The Best and Worst to Come: A Review of Health Care Policy for 2009-2010

As we review the best and worst health care legislation of 2009, it’s also time to begin to consider what ideas are likely to remerge during the 2010 session.

Since session ended in June 2009, the federal health care debate has overshadowed anything that might have happened at the state level. At several town halls throughout the country – and here in South Carolina as well – citizens have expressed their displeasure with the various federal plans being debated in Congress. Features of these proposals include:

Public option insurance: This is a government-run plan that would “compete” with private insurance options. But government programs actually provide lower quality care at a higher cost. For example, Medicare typically spends 15 percent to18 percent on fraudulent claims. By contrast, the private fraud rate amounts to 1 percent of spending.

Mandatory insurance coverage: Under Sen. Max Baucus’s (D-Mont.) bill, individuals who do not have health insurance can be fined $1,900. If the fine is not paid, the person can be prosecuted by the IRS and incarcerated for up to one year. The mandates are meant to force young, healthy consumers to subsidize care for older, unhealthy ones.

New coverage mandates: Among the 50 states, there are currently 2,000 different coverage mandates. South Carolina currently imposes 29 different mandates. If a similar mandatory health insurance program in Massachusetts is any indicator, Obamacare will result in many more new mandates. According to the Cato Institute, “In the three years since Massachusetts enacted its individual mandate, providers successfully lobbied to require 16 specific types of coverage under the mandate: prescription drugs, preventive care, diabetes self-management, drug-abuse treatment, early intervention for autism, hospice care, hormone replacement therapy, non-in-vitro fertility services, orthotics, prosthetics, telemedicine, testicular cancer, lay midwives, nurses, nurse practitioners and pediatric specialists. The Massachusetts Legislature is considering more than 70 additional requirements.”

President Obama has made health care a top priority, and some piece of legislation labeled as “health care reform” is likely to come out of Washington this year or next. Still, it would be a mistake for state lawmakers to sit back and do nothing. Indeed, it is precisely because the states have failed in their capacity to experiment with free market health care solutions that we are still debating the same old statist ideas that have already failed in other parts of the world.

The Best Ideas for 2010

While lawmakers in South Carolina have flirted with fundamental health care reform in past years (and should be praised for pursuing such initiatives as list billing and small business health plans), the focus on free market solutions has become blurred as legislators have begun to promote what might be termed public-private health care solutions (for instance, H 3584). Such half-hearted attempts at free market reform should be eschewed for more basic reforms that would deregulate the insurance market and permit free competition. Here are four ideas for positive, state-based health care reform for 2010:

Eliminate coverage mandates

South Carolina currently has 29 coverage mandates that increase health insurance costs by about 30 percent. The 2009 General Assembly added to that burden by passing mental health parity mandates and Medicaid chiropractic mandates. If trends in other states are any indicator, the legislature may also consider an HPV vaccine mandate for children.

A better option is to eliminate coverage mandates altogether and permit consumers to purchase out-of-state coverage from any licensed provider. While the General Assembly did not even consider this option during the 2009 session, 10 different states have considered this reform. At the federal level, Sen. Jim DeMint (R-S.C.) has introduced legislation (S 1015) that would permit the sale of non-group/individual health insurance across state lines.

Malpractice reform

Tort reform is a state-based initiative that would cut health care costs by as much as 10 percent. High malpractice premiums and the risk of lawsuits scare doctors away from treating uninsured patients while at the same time encouraging the practice of defensive medicine. This past session, the Senate passed legislation (S 168) that would have removed liability for health care professionals who treat patients for free. The bill will likely be taken up by the House in 2010.

Encourage alternatives to employer-based insurance

One of the problems with employer-based insurance is that for many people the loss of employment likely means a lapse in insurance coverage. The best way to address this problem is to permit consumers to use pretax dollars to purchase individual health insurance. The current system, however, punishes individuals who purchase health insurance on their own. In addition, the state should promote the use of Health Savings Accounts (HSAs) and high deductible health plans (HDHPs).

Reform Medicaid

Free market reform is the key to improving Medicaid. Reforms that have worked in other states, such as Florida or Louisiana, include:

· Eliminating fee-for-service reimbursement for doctors

· Providing choice to Medicaid participants by helping them choose their own HMO plans, putting individuals in control of their health dollars

During the 2009 session, legislators doomed substantial Medicaid reform by tying it to a cigarette tax increase (H 3584). A better option would have been to use existing Medicaid funds to enable consumers to purchase their own plans. This reform has already been implemented by several counties in Florida under a test pilot program. Another option that would help lower long-term care costs is to provide a tax credit on premiums paid for long-term care insurance. Such legislation (H 3532) died in committee last year. Currently only 5 percent of nursing home expenditures are paid for with private insurance accounts. The rest of the tab is picked up by taxpayers via Medicaid.

It is also possible the General Assembly will permit a restructuring of the Department of Health and Human Services. Three proposals on the table are:

  • S 384, which died in committee in 2009, would dissolve the board of the Department of Health & Environmental Control, replacing it with a director appointed by the governor. The bill would also establish two boards under the director – the Board of Health and Board of Environmental Control – with three members each (appointed by the governor).
  • H 3199, which passed the House in 2009, would consolidate the Department of Mental Health, the Department of Alcohol & Other Drug Abuse Services, and the Continuum of Care in order to create a cabinet level agency called the Department of Behavioral Health Services.

Bad Ideas from 2009

The worst ideas of 2009 that might again garner support in 2010 include additional taxpayer-funded insurance subsidies and credits (S 455 and H 3210) and a 50 cent per pack cigarette tax increase (H 3585). It remains to be seen whether legislators will pass a cigarette tax increase in an election year. If the state’s current budget troubles continue – and they will – smokers may become a politically popular target to raise revenue.

Legislation that Passed One Chamber in 2009

The Good

  • Malpractice reform

S 168 – See analysis above.

The Bad

  • Additional regulations

S 455 – This bill has already passed the Senate, and if signed into law would require insurance companies to provide “medium benefits” plans suited for employees of small businesses. While the intentions behind this legislation – increasing the availability of private insurance to small businesses – may be good, the law would create another unnecessary bureaucratic entity and shift costs to taxpayers and other consumers. Instead, the legislature should simply eliminate coverage mandates, which would help small businesses far more than a new state-regulated (and subsidized) insurance product.

  • More taxes

H 3584 – This legislation would increase the cigarette tax by 700 percent. The bill has already passed the House and received a favorable report from the Senate Finance Committee. A 50-cent increase in the cigarette tax will cost South Carolina 4,100 jobs, as demonstrated by a prior Policy Council study.

Instead of waiting for a federal health care reform bill most Americans will not support, the General Assembly should take the initiative to bring better health care to South Carolina. We need immediate, measurable ways to make health care more accessible and affordable without jeopardizing quality, individual choice, or personalized care. By encouraging free market alternatives, the General Assembly can help create a more patient-centered system.

To read more about health care legislation, click here.

Nothing in the foregoing should be construed as an attempt to aid or hinder passage of any legislation.

Copyright 2010. South Carolina Policy Council Education Foundation, 1323 Pendleton Street, Columbia, South Carolina 29201.


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