Universal Health Insurance in Washington State: A Grim Prognosis For All of Us

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1 Feature Article Universal Health Insurance in Washington State: A Grim Prognosis For All of Us Conrad F. Meier Late last year, in another assault on the truth, President Clinton claimed the rising number of uninsured is due to Congress failure in 1993 to pass hts plan for nationalizing health care.(l) Contrary to his predictable spin, the growing national population of uninsured citizens is a cancer clearly identifiable at the state level with Washington State becoming a textbook case for legislators and single-payer advocates. Make no mistake about this: it is not because state legislators failed to implement universal health care, but precisely because they did! The state of Washington experience is one we should not discharge with a cavalier wave of the hand. It has national implications of a metastasis spreading across this land, with no state, no citizen immune to the effects of liberal (socialist) health care reform. As grim as it may be, this experience allows us to see things others don t or refuse to see; the experience helps us find opportunities others miss or chose to ignore; the experience gives us perspective on negative long-term consequences where others seek short-term solutions; and the experience teaches us that unless we learn from our mistakes, we are destined to repeat these failures on a national scale. Washington State citizens were among the first Americans to be enrolled forcibly in a Clinton-clone health plan of universal coverage. At the height of reform fever in 1993, the Clinton Administration heavily influenced Washington State legislators into passing sweeping health insurance regulations. Quoting State Representative Phil Dyer: Four days into this legislative session, I became the ranking minority leader on the Health Care Committee, where I watched the passage of a bill that was constantly being revised with [arca code] 202 fax headers --- the latest wisdom from Washington, D.C. --- coming into the caucus, because in that Spring of 1993, the Ira Magaziner [health care] task force had been formed, and was, in fact, operating. (2) In May 1993, a solidly liberal legislature and governor passed a universal health care law that included all of the key elements of the original Clinton plan: --- A powerful new bureaucracy with more regulation --- Mandates to buy health insurance with government-defined benefits package --- Mandatory managed care --- Price controls and global budgets --- Govemment-controlled health care purchasing cooperatives --- Guaranteed issue coverage and guaranteed renewability with limits of pre-existing conditions --- Community rating and low income subsidies --- A patient data collection system Thus, Washington State succeeds in establishing total government control over health care with the attending loss of individual freedom of choice and the disruption of free-market competition. Don t Bother Me With Facts What has become a foot-in-the-mouth statement, former Governor Mike Lowry proudly proclaimed on September 23, 1993, I am pleased President Chnton s reform proposals so closely resemble Washington State s new law. Hillary Clinton, almost a year later and while still advancing the interests of the few at the expense of the many, stated she was aware of the early onset of problems occurring in Washington States individual

2 insurance market, and still confirmed the features of the Washington plan will still be the features of any plan that comes out of Congress (3) i The Puget Sound Business Journal, citing economic reasons, reported in November 1997 that some 14,000 state residents had dropped their individual health insurance during the first half of the year. This followed an even steeper decline in 1996, when the state s largest health insurers suffered a collective disenrollment of nearly 40,000 policyholders. The cost of insurance mandates and government regulations had become too much for consumers to absorb. By June 1999, The National Journal s Daily Briejng reported, Washington State s individual insurance is continuing to fall apart. The meltdown was well underway. It matters not that the new health care legislation was to be accomplished incrementally through Problems arose almost immediately, negatively impacting the economics of health care as well as the delivery of health care: --- Health care was rationed in order to control costs --- Consumers were forced to buy undesired --- Insurance coverage and were restricted in their choice of doctors --- The employer mandate was passed onto employees in the form of lost jobs or lower wages, and --- The state became a magnet, attracting people from around the country with high cost medical conditions because they could get guaranteed-issue coverage. Even after repealing some elements of the legislation in 1995, thanks to a new conservative administration, major portions of the old reform plan remain in tact --- so much so that a once vibrant individual health insurance market is but a memory of former times.(4) It Gets Worse As of September 1999, Croup Health Cooperative and Regence BlueShield --- the last two providers of individual health insurance --- both announced they would stop selling individual insurance policies in Washington State. This now leaves the individuals and families in 30 counties without private insurance options. According to State Senator Thibaudeau, there are now about 600,000 uninsured residents, or 11 percent of the state. In a desperation move, State Insurance Commissioner Deborah Senn has reopened the high-risk health insurance pool to those seeking individual health insurance in counties with no private options. Some serious consequences come to mind: First, the Washington high-risk pool is capped at a 125 percent of standard for managed care plans and at 150 percent of standard for fee-for-service coverage, making this a very expensive solution for most citizens.(5) Second, as of November 3, 1999, a new, low-cost managed care plan was established in all areas where private insurance compames were regulated out of business. These unsubsidized premiums are lower than the subsidized high-risk plan and create an insurance situation I call regulatory bias : some consumers will be denied access to the lower insurance premium pool. It appears to this observer that any significant claims loss in this new pool will have to be paid for by state taxpayers from general revenues. Third, due to state guaranteed-issue laws, healthy consumers will game the insurance pool plan by signing up for health insurance only when they need hospitalization, prescription drugs or maternity care, dropping the insurance when the medical event passes. W This revolving door to health care financing will get very expensive in a hurry and can only result in creating the same problems for the state health insurance pool as was created for the private health insurance market. The following reported incident illustrates the problem: A woman wrote to her insurance company congratulating them for their excellent maternity care while having her first baby.

3 She had been uninsured, but signed up after she got pregnant. Now that her baby was born, she was canceling her policy, but assured the insurance company she would come back if she ever got pregnant again. Of course, the costs of her maternity care and delivery significantly exceeded the premiums she paid.(6) This ability to conceal information from an insuring entity and/or to be guaranteed health insurance coverage creates an economic imbalance that produces inflation. Statistically, in any given group of 1,000 individuals, each individual has a 4 percent chance of experiencing a $50,000 loss. If, in this demonstration, the minimum premium is $2,000 and if we assume 100 new people are assigned to this risk pool, there becomes a 20 percent chance for each to have a claim for $50,000. Twenty additional claims requires an additional %1,000,000 in premiums. Now the minimum cost of insuring each of the 1,100 risk pool beneficiaries is $2, a 36 percent increase in premium. Hopefully Commissioner Senn has no desire to mandate that insurers sell auto insurance after a car accident or mandate fire insurance coverage while a house is burning down. Going Over the Edge Just as the alcoholic cannot be expected to reform behavior while continuing to drink, legislators cannot reform health care by practicing the same destructive behavior over and over again, legislating more bad health care policy while expecting different results.(7) In addition to opening the state insurance pool, efforts to reform-the-reform in Washington State currently include more provisions that will further distance the consumer from affordable health insurance by repeating the same mistakes as before and expecting different outcomes: --- Mandating expensive maternity benefits --- Mandating mental illness benefits as any medical benefit --- Mandating prescription drug benefits for comprehensive individual insurance plans --- Mandating subsidies on small-group employers to support the high-risk insurance pool --- Allowing direct access to the high-risk insurance pool for coverage only when you get sick --- Expanding the Health Insurance Pool Board so it more closely resembles the failed Health Services Commission --- Failure to repeal community rating, guaranteed issue, price controls, guaranteed renewability, mandated benefits, and mandated membership in managed care plans. We Feel Their Pain Washington State has provided state and federal legislators with a window into how Clinton-style health care fails to work: statist health care reform has resulted in greater numbers of uninsured citizens, higher costs, an expensive bureaucracy, and the micromanagement of health care delivery. The experience also shows us the answers to health policy problems lie not in denial and concentrating more power and control in government agencies, but in deregulating the private insurance market to allow real consumer choice in a market driven by competition, consumer satisfaction and consumer discontent. When it comes to making the free-market behave, there is simply nothing that replaces the power of a disgruntled consumer. For example, early in the history of private health insurance, prescription drugs were not an insured benefit. As drug technology improved and enhanced the quality of medical care, consumers, not legislators, began to demand that the private insurance sector provide this insurable benefit. Consumer demand, not government regulatory demand, encouraged the free-market to respond positively. Such consumer directed demand offers the best hope for improving the health care system --- both in the state of Washington and the nation --- as it returns to the individual the power to make important health care decisions in a truly free marketplace.

4 i_ Single-payer advocates know this, which is why the very idea of consumer power makes them break-out in a cold sweat and explains why they try to wrest away individual control in favor of a government bureaucracy where no one is held accountable. Single-payer advocates are aware a universal health insurance system would bankrupt the nation. In response to this reality, advocates of centralized health care planning use rationing as the ultimate cost-control mechanism. Canadians know this better than most of us. While they proudly claim to have universal health insurance, they also admit they do not have universal health care. The consequences of rationing health care to Canadian citizens are legendary. It s the Regulations, Stupid On October 4, 1999, Bill Hagens, one of the key architects of the 1993 reform debacle, was named Deputy Insurance Commissioner of Health Policy and senior staff member on the state s health care committee. Hagen was the 1992 recipient of a World Health Organization Travel Fellowship and studied health care systems in several European countries.(8) On October 15, 1999, State Insurance Commissioner Sem ordered a hearing to examine Regence BlueShield, the states largest health insurer, on the grounds they violated the law in pushing for a 28.1 percent insurance premium rate increase on individual insurance polities(8) Is it only a coincidence that Regence recently withdrew individual health insurance policies as a result of the significant regulatory demands stemming from legislation endorsed by Senn s office?(9) A Grim Summary Lo, As for health care policy, it s becoming apparent liberals and some conservatives don t much care if mandates and government regulations raise the price of health insurance and therefore increase the number of uninsured Americans. Since the more uninsured Americans there are, the stronger the popular support and hence the political support for a nationalized, single-payer health care system. What seems so disingenuous is that while both Clintons like to brag about how many components from their health plan have been incrementally legislated nationally, they are in denial over how government health care is being force-fed to all Americans on a scale no less than that force-fed to the citizens of Washington State. The consequences are becoming the same: the nation is now running an uninsured rate of about 17 percent. The market for health insurance in the state of Washington is collapsing because of determined shortsightedness. In 1993, before radical insurance reform, 19 insurers sold individual insurance, Today, only three do. Between 1994 and 1997, the six largest insurance companies lost more than $116 million on individual policies. The loss trend continues today for the remaining insurers. As premium inflation permeates the population, consumers find it sensible to maintain insurance only so long as it is needed, creating a death spiral created by politicians addicted to repeating what we know to be bad social policy. It seems appropriate to suggest that when it comes to health care issues, one of the best health care reform laws needed by Americans is one that protects us from some of our elected representatives and their appointed bureaucrats. Getting involved in the health care social policy debate is a lot of trouble, is expensive, is time consuming, and is guaranteed to offend someone. But, the alternative is worse. References/Notes L-2 1. Reuters News Service, Oct , President Clinton speaking to Reuters. This was also reported frequently on national television news. 2. Phil Dyer cited in Lessons on Reforming Health Care at the State Level: Massachusetts, Minnesota

5 and Washington State. Heritage Foundation Lecture, No. 548, June 14, Ostrom C. Facts in hand, Mrs. Clinton sees no reason to alter state s plan. Seattle Post-Intelligencer, July 24, 1994, p. AlO. 4. Meier CF. How Kentucky destroyed its health insurance industry (and a plan to rescue it). January 13, Online at 5. Meier CF. Extending affordable health insurance to the uninsurable. The Heartland Institute, Policy Study 91, August 27, Online at 6. Richards B. Health care reform in Washington State raises bills and riles nearly everyone, The Wall Street Journal, April 5, 1996, p Meier CF. Snake Oil cures in health care policy blunderland. Medical Sentinel 1999;4(3): Online at 8. Deborah Senn, Washington State Insurance Commissioner, News release, Oct. 4, 1999, hagen.htm. 9. Deborah Senn, Washington State Insurance Commissioner, News release, Oct. 15, 1999, Mr. Meier is health policy advisor for the Chicago-based Heartland Institute and Assistant in Research, Center for Advance Social Research, Universily of Missouri. cmeier@mail.coin.missouri.edu. Originally published in the March/April 2000 issue of the Medical Sentinel. Copyright Association ofamerican Physicians and Surgeons.