Share |





RX for New York's Ailing Health Care

David Gratzer
New York Post
November 22, 2006

November 22, 2006—GOV.–elect Eliot Spitzer knows he has to tackle New York's out–of–control Medicaid spending. But New York's private health–care insurance is just as obscene a mess. What New York health care needs is free–market medicine.

Start with the "private" market—which definitely isn't very free, in either sense of the word. The on–line brokerage eHealthInsurance compared the prices for a basic, non–employer-based family policy in America's 50 largest cities; New York City was the second most expensive. The basic family policy costs $171 a month in Kansas City, $180 in Long Beach,Calif., $185 in Tucson, and a staggering $713 in New York.

I recently spoke to a New Yorker who wants leave her job, but fears she couldn't afford health insurance as a freelancer. She's probably right—and Albany is largely to blame.

State lawmakers have mandated that health plans cover a host of procedures and "alternative medicine" services, far more than most states. So even the most basic plans must include coverage of off–label drugs, surgical second opinions and midwife and podiatrist services. Each mandated benefit adds to the policy's cost.

The incredible price of insurance partly explains why—despite having the most expensive Medicaid program in the country and being the fifth wealthiest state—New York still has the second–highest rate of uninsured adults. If state regulated clothing as it does health insurance, it would force us all to shop at Saks—and millions of New Yorkers would lack clothing. Albany must drop the excessive regulations on health insurance, allowing people to buy less–expensive plans.

Medicaid is as troubled as the private market. Originally intended as health insurance for the poor, the program has evolved into a dizzying mix of contradictions: It is at once generous and stingy; expansive and narrow. It covers the long-term care needs of a wealthy New Yorker with a clever lawyer—yet provides mediocre compensation for physicians, so that an inner-city child with asthma will struggle to see a pediatrician. It increasingly covers middle–class children (whose parents could afford insurance), while at the same time setting up obstacles that prevent the poor from getting needed medicines.

The end result? New York spends more on Medicaid than Florida and Texas combined—$45 billion a year—and costs are soaring.

During the campaign, Spitzer promised to crack down on Medicaid waste, fraud and abuse. He also promised to promote the use of generic drugs. All worthy goals, but far short of confront the real problem.

New York's per–capita Medicaid spending is twice the national average: That's a sure sign of a structural flaw, not just fraud. And, since drug spending is less than 9 cents on the Medicaid dollar, better use of generics can't do much for the bottom line.

Spitzer should look to other states' innovative ideas: In Florida, Medicaid recipients in two counties now select from a menu of insurance options. South Carolina is considering reforms that would literally give those on the program "health stamps" to cover routine expenses while using insurance only for bigger–ticket medical needs. And Kentucky offers Medicaid recipients incentives for healthier lifestyle choices, like quiting smoking.

These different initiatives share some key components: All increase the role of private insurance, and all empower recipients, giving them greater control over their own health care.

Some may ask: Do the poor really have the ability to make such important decisions? But welfare reform also relied upon the private sector and recipient choice—and it worked. Good things come through empowerment.

Medicaid rolls have swelled and eat up the state budget; meanwhile, individuals and companies struggle to pay for private health insurance. Spitzer can do more by doing less; he must get out of the business of micromanaging Medicaid and put an end to the hyper–regulation of private health insurance.

Dr. David Gratzer, a Manhattan Institute senior fellow, is the author of "The Cure: How Capitalism Can Save American Health Care."

home   spotlight   commentary   research   events   news   about   contact   links   archives
Copyright Manhattan Institute for Policy Research
52 Vanderbilt Avenue
New York, NY 10017
(212) 599-7000