This year’s elections were similar to those in the past in at least one respect: Most candidates for office promised to “do something” to fix the country’s imploding health care system. Invariably, their plans involved passing new laws that would create new programs, entitlements, and regulations.
It seems to me these efforts, while well intended, are fundamentally confused. The country’s health care system doesn’t need more laws: It’s already staggering under the burden of having to interpret and comply with thousands of rules and regulations. Instead of passing new laws, we should be repealing outdated, counterproductive, and unnecessary old laws.
In 1998, I wrote a report for the American Legislative Exchange Council (ALEC) on patient protection laws and mandated health benefits. I reported then that the General Accounting Office (GAO) identified 16 states–Idaho, Iowa, Kentucky, Louisiana, Maine, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Utah, Vermont, and Washington–as being the most aggressive in passing health benefit mandates and laws regulating insurance providers.
Those 16 states saw their uninsured rate increase 3.5 percent between 1990 and 1994. The 34 less-regulated states saw their uninsured rate fall by 2.9 percent. The reasons are obvious. National insurance companies stopped doing business in states with hostile regulatory environments, and local companies and agents dropped the products most affected by the regulations, often individual health insurance.
Consumers in the heavily regulated states also changed their conduct. Employers faced with higher prices dropped coverage for their employees. Individuals delayed purchasing insurance knowing they could buy it after they got sick. People with comprehensive insurance coverage used more medical services, driving up prices and costs.
Community rating, guaranteed issue, and mandated benefits reflect some of the key elements of former President Bill Clinton’s failed Health Security Act. These top-down regulations attempt to force the marketplace to respond to what regulators want, rather than what consumers demand and insurers are willing and able to provide. It’s a failed approach, not only in health care, but in every industry and in every country it has been tried.
Four years later, there is a new President in the White House and voters seem more skeptical about government-run health care than they were in the past. But we are still trying to fix what’s wrong with health care by passing new laws. A PricewaterhouseCoopers (PwC) study released last May estimated that health insurance premiums would increase 13.7 percent for 2002. PwC attributed 15 percent of the increase to government regulations and mandated benefits.
(Other factors leading to health care inflation include new pharmaceuticals and medical devices (22 percent); rising hospital expenses (18 percent); general inflation (18 percent); and increased consumer demand by a growing senior citizen population (15 percent).)
Regulations’ 15 percent of the $67 billion increase in health spending during 2001 is equal to $10 billion, quite a lot of money. Other estimates place the cost of mandates even higher.
A study by eHealthInsurance examined 30,000 new individual and family plans purchased by its members in the last six months and discovered the damaging effects of state regulations. The average annual premium for a single policyholder in California, a state without community rating or guaranteed issue, is $1,538. The average premium in highly regulated New York, which imposes both mandates, is more than twice as much at $3,589.
Replace Rather than Reform
My 1998 ALEC report and the latest reports from PwC and eHealthInsurance show the continued futility of trying to reform the health care system by passing new commands and rules and bureaucracies, rather than replacing the commands, rules, and bureaucracies that have failed to work.
Years ago, when I first started working with The Heartland Institute, Joseph Bast, Heartland’s president, told me, “they keep layering new shingles over the old and leaky roof, instead of taking off the old shingles first.”
Laws upon laws have been layered on top of one another, with little or no attention given to repealing those that aren’t working. We expand the power of previous legislation, broaden the scope of health care control, “close loopholes,” and amend laws in an endless effort to counteract the negative unintended consequences of previous policy decisions.
It just doesn’t work. New laws, even good laws, can’t work if they are superimposed on old laws that skew incentives, create unnecessary costs, or can’t be enforced. The weight of yet another layer of regulations assures that small medical practices and insurance companies drop out, unable to handle the administrative costs. That means fewer choices and less competition, just the opposite of what we want.
The current pattern of ineffective health care reform could be broken if state legislators embraced the Mandated Benefits Review Act proposed by ALEC in 1998.
The Act creates an independent committee charged with reviewing the cost effectiveness, medical efficacy, and social impact of each health care benefit mandate. All existing mandates would expire within one year of the Act’s effective date unless specifically reauthorized by the legislature. All proposed future mandates would require a financial impact study and a positive recommendation from the mandate review committee.
Congress could do the same thing concerning federal mandates by following its own rules, defined in the Congressional Review Act of 1996. Had the sensible men and women of Congress put the mandates in the Health Insurance Portability and Accountability Act (HIPAA) to the test, they may well have concluded the bill was not worth the billion-dollar price tag and attending loss of freedom.
We have tried and tried … and failed and failed … to reform health care by passing new laws and creating new programs. It’s time to launch a concerted effort to repeal past laws that don’t work and let providers, consumers, and insurers work together to get it right.
Conrad F. Meier is managing editor of Health Care News.
For more information …
The text of ALEC’s Mandated Benefits Review Act is available through PolicyBot. Point your Web browser to http://www.heartland.org, click on the PolicyBot icon, and search for document #6458.