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Wednesday, August 12, 2009

Charlie Arlinghaus: Why Obama spoke in NH and not next door


Apparently people in Washington think we pay no attention to what happens in our neighboring states. The President decided to speak on government health care plans in New Hampshire because each of the neighboring states has had a failed experiment with exactly the kind of changes Washington wants to bring to all of us.

None of the rhetoric in the President's speech was new to New Englanders. All of it is eerily reminiscent of the hopes and dreams of Dirigo Choice in Maine and Commonwealth Care in Massachusetts. Both of those plans went into effect, and neither has proved effective, which makes it odd that Congress and the President wish to develop a plan by copying the broad outlines of the "Massachusetts model."

Dirigo Choice was our region's first foray into having the government save money by spending money. The law was passed six years ago, about a month after it was introduced. Despite the short period of study, supporters were confident Maine's bold new experiment would prove a model of reform for states around the country. Maine's state slogan, "Dirigo," means "I lead." They hoped that as Maine went, so would go the country.

Dirigo's promise was great. It would eliminate the uninsured with no taxes at all. The plan would be paid for by savings in uncompensated care and end up reducing insurance costs for everyone. The plan included a significant Medicaid expansion and a subsidized government or "public option."

Six years later, it turns out that what sounded too good to be true was too good to be true.

Dirigo hoped to sign up 30,000 uninsured residents in year one and all 140,000 estimated uninsured residents by 2009. How did it do? In 2009, the Dirigo plan -- which promised to lead the nation and serve as a model for all -- covered about 3,500 previously uninsured people, or about 3 percent of its goal.

As for having no cost, the Dirigo plan has cost Maine taxpayers $150 million. Despite the taxpayer subsidy, premiums have been increasing and benefits dropping. Dirigo premiums climbed 74 percent during a period when state employee premium costs climbed only 17 percent. Skyrocketing costs have also required significant benefit reductions in the public plan. Hospital costs, for example, are now reimbursed at 70 percent, not 80 percent.

No wonder long-time Dirigo chronicler Tarren Bragdon called his look back at Dirigo "A Series of Unfortunate Events."

Just as unfortunate was the recent Massachusetts effort that is serving as a template for most of what Congress and the President want to do. Massachusetts added individual and employer mandates -- every business with at least 10 employees had to offer insurance to employees, and every resident of the state not otherwise covered had to buy insurance. There were subsidies for families earning as much as $66,000.

Lawmakers assumed that if everyone had insurance, premiums would decline on average. More important, they assumed that emergency room usage would decline significantly and the state would save millions on uncompensated care. Then-governor Mitt Romney predicted premium decreases of 25 percent or more.

But politics will always intervene. Rather than offering middle income people and young professionals a simple catastrophic plan, more and more mandates were added. As a result, premiums have increased, costs are out of control, and many are still uninsured despite a mandate to be insured.

Rather than declining, insurance premiums in Massachusetts are rising much faster than the national average. The cost of family coverage is about 30 percent higher in Massachusetts than the national average. In addition, the waiting time to see a doctor has increased from 33 days to 52 days.

Commonwealth Care, the subsidized insurance part of reform, will cost almost $900 million, about 20 percent higher than projected. To make up for the shortfall, the state ordered subsidized insurers to cut payments to service providers and is considering capping insurance premiums, excluding some residents from eligibility, and limiting coverage to "services that produce the highest value when considering both clinical effectiveness and cost." In other words, rationing.

Despite the costs and the subsidies, 3 to 6 percent of the population -- depending on the measurement used -- are still uninsured. Rather than creating an affordable option, state mandates made unaffordable premiums less affordable.

Dirigo Choice and Commonwealth Care were both noble experiments that adopted one approach to try and expand care and control costs. However, they failed. If states really are laboratories of democracy, as we often say, we should look carefully at the results of these experiments. They failed. It would be a shame to recreate them on a national scale.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.

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