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The Lesson of State Health-Care Reforms
Supreme Court Justice Louis Brandeis famously envisioned the states serving as laboratories, trying "novel social and economic experiments without risk to the rest of the country." And on health care, that's just what they've done.

Like participants in a national science fair, state governments have tested variants on most of the major components of the health-care reform plans currently being considered in Congress. The results have been dramatically increased premiums in the individual market, spiraling public health-care costs, and reduced access to care. In other words: The reforms have failed. ...

...The decline in the number of people enrolled in individual insurance plans, the authors say, is "attributable largely to a steep increase in premiums" because of the state's regulations. Messrs. Parente and Bragdon estimate that repeal of community rating and guaranteed issue could reduce the price of individual coverage by 42%.

New York's experience with guaranteed issue and community rating is not unique. In 1996, similar reforms in Washington state preceded massive premium spikes in the individual market. Some premiums increased as much as 78% in the first three years of the reforms—or 10 times medical inflation—according to a study presented at the annual meeting of the Association for Health Services Research in 1999. Other results included a 25% drop in enrollment in the individual market, and a reduction in services offered. Within four years, for example, none of the state's major carriers offered individual insurance plans that included maternity coverage.

A 2008 analysis by Kaiser Permanente's Patricia Lynch published by Health Affairs noted that in addition to Washington and New York, the individual insurance markets in Kentucky, Maine, Massachusetts, New Hampshire, New Jersey and Vermont "deteriorated" after the enactment of guaranteed issue. Individual insurance became significantly more expensive and there was no significant decrease in the number of uninsured....

...The experience of Massachusetts, which implemented an individual mandate in 2007, suggests otherwise. Health-insurance premiums in the Bay State have risen significantly faster than the national average, according to the Commonwealth Fund, a nonprofit health foundation. At an average of $13,788, the state's family plans are now the nation's most expensive. Meanwhile, insurance companies are planning additional double-digit hikes, "prompting many employers to reduce benefits and shift additional costs to workers" according to the Boston Globe.

And health-care costs have continued to grow rapidly. According to a Rand Corporation study this year, the growth now exceeds state GDP by 8%. The Boston Globe recently reported that state health-insurance commissioners are now worried that medical spending could push both employers and patients into bankruptcy, and may even threaten the system's continued existence.

Meanwhile, survey data from the Massachusetts Medical Society indicate that the state's primary-care providers are being squeezed. Family doctors report taking fewer new patients and increases in wait time.

Reform measures in other states have proven to be expensive duds. Maine's 2003 reform plan, Dirigo Health, included a government insurance option resembling the public option included in the House health-care bill. This public plan, "DirigoChoice," was supposed to expand care to all 128,000 of Maine's uninsured by 2009. But according to the U.S. Census Bureau, the 2007 uninsured rate remained roughly 10%—essentially unchanged. DirigoChoice's individual insurance premiums increased by 74% over its first four years—to $499 a month from $287 a month—according to an analysis of Dirigo data by the Maine Heritage Policy Center. The cost of DirigoHealth to taxpayers so far has been $155 million.

Tennessee's plan for universal coverage, dubbed TennCare, fared even worse in the 1990s. The goal of the state-run public insurance plan was to expand coverage to the uninsured by reducing waste. But the costs of expanding coverage quickly ballooned. In 2005, facing bankruptcy, the state was forced to cut 170,000 individuals from its insurance rolls. ...