Texas Public Policy Foundation says health plans would cause more harm than good

The health care reform plans pending in the U.S. Congress would cause more harm than good, according to a study released today by the Texas Public Policy Foundation.

The study, "The Prognosis for National Health Insurance," ( LafferHealthCareReport.org/ ), concluded that the current health care reform proposals in Washington would cause serious harm to Texans:

• Texas would see 4.7 percent lower economic growth in 2019 compared to the baseline scenario.
• In addition to federally-funded expenditures, the net present value of all Texas state government expenditures through 2019 that will occur due to federal health care reform is $8.9 billion, or a $365 bill for every man, woman, and child in Texas.
• If the federal government requires states to financially cover the expansion of lower income individual's health insurance, Texas taxpayers will have to cover an additional $28.2 billion in costs, for a total cost to Texas general revenue of $37.1 billion over 10 years.
• The current net present value of funding health care reform based on President Obama's priorities will be $4,265 for every person in Texas. This equals $103.8 billion in total costs that Texans will have to bear.
• Expansion of Medicaid eligibility may further increase Medicaid costs in Texas due to the Frew v. Hawkins lawsuit, a suit based on inadequate access for Medicaid enrollees because the state's physician reimbursement was so low that not enough doctors would take Medicaid patients.

"Current proposals based on President Obama's policies would worsen the system, increase costs, further escalate medical price inflation and add more than $285 billion to the deficit over the next 10 years," said TPPF Senior Fellow Donna Arduin, a partner in the economic research firm Arduin, Laffer & Moore Econometrics. "Clearly, these reforms are not a cost-effective way to expand health insurance and the news could be worse for Texans. If the federal government chooses to pass the financial responsibility for covering the expansion of lower income individual's health insurance coverage to the states, the cost to Texans could be higher than the national average."

According to Arduin, legislation that would provide an additional $1 trillion in federal health care spending would not only slow both the Texas and the national economy, but also leave 30 million Americans uninsured.

Arduin urged Congress to work toward a solution that will not penalize the 70 percent of Americans who currently are happy with their health care arrangements, and that will not increase the federal deficit while only reducing the number of uninsured Americans by roughly one-third. Instead, Arduin emphasized the need for patient-centered reform.

"It's clear Washington has no interest in allowing states to develop their own tailored solutions to problems that affect their citizens," said Governor Rick Perry. "Instead we have a federal government bearing down on the states, preparing to take greater control through mandates and trampling innovation through runaway costs. The health care reform legislation currently being considered not only poses a serious threat to patients and providers, but will also cost Texas taxpayers tens of billions of dollars over the next 10 years without significantly improving care for Texans."

The study indicates that reforms need to focus on reducing costs by closing what Arduin and her report co-authors have coined the "health care wedge" - a separation of effort and reward by which a patient understands the true costs of their health care and is therefore driven to be more efficient in his or her spending. This separation is actually the reason health care costs are skyrocketing, according to Arduin.

"When the government spends money on health care, the patient does not," Arduin said. "The patient is then separated from the transaction in the sense that costs are no longer his concern. Health care reform should be based on policies that diminish this wedge rather than increase it."

Health care costs have risen over the past 50 years, while the patient's out-of-pocket contribution has plummeted: half of all medical expenditures in 1950 were paid by patients in the form of out-of-pocket expenses; today only 10 percent of expenditures are paid the same way.

Arduin said there are many solutions available to better the health care system without destroying what already is good in the system. The path to true health care reform is through patient-centered solutions, which emphasize the patient-doctor relationship and work to shrink the wedge by allowing patients and doctors to make more effective and economical health care choices. These solutions include:

• Provide for individual ownership of insurance policies - the tax deduction that allows employers to own your insurance should instead be given to the individual;
• Better leverage Health Savings Accounts (HSAs) - HSAs empower individuals to monitor their health care costs and create incentives for individuals to use only those services that are necessary;
• Allow interstate purchasing of insurance - policies in some states are more affordable because they include fewer bells and whistles; consumers should be empowered to decide which benefits they need and what prices they are willing to pay;
• Reduce the number of mandated benefits insurers are required to cover - empowering consumers to choose which benefits they need is only effective if insurers are able to fill these needs;
• Reallocate the majority of Medicaid spending into simple vouchers for low-income individuals to purchase their own insurance - an income-based sliding scale voucher program would eliminate much of the massive bureaucracy that is needed to implement today's complex and burdensome Medicaid system and produce considerable cost savings;
• Eliminate unnecessary scope-of-practice laws and allow non-physician health care professionals to practice to the extent of their education and training - retail clinics have shown that increasing the provider pool safely increases competition and access to care and empowers the patient to decide from whom they receive their care; and
• Reform tort liability laws - defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients.

The full report may be downloaded at www.LafferHealthCareReport.org/states/Texas .

About Donna Arduin

Donna Arduin is a Senior Fellow at the Texas Public Policy Foundation, and a partner with Arduin, Laffer & Moore Econometrics. Arduin provides economic, fiscal, and policy advice to Governors, Legislatures, and think tanks throughout the country. One of the leading economists looking at state and local governments, she has served in the administrations of governors in Florida, New York, Michigan, and California.

About Texas Public Policy Foundation (TPPF)

The Texas Public Policy Foundation is a non-profit, free-market research institute based in Austin.