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Commentary

Medicaid is behind the decline in private health coverage
Michael Cannon, New Hampshire Union Leader, 9-19-05

Government’s job is to pool common resources in order offer services that would not be provided by market forces or individual firms. The classic example is national defense. But when governments offer services that the market already provides at artificially low prices, private firms can’t compete and exit the market. This leaves government—and taxpayers—footing the bill for government services that are less efficient than the ones formerly provided by private companies. Cannon argues that Medicaid, the government’s insurance program for low income Americans, is having this effect on private insurance markets:

Every August, the Census Bureau releases estimates of how many Americans have health insurance and where they obtain it. Every August, some health policy wonks respond by bemoaning that the number of Americans without health coverage is increasing, "even though" government programs are expanding. Next, they bemoan the decline in private coverage, and praise Medicaid — the government program to the poor — for "picking up the slack." And every August, many reporters uncritically quote this storyline, sometimes even repeating it as fact.

But the ritual is a con. Wonks know full well that expanding Medicaid causes private coverage to decline, and can even increase the number of people counted as "uninsured." But they also know that portraying Medicaid as the hero in this narrative may build support for expanding the program. …
USA Today reports, "Many workers choose Medicaid over insurance offered by their employers because it is less expensive. Wal-Mart workers pay $273 a month for the company's family medical coverage and get fewer benefits than Medicaid."

If state and federal legislators are serious about expanding health insurance coverage, then the first thing they should to is ensure that government policies aren’t sabotaging it.



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