September 20, 2007

The $50 Billion ‘Ohio (Universal) Health Care Plan,’ and What It Implies about Hillarycare II

This story about Ohio has nationwide application. That’s because Ohio’s media have been awfully quiet about the tax increases that will be necessary if the Buckeye State’s version of “universal health care” comes to pass. The bill was introduced on April 25, according to this Ohio Legislative Services Commission bill analysis, and has flown under the radar ever since. I expect that national Old Media scrutiny of the Second Coming of Hillarycare will also be minimal.

My interest in the so-called “Ohio Health Care Plan” was perked when I heard an ad from the Ohio Chapter of the National Federation of Independent Businesses (NFIB) claiming that the plan would cost Ohio taxpayers $50 billion.

$50 billion. With a “b.” In one state.

That’s over $4,400 for every man, woman, and child in Ohio, or over $17,000 for a family of four.

A separate fiscal analysis by the Legislative Services Commission is pending, so I thought that the NFIB might be engaging in a bit of reckless hyperbole.

They are not.

A cruise through the state-related stats at the Centers for Medicare and Medicaid Services (CMMS) shows that total health care expenditures in Ohio from all sources (employees, employers, Medicare, and Medicaid) were $65.6 billion in 2004 (a very large JPEG copy of the relevant page that will open in a separate window is here). Add 20% or so to that $65.6 billion to account for health care inflation in the intervening years, and a good ballpark estimate for statewide health care expenditures in 2007 is $80 billion.

Now, about how much of that $80 billion is currently handled by Medicare and Medicaid? Here’s your answer, with the 2004 numbers coming from the same source (see this CMMS page for links to PDFs of State-by-State Medicaid and Medicare costs):

OHhealthCareExp.jpg

The NFIB’s $50 billion is right there in the red box.

So, based on estimated costs today, a truly universal, single-payer system, as is being proposed, would shift responsibility for all of the estimated $50.9 billion in payments currently being made by “-EEs, -ERs and others” to ….. the State of Ohio.

That means that the State of Ohio would have to raise taxes, revenues, fees, etc. by $50.9 billion a year (i.e., over $4,400 per person or over $17,000 for a family of four), so the State would have the money to pay for all of the services for which it has assumed responsibility.

A little context: The entire two-year 2007-2009 budget for the Buckeye State just passed by the General Assembly is $52 billion.

But you may be thinking, “Big deal. If employers and employees didn’t have to pay health insurance premiums, deductibles, copays, and direct costs (for self-insured employers), you’re just talking about a cost-shift.”

For that not to be a “big deal,” you’d need to have confidence that the government will be a more efficient provider of medical services than the private sector.

On the surface, it’s an appealing argument. After all, administrative services currently at all of the different providers might be consolidated into one leaner operation, management layers might be eliminated, etc.

The trouble is that reality differs — bigtime.

If the government were so much more efficient at providing medical services, it should have long since proven its efficiency in the provision of Medicare and Medicaid services. After all, you would think that once you get to a million members, economies of scale should have kicked in.

It hasn’t happened, even, as you’ll see, if you separate out the uninsured from the non-Medicare/Medicaid population:

OhioHCcostPerPerson2004

(2004 is the latest year for which complete data is available. Cost per person for Medicare and Medicaid came from this Exhibit at Health Affairs, and total Ohio population in 2004 from the Census Bureau. The Total Spending numbers were already discussed above. All other items are calculated as expected. The calculated statewide cost per person is only $1 different from the figure at this link. The uninsured figure came from the Ohio Health Policy Review.)

Okay, you can argue that the Medicare difference is explainable, because it covers the higher-cost elderly. I doubt that this accounts for the entire difference, but I’ll let it go for the moment.

The Medicare justification isn’t available with Medicaid. And it doesn’t include amounts likely in the hundreds of millions, perhaps even billions, in cost-shifting from Medicaid to the rest of the population (this occurs in Medicare too).

Adverse selection? I’m not buying it. That argument has worn out its welcome, because for at least a decade, employers have been required to fully cover anyone who applies, regardless of pre-existing conditions, as long as that person had employer or other coverage when they applied for employment at their new company. Even pre-existing condition riders go away after 12 months.

So the promoters of the Ohio Health Care Plan want us to shift all insurance coverage from the lower-cost private sector to the higher-cost public sector. Costs will explode to the tune of billions of dollars — and that’s even before you consider the ramp-up in utilization when health care is perceived as a “free” good, or the increase in the number and types of conditions that will inevitably be covered.

This is madness.

Now to the Second Coming of Hillarycare. If the tax increases required in just one state for the Ohio Health Care Plan will be over $50 billion, how can Hillary Clinton credibly claim that her “universal” health care scheme will only “cost” $110 billion, $370 per person? Why is Old Media not challenging a number that, based on applying Ohio’s plan to the rest of the country, appears to be off by at least a factor of 10?

Cross-posted at NewsBusters.org.

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3 Comments

  1. [...] BizzyBlog has a must-not-miss post on the proposed plan to cover everyone with healthcare. So, based on estimated costs today, a truly universal, single-payer system, as is being proposed, would shift responsibility for all of the estimated $50.9 billion in payments currently being made by “-EEs, -ERs and others” to ….. the State of Ohio. [...]

    Pingback by NixGuy.com » HillaryCare Ohio-Style — September 20, 2007 @ 11:18 pm

  2. TB,

    Medicare coverage is so bad that 75% of beneficiaries carry supplemental coverage. But Medicare is cheap for beneficiaries – at least out-of-pocket (on average $1100/year) – so that 80-90% are satisfied with the program.

    Eventually someone is going to make the phony argument that the overhead for Medicare is only 2%, much lower than the private plans, and the VA system isa marvel of efficency, don’t believe it. [I'll explain in a later post (no time right now).]

    The vast majority of Medicaid recipients -young women and children – are also actuarily the cheapest to insure. So why is the cost per unit the ~ the same for Medicare and Medicaid? [Hint - 2 governments instead of 1 involved]

    The bottom line: ~$600 BILLION per year is spent on Medicare and Medicaid just by the federal and State governments (~$7000/beneficiary + supplemental + out-of-pocket). If all that wasted money was turned over to the private sector as bloc grants, every beneficiary could be covered with a better plan for a cheaper per unit cost for everyone because of the enlarged risk pools and reinsurance. Plus we could eliminate 2 of the largest government agencies or at least seriously scale them down.

    Comment by Joe C. — September 21, 2007 @ 7:09 am

  3. Very good post! I have forwarded this to the Miami Valley Conservative Alliance Discussion Board and Miami Valley Republican Club for wider distribution of this serious issue.

    The maddening thing about this slice of socialism is that the republicans in Ohio are behind this.

    Comment by Brian — September 21, 2007 @ 1:14 pm

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