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The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

Amity Shlaes: Obama’s Health Beast Squashes State Experiments (Including Indiana’s)

Posted by iusbvision on April 4, 2010

We hear about Massachusetts’ “RomneyCare” all the time in the news because it is going broke and the cost overruns have been staggering. RomneyCare is similar in several ways to the new federal legislation.

What you never hear about is Indiana’s experiment called “HIP” Healthy Indiana Plan, which has been a great success at gettring people care, keeping costs down and it is completely voluntary. In short, the incentives built into the plan are smart and it works. Of course since the plan was concieved by Indiana Governor Mitch Daniels the elite media doesn’t really want to talk about it.

Amity Shlaes:

State attorneys general are filing lawsuits seeking to prove President Barack Obama’s health-care plan is unconstitutional. The litigation takes the spotlight away from something else about the states that matters.

It is that states can be laboratories where the country experiments to ascertain which mix of taxes, incentives and public administration works best when it comes to health care.

Amity Shlaes

Amity Shlaes

Obamacare threatens such experiments by superseding them. In doing so, the new federal program deprives the country not only of the experiments themselves but also of evidence that might cast doubt on the promises of the new legislation.

In few states is the change as dramatic as in Indiana. Several years ago Republican Governor Mitch Daniels and the legislature began wondering about the same questions that preoccupied the framers of Obama’s health-care plan: why so many of the uninsured mob hospital emergency rooms, why citizens turn their backs on preventive medicine, why health-care spending expands, and how you get Americans to be aware of health-care costs.

In response, Daniels’s team created the Healthy Indiana Plan, known as HIP. It was billed as subsidized insurance for low- and middle-income Hoosiers: citizens who suffer from catastrophically expensive illnesses get coverage subsidized by state and federal dollars. The state doubled cigarette taxes to pay for it all. So far, so familiar.

But Healthy Indiana features a few other interesting traits. Joining was voluntary. Participants pay a penalty co-pay if they use an emergency-room for routine health-care needs.

Spending Accounts

In addition, as part of HIP, the state created a health spending account of $1,100 per adult to be used for basic medical needs and preventive care. At the end of the year, patients can roll over what remains in the account. If they have a record of seeking appropriate preventive care, they may also get additional cash from the state for their health needs. Those who don’t get the preventive care do not get those funds.

In its two-year life, Healthy Indiana has proven popular, with some 60,000 Hoosiers enrolling. Ninety nine percent said they would re-enroll.

The preventive component seems to work: Adult HIP members use emergency rooms at a lower rate than adults on standard Indiana Medicaid. They use generic drugs more frequently than the commercially insured. The program hasn’t busted the budget. Some three-fourths of HIP enrollees say they are more likely to seek preventive services. In a state where one in four adults is obese, this is perhaps the most interesting news of all.
Now Healthy Indiana will be overwhelmed by Obamacare, which will have little regard for individual budgeting and incentives. Perhaps Medicaid administrators will cut off the cash that has flowed to Healthy Indiana. Or perhaps the insurance that Obamacare offers will be more attractive and woo away HIP’s volunteers. Healthy Indiana may survive in name. But the experiment, isolating the effect of a certain incentive upon a certain problem, has been aborted.

I happened to be in the Indiana state house the week that it became clear the president’s plan would become law. Unsure of future funding, Daniels was already freezing new enrollment for the plan. Daniels points out that the federal law will force tax increases at the state level in Indiana and elsewhere. That’s because the federal law effectively mandates expansion of Medicaid, whose costs the states help foot.


One Response to “Amity Shlaes: Obama’s Health Beast Squashes State Experiments (Including Indiana’s)”

  1. Wesley Ray said

    I meant in Canada we had large budget cuts to our social welfare programs like health care.

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