Health Care Reform – History of Fiscal Folly

Health Care Reform – History of Fiscal Folly

As Statesman and Philosopher Sir Edmund Burke once stated “Those who don’t know history are destined to repeat it.” This quote speaks volumes when you put into perspective of the present day fiasco of Massachusetts attempt at Health Care Reform and the past Health Care Reform efforts in Tennessee.

As spectacular failures go, it’s hard to do worse than Tennessee. The Volunteer State’s early attempt to dramatically increase health insurance coverage, dubbed TennCare, started off promisingly, says Peter Suderman, an associate editor at the Reason Foundation.

· In 1994, the first year of its operation, the system added half a million new individuals to its rolls.

· Premiums were cheap — just $2.74 per month for people right above the poverty line — and liberal policy wonks loved it.

· The Urban Institute, for example, gave it good marks for “improving health coverage of the uninsurable or high-risk individuals with very limited access to private health insurance coverage.”

· At its peak, the program covered 1.4 million individuals — nearly a quarter of the state’s population and more than any other state’s Medicaid program — leaving just 6 percent of the state’s population uninsured.

But those benefits came at a high price, says Suderman. By 2001, the system’s costs were growing faster than the state budget. The drive to increase coverage had not been matched by the drive to control costs. Vivian Riefberg, a partner at consulting firm McKinsey & Company, described it as having “almost across the board, no limits on scope and duration of coverage.” Spending on drug coverage, in particular, had gone out of control:

· The state topped the nation in prescription drug use, and the program put no cap on how many prescription drugs a patient could receive.

· The result was that, by 2004, TennCare’s drug benefits cost the state more than its entire higher education program.

· Meanwhile, in 1998, the program was opened to individuals at twice the poverty level, even if they had access to employer-provided insurance.

In other words, the insurance program’s costs were uncontrolled and unsustainable, says Suderman:

· By 2004, the budget had jumped from $2.6 billion to $6.9 billion, and it accounted for a quarter of the state’s appropriations.

· A McKinsey report projected that the program’s costs could hit $12.8 billion by 2008, consuming 36 percent of state appropriations and 91 percent of new state tax revenues.

Source: Peter Suderman, “Health Care’s History of Fiscal Folly; Expanding health coverage busted state budgets. Will it bust the federal budget too?” Wall Street Journal, April 23, 2010.

Health insurance companies are taking advantage of you and you are allowing it to happen. 92% of Americans are paying 30-40% higher health insurance premiums than is necessary. The higher health insurance premiums equate to an average of $2,208.44/year.

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