The Governor's New Clothes

According to published reports, Governor Baldacci’s chief health care advisor, Trish Riley, has said it is “essential” that the governor’s health care plan “not be subjected to fragmented review by multiple legislative committees.” Instead it is on a “fast track” to be enacted within weeks of its release to the public.

Why the rush? Why the need to stampede the legislature into action? Because if people have a chance to read and consider the 47-page legislation and the 75-page supporting document, they might decide the Governor’s New Outfit is nothing more than a birthday suit.

There is no question that Maine needs to address its serious health care problems, but most of the Baldacci plan moves us in precisely the wrong direction.

Take, for instance, the proposal to develop a statewide health planning bureaucracy and “strengthen” Certificate of Need (CON) regulations. I was somewhat involved in Maine’s last effort to use politicians to control costs with massive statewide planning, hospital rate-setting, and CON, back in the 1970s.

Hospitals would apply for permission to add new services or facilities, and the bureaucracy would approve or deny their request. Politically well-connected institutions would get approved, while less influential entrepreneurs would be denied. It ended up being a way for special interests to defend against new competition.

Most of the health planning bureaucracy is gone – repealed as a massive failure by the federal government. But CON is still around. It applies to “health facilities” wishing to spend capital on new services, according to the governor’s report. But that same report shows what a failure it has been. The report points out that Maine has more MRI machines than the entire nation of Canada, the growth in capital expenditures in Maine is double that of the rest of New England, and Maine has the highest number of hospital beds, hospital days, and emergency room visits on a per person basis.

So, in the face of abject failure, what do the politicians want to do about CON? Why expand it, of course. They want it to apply, not only to hospitals, but doctors’ offices as well. This is political thinking at its finest. If a program fails, don’t repeal it — expand it.

The thinking behind the health insurance proposal isn’t much better. First, the proposal includes tax-financed subsidies for everyone with incomes below 300 percent of the federal poverty level — $45,750 for a family of three. Yet the median household income in Maine is $37,240. The state seems to think it will pay for the subsidy by “recovering” $164 million in freed-up money from bad debts, now that the uninsured will be covered. But the subsidy isn’t confined to the previously uninsured. It is available to everyone meeting the income threshold – well over half the state population.

The insurance product itself is a throwback. It will cover just about everything with only a $250 deductible, $10 copayments for doctors’ visits, and total out-of-pocket exposure limited to $1,250 for individuals. There is no lifetime maximum and no cost-sharing at all for low-income people. There are no gatekeepers or other managed care restrictions. This is an extremely rich benefits package, and it completely fails to sensitize consumers to the true cost of their care.

More importantly, the program is a huge billboard for adverse selection. It provides no incentive for people to sign up while they are young and healthy, but allows them to wait until they know they need services before enrolling. There is no waiting period for pre-existing conditions, and though the report doesn’t specify premiums, it will presumably be community-rated, meaning everyone pays the same premium regardless of risk factors such as age.

That may look good on paper, but like much of what politicians say, it will not work in practice. Healthy people can decline to get coverage, knowing that if they ever get sick they can be covered immediately at no extra cost, and no inconvenience. There is absolutely no advantage in pre-enrolling, especially not if the employer pays only 60 percent of the cost of coverage, leaving another 40 percent for the worker to pay. With the younger people out of the insurance pool, premiums will skyrocket, making coverage unaffordable for everybody.

This is a program destined to fail. But like in the fable of the emperor’s new clothes, no one in Maine seems willing to admit it. We wouldn’t want to embarrass the governor.




Greg Scandlen is the Director of Galen Institute’s Center for Consumer Driven Health Care. He is a graduate of USM and lived and worked in Maine for 15 years before relocating to Washington, DC.

SHARE THIS ARTICLE

About the author

According to published reports, Governor Baldacci’s chief health care advisor, Trish Riley, has said it is “essential” that the governor’s health care plan “not be subjected to fragmented review by multiple legislative committees.” Instead it is on a “fast track” to be enacted within weeks of its release to the public.

Why the rush? Why the need to stampede the legislature into action? Because if people have a chance to read and consider the 47-page legislation and the 75-page supporting document, they might decide the Governor’s New Outfit is nothing more than a birthday suit.

There is no question that Maine needs to address its serious health care problems, but most of the Baldacci plan moves us in precisely the wrong direction.

Take, for instance, the proposal to develop a statewide health planning bureaucracy and “strengthen” Certificate of Need (CON) regulations. I was somewhat involved in Maine’s last effort to use politicians to control costs with massive statewide planning, hospital rate-setting, and CON, back in the 1970s.

Hospitals would apply for permission to add new services or facilities, and the bureaucracy would approve or deny their request. Politically well-connected institutions would get approved, while less influential entrepreneurs would be denied. It ended up being a way for special interests to defend against new competition.

Most of the health planning bureaucracy is gone – repealed as a massive failure by the federal government. But CON is still around. It applies to “health facilities” wishing to spend capital on new services, according to the governor’s report. But that same report shows what a failure it has been. The report points out that Maine has more MRI machines than the entire nation of Canada, the growth in capital expenditures in Maine is double that of the rest of New England, and Maine has the highest number of hospital beds, hospital days, and emergency room visits on a per person basis.

So, in the face of abject failure, what do the politicians want to do about CON? Why expand it, of course. They want it to apply, not only to hospitals, but doctors’ offices as well. This is political thinking at its finest. If a program fails, don’t repeal it — expand it.

The thinking behind the health insurance proposal isn’t much better. First, the proposal includes tax-financed subsidies for everyone with incomes below 300 percent of the federal poverty level — $45,750 for a family of three. Yet the median household income in Maine is $37,240. The state seems to think it will pay for the subsidy by “recovering” $164 million in freed-up money from bad debts, now that the uninsured will be covered. But the subsidy isn’t confined to the previously uninsured. It is available to everyone meeting the income threshold – well over half the state population.

The insurance product itself is a throwback. It will cover just about everything with only a $250 deductible, $10 copayments for doctors’ visits, and total out-of-pocket exposure limited to $1,250 for individuals. There is no lifetime maximum and no cost-sharing at all for low-income people. There are no gatekeepers or other managed care restrictions. This is an extremely rich benefits package, and it completely fails to sensitize consumers to the true cost of their care.

More importantly, the program is a huge billboard for adverse selection. It provides no incentive for people to sign up while they are young and healthy, but allows them to wait until they know they need services before enrolling. There is no waiting period for pre-existing conditions, and though the report doesn’t specify premiums, it will presumably be community-rated, meaning everyone pays the same premium regardless of risk factors such as age.

That may look good on paper, but like much of what politicians say, it will not work in practice. Healthy people can decline to get coverage, knowing that if they ever get sick they can be covered immediately at no extra cost, and no inconvenience. There is absolutely no advantage in pre-enrolling, especially not if the employer pays only 60 percent of the cost of coverage, leaving another 40 percent for the worker to pay. With the younger people out of the insurance pool, premiums will skyrocket, making coverage unaffordable for everybody.

This is a program destined to fail. But like in the fable of the emperor’s new clothes, no one in Maine seems willing to admit it. We wouldn’t want to embarrass the governor.




Greg Scandlen is the Director of Galen Institute’s Center for Consumer Driven Health Care. He is a graduate of USM and lived and worked in Maine for 15 years before relocating to Washington, DC.

SHARE THIS ARTICLE

About the author