Rising
Costs, Reduced Access: How Regulation Harms Health Consumers and the
Uninsured
Produced by the Domestic Policy Studies
Department
Published by The Heritage Foundation
July 20,
1999
By Grace-Marie Arnett
Members of Congress once again are embroiled in a debate over
managed care reform legislation that attempts to address some of the
symptoms plaguing America's health care system. Instead of changing
federal policies that restrict competition and patient choice, the
Patients' Bill of Rights Act of 1999 would burden the health care system
with more federal regulation. A growing body of evidence indicates that
adding new layers of regulation would increase the cost of health
insurance for many Americans and add to the number of people who are
uninsured. Specifically:
-
The managed
care reform proposals would increase health insurance costs for
America's workers and their families. According to recent
Congressional Budget Office (CBO) estimates, if the Patients' Bill of
Rights Act of 1999 provisions were fully phased in, insurance premiums
would rise by an average of 4.8 percent. The private-sector mandates
in Title I of the bill would cost about $3 billion in 2000 and $13
billion in 2004.
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In driving up
the cost of coverage, the proposed legislative reforms would throw
more people off the insurance rolls. The CBO, as well as several
private economists, estimates that each 1.0 percentage point increase
in the cost of health insurance drives between 200,000 and 300,000
additional Americans off the insurance rolls.
Each new mandate and regulation
passed by federal and state regulators may increase costs by a
percentage point or two; some by much more. And even though they can be
justified individually, the cumulative effect of the added regulations
is that more and more people will be forced to forego health
coverage.
In a properly functioning health
care market, in which consumers could choose and own their health
insurance policies, companies would be forced to shape insurance
products to meet
customers' needs for services, quality, and price.
Companies that did not do so quickly would lose customers and revenue.
Sellers of health insurance policies would be bound by the contract
agreement they had made, which would be enforceable through the existing
legal system.
The direct link between imposing
regulations and mandates on the health insurance market and the number
of uninsured is well-established in the research. For
example:
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Duke University
researchers found that the higher the number of coverage requirements
placed on plans, the higher the probability that an individual will
become uninsured and the lower the probability that a person will have
any private health insurance coverage, including group
coverage.
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Professors at
Wayne State University and the University of Alabama-Birmingham
determined that as many as one in four Americans lacks health
insurance because of benefit mandates. Each additional mandate
significantly lowers the probability that a firm or an individual will
have health insurance.
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A researcher at
Georgia State University found that state guaranteed issue
requirements, coupled with either community rating or rate bands in
the small-group insurance market, increase the probability that a
person will become uninsured by nearly 29 percent.
As costs and the number of
uninsured continue to rise, a different approach clearly is needed. By
injecting patient choice and competition into the health care sector,
many of the problems the political community is attempting to solve
through legislation and regulation would be addressed by consumers
within a competitive marketplace.
Specifically, Congress should
consider:
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Targeted tax
credits for the uninsured. Legislators on both sides of the political
aisle are introducing a number of innovative tax credit bills. Other
bills would allow individual tax deductions for the purchase of health
insurance. Tax deductions can ease the burdens of self-employed
individuals, but they do not roll back the regressive nature of the
current system, which provides more tax relief for those with higher
incomes and a higher tax break for the purchase of more expensive
health insurance policies. Tax credits would be more equitable, and
they could be made refundable and targeted to those who are most
likely to be uninsured. Tax credits would empower consumers to shape
the health insurance market through competition instead of
regulation.
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Alternative
purchasing mechanisms. Providing alternative grouping mechanisms for
individuals in purchasing health insurance would give them the
benefits of group purchasing. A number of mechanisms are being
debated, like voluntary choice cooperatives, HealthMarts, and
association health plans.
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A moratorium on
regulation and mandates. Congress and state legislators should place a
moratorium on passing more insurance regulations and health benefits
mandates until their costs and impact can be explored in full.
People are denied health coverage suited to their needs when
government forces plans to provide an array of benefits designed by
politicians, not consumers. Regulations and mandates drive up health
care costs, making insurance more costly for individuals and families
who have no choice but to purchase the policies prescribed by
politicians.
If increasing access and lowering
costs are genuine goals of Congress, a better approach would be to
empower individuals and families to make their own health care choices,
restore the doctor-patient relationship and the independence and
integrity of the medical profession, and force the health care industry
and insurance companies to compete for consumer dollars. The health care
delivery system, at all levels, should be directly accountable to those
it serves.
Produced by The Domestic Policy
Studies Department
Published by The Heritage Foundation
214
Massachusetts Ave., N.E. Washington, D.C. 20002-4999
(202)
546-4400
http://www.heritage.org/
Grace-Marie Arnett is president of the Galen
Institute, a public policy research organization based in Alexandria,
Virginia. She is the editor of Empowering Health Care
Consumers through Tax Reform, published in 1999 by the University of
Michigan Press.