A Montana Perspective on Healthcare and Health Insurance Reform (2011)

A Project of the Montana Policy Institute and Arduin, Laffer, & Moore Econometrics


Montana residents are much like the residents in other states—they are concerned about health care and rising medical costs. The mandated federal health care policies and increased federal regulation will have great negative impacts on the state’s citizens. The Patient Protection and Affordable Care Act (PPACA) will be very expensive for Montanans. There are also concerns about the mandatory health care requirements—and the costs and confusions that the system will bring. Many Montana residents would end up in the publicly provided health care pool—and a large number would still lack coverage. Couple these concerns with concerns about the growing deficit and rising taxes to pay for the program. One of our goals should be patient centered health care and health insurance that is owned by the individual and portable from job to job and state to state.


No one disputes that our healthcare and health insurance could stand improvement. Too often the heated arguments and public policy itself ignore the impacts of incentives and disincentives, focusing on emotions and benefits without looking at costs and benefits. The recent election helped highlight this fact as the candidates who ran to repeal and replace the (PPACA) were the majority of winners elected to serve us.

• The PPACA is rejected by the majority of those whom it is supposed to serve. Turns out most Americans don’t want the government deciding who gets treated, for what, and at what price. It has a negative public connotation and creates more overbearing government while creating a massive unfunded burden on Montana taxpayers.

• MT’s own Dept. of HHS estimates our state’s share of Medicaid payments will increase by $70m in 2019 because of PPACA’s increased eligibility and increased administrative costs.

• Medicare/Medicaid’s chief actuary has said that the PPACA will increase costs, increase coverage, but arguably not care and bend the cost curve up, not down. Don’t confuse coverage with care.

• The non-partisan CBO, CMS, and IMF have all discredited the idea that the PPACA will reduce the deficit. And federal budget gaps will be passed onto the states, and that means the government is reaching in our pockets to pry open the wallets and our children’s wallets.

 Cost projections are unrealistically low and not comprehensive. “Doc Fix” assumes decreased reimbursement rates which also impact quality and accessibility to care. There is no historical precedent for removing billions from Medicare or other entitlements.

 1967 Medicare projected 1990 costs at $12B. Actual is $110B.Compliance costs to business and consumers are real costs to our state’s overall economy.

• We are watching and we don’t buy into the federal government’s gimmicks of spending money twice, counting revenues on cash basis and expenditures on accrual and much more. We expect our citizen legislators to make decisions based on hard data, the need for a limited government and a respect for our fellow Montana’s individual liberty.

The government health care program is too complex and is already causing unintended changes.

• The fallacy of “you can keep your insurance” under PPACA has been exposed. More and more businesses will weigh the costs of compliance and continuing coverage for their employees versus dumping them. Ex: The provisions designed to expand dependent coverage spurred an SEIU local in NY to drop 6,000 dependents leaving them uninsured.

• There is a large and growing government health care wedge – an economic separation of effort from reward, of consumers (patients and their families) from producers (health care providers), caused by government policies.

• Rising government expenditures on health care the main factor driving the growth in the wedge. The wedge is a primary driver in rising health care costs, i.e. inflation in medical costs.

• The PPACA will further increase the wedge, and thus be expected to increase medical price inflation. A public health insurance exchange, mandated minimum coverage, mandated coverage of preexisting conditions, required purchase of health insurance- do not address the growing wedge and its role as the fundamental driver of health care costs.

• PPACA’[s anti-consumer regulations are not the only way to provide coverage for the medically-unisurable. For example, high-risk pools can insure those with pre-existing conditions without decimating the private insurance market.

The PPACA cannot deliver cheaper insurance without killing the private sector. Many government programs have often already been tried—or are underway—and are recognized as failures

Individual Mandate: The thinking here is that f only everybody had to buy insurance, and then we’d all share the costs. This is designed as each according to his ability, and to each according to his needs. Big insurance and health industry companies love mandates because they effectively lock out competition and lock in profits.

Mandates do not control costs. Mandates kill jobs. If employers are forced to either insure or pay a fine on their low wage employees, then those employers lose incentives to retain those employees or hire more. Low wage earners are the people most easily replaced through outsourcing and mechanization, and the ones who will be most hurt by mandates. Market Control. Since the government decides what coverage satisfies the mandate, they effectively control the market. Government programs typically don’t reduce costs or improve services, especially once they achieve the monopoly level and control. The debt-ridden monopolistic postal service is a good example of these failed programs.

Exchanges: Bureaucrats want to put in place measures to “protect” patients/consumers by having big government decide which insurance companies can be included in a government structured and state funded internet site to link insurers and patients/consumers. Bureaucrats dictating what they must cover, what they can charge, and what products) they can make available. They will begin with billions of taxpayer dollars, initially receive billions more in taxpayer subsidies, put states on the hooks for administrative costs, and be run by government appointees. No matter the name, the program is too expensive. Montanans are unfortunately very familiar with the “success” and administrative costs of numerous state technology “improvements.”

We all agree that health care and health insurance programs need change We believe that Patients receiving the care and their families are the ones best able to make decisions on what is best for them. The key is connecting the patient with the cost and the PPACA removes the patients even further from it. So long as there’s no incentive to be responsible consumers of health care, we shouldn’t expect the system to be responsive to concerns about costs and quality. The patient-centered options listed below will help individuals and families make—and own—their decisions.

o Individual ownership of insurance policies. Equalize tax treatments. The tax deduction that allows employers to own insurance should instead be given to the individual.

o Leverage Health Savings Accounts (HSAs). HSAs empower individuals to monitor their health care costs and create incentives for individuals to use only those services that are necessary.

o Allow interstate purchasing of insurance. Policies in some states are more affordable because they include fewer bells and whistles. Consumers will decide which benefits they need and what prices they are willing to pay independent of what government bureaucrats think consumers should be forced to buy in a mandated government exchange.

o Reduce the number of mandated benefits that insurers are required to cover. Empowering consumers to choose which benefits they need are effective only if insurers are able to fill these needs. PPACA imposes its highest taxes on young adults, who must buy government-mandated health insurance at inflated premiums.

o Reallocate the majority of Medicaid spending into simple vouchers for low-income individuals to purchase their own insurance. An income-based sliding scale voucher program would eliminate much of the massive bureaucracy needed to implement today’s complex and burdensome Medicaid system. It would also produce considerable cost savings. We can better take care of our own.

o Eliminate unnecessary scope-of-practice laws and allow non-physician health care professionals practice to the extent of their education and training. Retail clinics have shown that increasing the provider pool safely increases competition and access to care and empowers patients to decide from whom they receive their care.

o Reform tort liability laws. Defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients.

Federally mandated health care reforms such as PPACA will weaken our nation’s health care system while increasing medical inflation prices. It will also pressure the Montana state budget through increased expenditure levels. PPACA costs will only go up for Montana as the federal government forces more responsibilities—and costs—of the program down to the state levels. PPACA and U.S. Department of Health and Human Services Secretary Kathleen Sebelius’s forthcoming federal regulations will incur costs that Montana taxpayers don’t want and can’t afford.


The Montana Policy Institute is a 501(c) (3) policy research organization that equips Montana citizens and decision makers to better evaluate state public policy options from the perspective that policies based upon limited government, individual rights, and individual responsibility will result in the greatest common good. To find out more or for copies of the complete Cap-and-Trade study, visit us at www.montanapolicy.org. NOTHING WRITTEN here is to be construed as an attempt to influence any election or legislative action. PERMISSION TO REPRINT this paper in whole or in part is hereby granted provided full credit is given to the authors, the American Council for Capital Formation, and the Montana Policy Institute.

Copyright © 2011


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