Indiana choice plan better than the top=down approach
One of the biggest factors in the explosive acceleration of health care costs is the separation of consumers from the real costs of services. The more third parties like insurance companies and government agencies take over the costs, the less incentive there is for consumers to be careful in their use of health care. Indiana seems to understand this. The federal government, in the early stages of Obamacare plans that will greatly add to Washington’s health care role, clearly does not.
And that sets up a battle of ideas and a clash of visions on federalism’s call for state-level experimentation. It is described in the current edition of the conservative journal Weekly Standard: “There’s a collision brewing between Indiana and Washington over health care: whether our system will be a top-down affair of central planning, or whether it will leave any room for bottom-up arrangements that rely on dispersed, individual decision-making and resource-allocation by self-correcting consumer choice.”
In 2006, Indiana added a consumer-driven health plan to the benefit options offered to state employees, and 4 percent chose to. This year, 94 percent did. Then in 2008, the state used a consumer-driven model called the Health Indiana Plan for low-income Hoosiers not eligible for Medicaid. In both of these choice plans, consumers are given health care bank accounts. Money they don’t spend rolls over and draws interest.
“The idea behind consumer-driven health plans,” the Weekly Standard reminds us, “is that people are careful shoppers when paying for services piecemeal but tend to overuse what seems to be free — think of an open buffet. Making every consumer of health care cost-conscious will spread market discipline throughout the system, the thinking goes, and contain prices more successfully than commands from on high.”
A choice plan isn’t a magic bullet for all health care ills, but the results here are encouraging enough to continue the experiment. Overuse of emergency rooms and specialists has declined, use of generic drugs has risen, the state’s cost for insuring its workers has been reduced. Most significantly, participants have accumulated in their personal Health Savings Accounts combined reserves of nearly $60 million. “That’s $60 million worth of health security for the future,” the Weekly Standard says.
If we’re smart enough to elect legislators who will kill Obamacare, that experiment will continue. If Obamacare survives, it remains unclear whether the Healthy Indiana Plan can. The state got a one-year waiver (it sought three) to use HIP as the vehicle for the increased Medicare spending required by the federal plan. But the rules of Obamacare are so complicated and vast no one knows for sure if the waiver means anything.