How states encourge higher uninsurance rates

Wall Street Journal article by Tarren Bragdon questions

Why does New York spend more on Medicaid — a health-care program for the poor — than every other state but still have a larger portion of its population walking around without health insurance than states that spend far less?

His comparison, interestingly, is Pennsylvania:

Last year, New York spent $48 billion on Medicaid. That amounts to about $2,100 for every man, woman and child. Yet 13.5% of the state’s population lacks health insurance. Pennsylvania, meanwhile, spent closer to $1,300 on Medicaid for every state resident and ended up with an uninsured rate of 10.5%.

This should raise eyebrows for Pennsylvania lawmakers, since Governor Rendell proposes lower then number of uninsured by spending more on Medicaid.

But the reasons for New York’s uninsurance problem is regulation and mandates.

Three mandates are largely responsible. Two — “guaranteed issue” and “community rating” — are closely linked.

Guaranteed issue hits those who are buying insurance on their own. It requires insurers to sell a policy to anyone who can pay for it, regardless of health status. It sounds fair, but drives up premiums for the healthy and induces them to drop out of the insurance pool. …

Community rating requires insurers to charge the same premium to anyone in a given plan, regardless of age, gender or health. This forces the healthy to subsidize the unhealthy, also driving up the cost of insurance.

Every state mandates that insurers cover basic care. But a third New York mandate goes well beyond the basics and requires insurers to cover 52 types of services, ranging from chiropractic to fertility treatment to mental-health services. This adds about 12% to the cost of insurance in the state.

Again this should provide a lesson to lawmakers, many of whom support additional mandates and passing community rating laws in PA.