Policy Analysis No. 197

Laboratory Failure: States Are no Model for Health Care Reform

Executive Summary

While the media are focusing primarily on the debate in Washington, an intense battle over reforming health care is under way in America’s state capitals.

Nearly every policy debated at the national level is also being debated in the state capitals or is being put in place. Many of the state plans are being hailed as models for national health care reform.

Unfortunately, reforms at the state level have generally relied on increasing government control rather than expanding market choices. A review of nine states’ reforms reveals a host of negative consequences: insurance premiums increase; access to medical care is not improved; jobs are lost; spending on Medicaid goes up; insurance companies leave the market; and medical care is explicitly rationed.

Although many of the problems with our health care system can be addressed only at the federal level, there is much the states can do to lower the cost of and increase access to medical care. Specifically, states could take steps to deregulate the health care industry, including eliminating mandated benefits, repealing certificate-of-need requirements, and lifting restrictions on what nonphysician practitioners’ are allowed to do.

The debate at the state level and the experience of programs already introduced provide important guidance by showing the failure of many of the concepts most eagerly debated at the national level. Congress should learn from the states’ mistakes.

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Michael Tanner is director of health and welfare studies at the Cato Institute.