Shadegg Bill Would Reduce Uninsured by 25 percent

Posted by Gregory L. Schneider in Health Care on Aug 11th, 2008 | no responses

An important new study was released at a briefing of the American Enterprise Institute last week. It looks at the potential reduction of the uninsured by moving to a national market as envisioned by the legislation introduced by Rep. John Shadegg (R-AZ) and Sen. Jim DeMint (R-SC) that would allow the interstate purchase of health insurance.

The study was performed by Steve Parente, Roger Feldman, Jean Abraham, and Yi Xu, all of the University of Minnesota. It simulates a national market under three scenarios – a national market in which each consumer can choose insurance from the least regulated state in the country; a regional market where people are confined to choosing coverage from the least regulated state in their region, and a large-state scenario in which only the five largest states are allowed to offer cross-border coverage. The study provides minimum, midpoint, and maximum estimates of the changes in enrollment under each scenario. It finds the national market model would have the greatest impact, and follows with more detailed results of the midpoint estimates under that model.

The results are astonishing. Due entirely to the avoidance of excess regulation in their states of residence, 12 million more people would become covered, cutting the rate of non-insurance by one-fourth. This is without any federal expenditures – no tax credits, no subsidies, no change in tax law.

The state-by-state impact is even stronger, especially for the most highly regulated states. New Jersey would increase its insured population 49%, Oregon 25%, Massachusetts 23%, New York 22%, and West Virginia 21%.

The study also simulates what might happen if a national market were supplemented with a tax credit proposal like that proposed by President Bush in his State of the Union address in 2008. The authors conclude such a scenario would reduce the numbers of uninsured in the individual market by 70% for those with incomes below $45,000 and by nearly 100% for those with higher incomes. The group market would become 100% insured for all incomes. There would remain fewer than 8 million uninsured.

Obviously, this is an extremely complex simulation. The authors needed to calculate the cost of several areas of regulation including mandated benefits, guaranteed issue, community rating, and any willing provider laws, on a state-by-state basis and apply those costs to several different types of coverage. But there is no team of economists in the country better equipped to tackle the challenge, and these results should be taken very seriously, indeed.

SOURCE: American Enterprise Institute (click on “Consumer Response to a National Marketplace for Individual Insurance” for a pdf of Parente’s study)