Publication Date: December 2007
Publisher: Manhattan Institute for Policy Research. Empire Center for New York State Policy
Author(s): Tarren Bragdon
Research Area: Business; Health
Keywords: insurance regulations; subsidized insurance; health insurance; privatization
Coverage: New York
What's the best way to ensure that all New York State residents-adults and children alike-have access to affordable health-insurance coverage?
Over the past decade, the state government has answered that question by expanding publicly subsidized forms of health insurance, building on what was already the nation's most expensive Medicaid program, while maintaining insurance regulations that make private coverage both scarce and expensive.
Governor Spitzer's first major health-care initiative would carry the trend a step further, by extending Medicaid-funded health care to children in middle-class families previously considered ineligible for such assistance.
But this approach is likely to have two unintended and apparently unanticipated consequences.
First, an increased reliance on such government-subsidized programs will inevitably encourage more New Yorkers to drop their private insurance. As a result, it is likely to be far more costly than the governor expects-adding to a Medicaid budget that already equals the amounts spent by Texas, Florida, and Pennsylvania combined.
Second, offering more government-subsidized coverage to more people will add to the cost pressures on private insurers that effectively subsidize Medicaid's low reimbursement rates. That will ultimately shrink the availability of affordable private insurance options, casting some New Yorkers adrift in a broken market and resulting in a smaller net reduction in the state's uninsured population.
This report offers a way to make health care more accessible and affordable for all New Yorkers without expanding Medicaid. Instead, we offer market-driven reforms to make private insurance more affordable and accessible by:
Restoring flexibility to New York's health-insurance regulations to permit more innovative and diverse health-plan offerings.
Creating a guaranteed-access, high-risk pool for high-cost individuals who cannot obtain coverage through their employers and may not be "insurable" in the newly competitive individual insurance market.
Allowing low-cost, temporary health-insurance plans.
Requiring small businesses to allow employees to pay their share of premiums with pretax income, through payroll deductions.
Basing Medicaid income eligibility on fixed income limits rather than a percentage of the federal poverty limits, which don't take account of regional cost-of-living differences.
Reaching out to noncitizens by targeting private insurance coverage options to them.
Making Health Savings Account-eligible plans available in the individual-insurance market.