Criticism, Praise for Schwarzenegger Plan

January 19, 2007

An analyst with the Reason Foundation has written a critique of the Schwarzenegger health plan in which she says that it’s “audacious, ambitious – and awful.” Shikha Dalmia, whose employer is described as a “free-market think tank” (does that mean libertarian?), argues that the plan criminalizes rather than helps the lower-income uninsured.

In this paragraph, Ms. Dalmia neatly summarizes why some critics feel the plan won’t work and will “criminalize” the poor:

These fines might still be much cheaper than buying insurance. In that case, many low-income families could opt to pay the fines or avoid filing taxes altogether — becoming tax fugitives — rather than buying health coverage. In effect, a program meant to help low-income people will tax them or turn them into criminals.

Ms. Dalmia suggests that California wait until the first year results are in for the Massachusetts plan in July. (I think that’s early; mandatory coverage only went into effect on January 1 in Massachusetts.)

Meanwhile, health insurers like the plan – sorta. Says the Kaiser Network’s Daily Health Policy Report:

The health “insurance industry has been quick to voice its qualified support” for a proposal announced last week by Gov. Arnold Schwarzenegger (R) that would require all state residents to obtain health insurance, the Wall Street Journal reports. In 2003, when California enacted a similar law that state voters later repealed, “the reaction of most of the state’s big health insurers ranged from skepticism to stony silence,” the Journal reports. According to the Journal, the “difference suggests how much the political momentum behind health care reform efforts has intensified in three years — and how health insurers plan to cope, or even benefit.”

I reviewed the argument against mandated coverage here, and gave my initial impression of the Schwarzenegger plan here. (I’ll update it soon, now that more detail is available.) I called health insurers qualified “winners” under the plan, since they stand to gain millions of new mandatory subscribers. My view is echoed by Stephen Hemsley, CEO of UnitedHealth Group, who said that it will provides “real opportunities for our business.”

I knew insurers would have concerns about the initiative’s cap on administrative costs at 15% of premium, but since the plan doesn’t include rate regulation that problem’s easily fixed, simply by raising those premiums – provided, of course, that market forces fail to hold them down. (And when coverage is mandated, market forces don’t have a free “invisible” hand. Maybe that’s why the Reason Foundation objects.)

As for the Massachusetts plan, my own agnosticism about it is reflected in the fact that I called my review of it Massachusetts: Miracle Or Mirage? Significant structural changes would need to take place in order to address the concerns raised by Shikha Dalmia and others. These might include dropping the minimum out-of-pocket cost to zero, and using means-tested copays and deductibles. But those solutions would cost money.

No easy solutions – welcome to the world of healthcare.


One Response to “Criticism, Praise for Schwarzenegger Plan”

  1. I would like to know how to get the software for electronic

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