Life Insurance

With a quarter of Texans lacking health insurance, and Texas' share of Medicaid spending consuming about 25 percent of state spending, health care is on everyone's mind in Austin. Gov. Rick Perry's plan is to sell the lottery and use the proceeds to help more Texans purchase insurance. The Senate's health guru, Flower Mound Republican Jane Nelson, just introduced a bill to deal with Medicaid.

: The 12 recommendations from the recent Texas Health Institute study would be a good start. They include using the Medicaid program to cover more of the uninsured, expanding the Children's Health Insurance Program to where it was before the 2003 budget cuts, and reinstating the "medically needy" program that was intended to help people who had to "spend down" into poverty because of illness or injury.

In total, their recommendations could cut the number in half. But they would require $1.7 billion in new general revenue spending. And it cannot be simply a shift of dollars from safety net hospitals to insurance, which Gov. Perry has been talking about and Sen. Jane Nelson's bill explores. That would only cover half a million people and potentially could weaken the safety net.

Second, Texas delivers about $1,500 of free care each year to every uninsured person on average. This extensive free-care system encourages people to go without private insurance. As Gov. Romney has done in Massachusetts and Gov. Schwarzenegger in California, we should use the free-care money to subsidize private insurance instead.

Finally, our Medicaid and CHIP initiatives are crowding out private insurance. Why pay expensive premiums when the state offers health insurance for free? We need to use public funds to subsidize the purchase of private insurance instead.

: Using Massachusetts to define a solution for Texas is problematic. Solutions for Massachusetts are likely to be very expensive for Texas. Massachusetts has an 8 percent uninsured rate as opposed to our 25 percent.

Gov. Perry's proposal, and others that will come forward, do offer coverage to around 500,000 of the 5.6 million uninsured in Texas. (Many more are underinsured.) But it's often bare bones coverage. And, depending on how good the insurance, it may or may not be accepted by the private sector.

Therefore, the patients still will depend upon the safety net for their care. And under the governor's proposal, the safety net could potentially have less money to care for these individuals. If new Medicaid reforms result in more people being covered without harming the safety net, then they should be fully explored.

Studies estimate that for every dollar we spend on Medicaid, private insurance spending contracts by 50 to 75 cents. This is an incredible "crowd out" rate. It explains why the taxpayer burden has soared over the last decade.

Instead of using taxpayer dollars to encourage people to drop their private coverage, we should do the opposite. Who would not prefer a typical employer plan to Medicaid if he had the option?

Three-share programs, where individuals, the state or local governments and businesses share the cost of a premium, have the potential to assist small employers with coverage. It wouldn't be as comprehensive as Medicaid, but it would be better than what many get now.

Here's another thing the state could do. Simply requiring Texas college students to have health coverage and allowing their parent's insurance to pay for it would cover an estimated 400,000 people.

: The safety net is already in tatters. The reason: There is no connection between the spending subsidies for free care and the tax subsidies for those who are insured.

How much better the system would work if we allocated $1,500 per person (or $6,000 for a family of four) to everyone. Let the money follow the people.

If they choose private insurance, let the money be available as a subsidy. If they choose to become insured, the money would be added to the safety net in the community where they live.

When patients are managing their own money, providers will view the patients as their real customer. All too often, their real customer is a large impersonal insurance company bureaucracy.

Patient power causes two good things to happen. On the demand side, patients would be encouraged to become prudent shoppers in the medical marketplace. On the supply side, doctors and hospitals would start competing for patients based on price and quality, the way suppliers compete in other markets.

As much as one-third of all health care spending is wasted. We could have all the benefits we have today at two-thirds the cost if we could turn the medical marketplace into a truly competitive market.

: To make it work, we need more information about health care quality and pricing. Transparency would help consumerism work. Consumers could make more informed decisions.

But we also need to recognize that patients are vulnerable and cannot negotiate when they are critically ill or injured. We do not want a system of health care that is a straight-up business deal. We want a true covenant relationship with our providers and expect they will fulfill their duty to us.

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