A large part of the discussion on health care in Washington has revolved around the so-called public option – a government-run health insurance plan that would increase coverage and compete with private insurers to “keep them honest.”
President Obama has said he wants a public option. It is a key element in the health care reform plan presented recently by Sen. Chris Dodd, D-Conn.
But there’s been surprisingly little discussion about the experiment that the State of Maine has conducted with a public option over the last five years. Before acting on health care reform, federal legislators would do well to look at a recently released paper by the Maine Heritage Policy Center. It describes what has happened in Maine – tskyrocketing premiums, decrease in quality of coverage, and failure to cut both costs and the number of uninsured.
In 2004, Maine’s Dirigo Health reform plan began with $53 million and lots of good intentions. Among other reforms, leaders there hoped to cut the number of uninsured in the state by offering affordable, subsidized DirigoChoice insurance plans.
The theory was that this plan would insure so many more Mainers that it would end the phenomenon of “cost-shifting,” by which the cost of treating the uninsured is passed along to everyone else in the form of higher prices. Lawmakers were certain that Dirigo would create big savings for private insurers – so certain that they charged the private insurers an amount supposedly based on the expected savings to pay for Dirigo.
Over the next five years, Dirigo would collect premiums and dole out subsidies, for net revenues of $109 million. Taxpayers and insurers kicked in in $155 million more. As of May 2009, Maine had spent about $317 million on Dirigo, including the start-up money.
The result: About 3,400 previously uninsured Mainers are insured today with Dirigo. That’s $93,000 for each newly insured person. The percentage of uninsured Mainers remains right where it was when Dirigo started: 10 percent. A large majority of those who switched to Dirigo – 64 percent – dropped their private insurance and switched to the subsidized “public option.”
Dirigo’s enrollment numbers had never approached expectations, but they have plummeted recently because the program is no longer a good deal. The expected cost-reductions never materialized, so premiums had to be ratcheted up by 74 percent in five years. Individual and self-employed family plans under DirigoChoice now cost $1,500 per month, which in Maine looks more like a mortgage than an insurance payment. (Dirigo “temporarily” closed enrollment for subsidized plans and small business group plans two years ago. It’s still closed.)
Dirigo’s failure has been most damaging to the self-employed, the jobless, and to those who cannot get health insurance through work. Their only affordable options now are either to go without insurance or go on Medicaid, a free program that covers fully 23 percent of the state’s population and is available to anyone who makes less than 200 percent of the federal poverty level ($46,000 for a family of four). That’s because Maine’s “guaranteed-issue” law, which forbids insurers from refusing policies based on individuals’ health condition (that is, you can get lung cancer and only then apply), had already dried up the individual health insurance market. Esurance.com, the online portal for purchasing individual health insurance plans, doesn’t even serve the state of Maine. Aside from the companies that manage large group employer plans, the only insurer is Anthem, which manages
Senator Dodd’s plan includes both the “public option” and the “guaranteed issue” provisions. The lesson from Maine is that lower costs and savings do not necessarily follow from these policies — in fact, there are good reasons to suspect they are counterproductive.
In Maine, good intentions paved the road to health-care Hell. President Obama and everyone in Congress should take careful note lest we all end up on that road.
