March 23 2009

Policy Brief #19: Hawaii's Lesson in the Perils of Universal Health Insurance

Carrie L. Lukas

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Executive Summary

President Obama intends to greatly expand government's involvement in the provision of health insurance, moving toward the goal of "universal" health insurance coverage.  He included $634 billion over ten years in his budget for healthcare reform, which his staff has characterized as a "down payment" for a more expensive reform package.  President Obama will find a willing partner in the cause of expanding government's role in our healthcare system in the Democrat majority Congress.  Both Speaker Nancy Pelosii and Majority Leader Harry Reidii  have expressed support for universal insurance.

Yet the American people should be concerned about the march toward greater government provision of health insurance.  While President Obama pledged during the campaign that nothing will change for those satisfied with their current health insurance, that will be a difficult promise to keep.  Everyone will be affected by such massive changes to our healthcare system.

State forays into providing "universal" health insurance provide a helpful preview into what the public can expect from similar federal efforts.  For example, the state of Hawaii recently created a program to provide free health insurance coverage for children.  Lawmakers intended that this program help the uninsured population, but they found that an estimated 85 percent of those who enrolled had insurance previously.  Recognizing the program's inefficiency and concerned about its costs, lawmakers terminated the initiative just seven months after its launch.

Federal lawmakers can learn an important lesson from Hawaii's experience:  expanding government health insurance programs will crowd out private insurance by encouraging many who are currently covered by private insurance to switch to the government program.  This will affect all Americans, both through the high costs of the new program and the strain placed on the private marketplace.

There are better ways for policymakers to make health insurance more affordable and accessible for all Americans:  by ending the bias in the tax code for employer-provided health insurance, providing refundable tax credits for the purchase of health insurance, and eliminating regulations that require individuals to purchase policies from providers in their state.  More competition and individual control of health insurance resources, not bigger government, is the answer to the United States' healthcare challenge.

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