,000 people under Medicaid coverage. Phased in over two years, the program would cost $1,500 per person per year.”
  • Expanding the State Coverage Insurance program to help more working adults and asking the federal government to raise the federal poverty requirement to 300 percent with cost-sharing based on income. Expanding this public/private partnership with small employers will help cover working New Mexicans who currently cannot afford insurance, Richardson said. Currently serving 5,000 adults with incomes up to twice the poverty level, the program would be expanded to three times the poverty level, described as a family of three with an income of $49,800.

Federal Largesse

According to the Kaiser Family Foundation, 22 percent of New Mexicans lack health care coverage–more than any other state but Texas.

If enacted in its entirety in the upcoming legislative session, Richardson’s plan is expected to insure 59,000 New Mexicans–approximately 15 percent of the population currently lacking health insurance. It would cost the state $77 million a year while significantly raising the amount New Mexico receives for Medicaid from the federal government.

“The plan is affordable, because it would leverage $250 million in additional federal Medicaid funds,” New Mexico House Speaker Ben Luján (D-Nambé) told the Santa Fe New Mexican on July 21. New Mexico currently receives nearly $3 from the federal government for every $1 it spends on Medicaid from state funds.
Split Opinion

Reaction to Richardson’s proposal among public policymakers and opinion leaders was split along ideological lines.

Sharon Kayne, communications director for New Mexico Voices for Children, a self-described progressive, nonpartisan organization, welcomed the plan, saying, “We are pleased that the five-point plan revealed today includes an expansion of Medicaid, which plays an important role in lowering health care costs for everyone.”

But Michael Cannon, director of health policy studies at the libertarian Cato Institute in Washington, DC, said the governor’s plan will “increase taxes, pull more New Mexicans down into poverty, and increase the cost of private health care and coverage.”

Cannon said Richardson should instead make “these programs less burdensome by recovering Medicaid costs from the estates of well-to-do seniors” and make health care more affordable and convenient by deregulating nurse practitioners and other providers. Cannon also suggested the state lower the cost of private health insurance “by letting New Mexico residents and employers purchase coverage from out of state.”

Categories
Health Care

Bill Richardson’s Immodest Medicaid Proposal: A beggar Thy Neighbor Approach from the Presidential Candidate to be

New Mexico governor and presumptive presidential candidate Bill Richardson recently joined the ranks of governors who have proposed significant changes to their state’s Medicaid systems. Starting with passage of Mitt Romney’s groundbreaking and controversial universal-coverage plan in April, states from West Virginia to Idaho and from Florida to Maine (to name just a few) are taking steps to improve care while cutting costs.

Richardson, however, despite his national image as a “moderate,” has taken a different path, namely the path of least resistance. Rather than making tough decisions and prioritizing as most other states are doing, Richardson plans to leverage New Mexico’s impoverished status to take federal taxpayers for a ride.

Along with ranking in the bottom-five of states in nearly all personal-income and education measures, New Mexico lags significantly behind other states in health care coverage. In fact, according to the U.S. Census, nearly 22 percent of New Mexicans lack health care coverage. That is more than any other state but Texas. In fact, New Mexico and Texas are the only two states with more than 20 percent of their citizens uninsured.

Under federal guidelines, poor states like New Mexico can receive up to $3 for every $1 they spend on Medicaid. With few incentives to cut costs and every incentive to spend, Richardson’s Medicaid plan is long on expanding services and short on anything that will reduce costs.

In what follows I set out the basics of the governor’s plan, while adding some commentary of my own:

  1. Require companies that do business with the state to offer health insurance to their New Mexico employees. Of course, forcing mandates on state contractors will inevitably raise the costs for government services that are ultimately borne by taxpayers. At the same time, fewer small businesses will work with the state.
  2. Pinpoint the number of state employees who decline health coverage. Currently, if an employee declines enrollment, the state does not check to see if he or she has coverage through a spouse or another entity. Studying why people decline health coverage makes sense, but rather than limiting the discussion to state employees, states should be examining whether the uninsured are spending their money on cable TV and the latest video-game gear, whether they are young and healthy and don’t feel they need insurance, or whether misguided mandates are driving prices beyond what people can afford.
  3. Maximize the Medicaid program by covering more adults. According to New Mexico Human Service Department secretary Pam Hyde, “Medicaid currently covers only adults with children whose incomes are below 30 percent of the poverty level, or $4,700 per year for a family of three. Covering all adults to 100 percent of the poverty level, or $16,600 a year for an equivalent family would bring another 42,000 people under Medicaid coverage.” In exchange for spending “only” $62 million a year in state funds, New Mexico will receive over $190 million courtesy of federal taxpayers.
  4. Expand the State Coverage Insurance program to cover more adults and ask the federal government to raise the federal poverty requirement to 300 percent with cost-sharing based on income. Adults with incomes up to twice the poverty level are currently eligible for Medicaid. Richardson would like to expend the program to cover adults making up to three times the poverty level (a family of three with an income of $49,800). The program would cost the state $15 million, but if Congress can be convinced to go along with the idea, an additional $57 million in federal funds would flow into New Mexico.
  5. Appoint a 21-member task force to analyze health coverage models and make recommendations on universal coverage solutions for New Mexicans.

According to the governor’s office, this plan — if enacted in its entirety in the upcoming legislative session — would cost the state $77 million a year. But as statehouse speaker and Richardson ally Ben Luján told the Santa Fe New Mexican, “The plan is affordable to New Mexicans, because it leverages $250 million in additional federal Medicaid funds.”

Clearly, Congress needs to reform a Medicaid system that allows states like New Mexico to get away with highway robbery. Perhaps it is more surprising, however, that Bill Richardson, who clearly plans to run for president and who spends more time outside of New Mexico than in it, couldn’t come up with something better than a “beggar thy neighbor” Medicaid proposal. Such a ham-handed approach is unlikely to sit well with voters in a nationwide race.

— Paul J. Gessing is president of New Mexico-based Rio Grande Foundation.