The Disaster that Is Dirigo

Health care reformers take note.  An article on Maine’s experience with its Dirigo health care program in today’s New York Times highlights some important lessons for those who would use command-and-control tactics to achieve “universal coverage.”

1. Government Coverage Crowds out Private Coverage

The Times reports:

When Maine became the first state in years to enact a law intended to provide universal health care, one of its goals was to cover the estimated 130,000 residents who had no insurance by 2009, starting with 31,000 of them by the end of 2005, the program’s first year.

So far, it has not come close to that goal. Only 18,800 people have signed up for the state’s coverage and many of them already had insurance.

In fact, some 60 percent of Dirigo enrollees previously had private insurance.  That’s consistent with recent estimates by economists Jon Gruber (MIT) and Kosali Simon (Cornell) that whenever government provides health insurance to 10 people, six people lose their private coverage.  Thus only four people gain coverage as a result of the expansion.

That’s government efficiency for you: covering four people for the price of 10.

2. Adverse selection happens.

More from the Times:

[P]remiums have increased, not become more affordable, because some of those who signed up needed significant medical care, and there are not enough enrollees, especially healthy people unlikely to use many benefits…

The program completely covers preventive care, subsidizes premiums and deductibles, and unlike most insurance plans, covers treatment for mental illness and does not exclude people for pre-existing medical conditions…

An Anthem spokesman, Mark Ishkanian, said the increase was necessary because medical claims of DirigoChoice customers were “substantially higher” than anticipated, about double those of non-Dirigo plans…

[A spokeswoman for the governor] said the state was surprised that more than half of DirigoChoice enrollees qualified for the highest subsidy, 80 percent, which meant the program has been more expensive for the state.

Hmm.  Benefits much more comprehensive than the market provides.  And enrollees were disproportionately high-cost.  Didn’t see that coming.

3. Predicted reductions in uncompensated care may not materialize.

Premiums are increasing under Dirigo.  (One diabetic man dropped out after his rates increased 13.4 percent.)  Part of Dirigo’s funding was to come from “assumed…savings because an increase in insured people would mean less charity care from hospitals.”  Guess not.  Gov. Romney, call your office.

4. For some, it’s not about better health care.  It’s about more government control.

When even the New York Times sees fit to run an article about how your big-government health plan is a disaster, it takes chutzpah to say that the answer is more mandates, more taxes, and more regulation:

[Democratic] Governor [John] Baldacci said in an interview that when the Legislature enacted the Dirigo Health Reform Act in 2003, it gave him less money and more compromises than he had wanted. He said his administration had now learned more about what works and what does not.

His new proposals include requiring people to have insurance and employers to offer it and penalizing them financially if they do not; making the subsidized insurance plan, DirigoChoice, more affordable for small businesses; creating a separate insurance pool for high-risk patients; instituting more Medicaid cost controls; and having the state administer DirigoChoice, which is now sold by Anthem Blue Cross.

“We’ve got a reform package that takes Dirigo to the next level,” Mr. Baldacci said. “It takes the training wheels off.”

Seems like the training wheels – indeed all the wheels – have already come off.