Has Washington D.C. Learned Nothing From Washington State’s Failed Healthcare Reform?

In 1993, Washington's decidedly liberal state legislature enacted a bill imposing healthcare reforms closely resembling those being proposed today at a national level.   Putting aside the attack on our foundational federalistic fabric, it is a shining example of how and why any government controlled healthcare plan will fail.
The Washington state plan included many of the ObamaCare key elements, including:

  - It created a powerful new bureaucracy
    (Washington State Health Services Commission)
  - It increased taxes (estimated at $2B over six years)
  - It increased regulation (Guaranteed issue, limitations on pre-
     existing conditions, guaranteed renewal, etc…)
  - Enacted employer and individual mandates
  - Government defined package that everyone was required to buy
  - Mandatory managed care
  - Low income subsidies
  - State controlled data collection system
  - Arbitrary caps on premiums and industry revenues
  - Government controlled healthcare purchasing co-ops

Basically, the state took over the health care industry which resulted in a massive loss of individual control and virtually eliminated individual choice.

This government takeover ended up being a politicians worst nightmare.  The bill resulted in higher costs and fewer choices, in great contrast to what it was set out to do.  The reform was enacted with little knowledge by the general public and as the details became more apparent, a backlash ensued revolting against the changes and resulting in a Republican takeover of the legislator.  Control of the state House switched from 65 Democrats and 33 Republicans to 61 Republicans and 37 Democrats.  The Democrats were also reduced to a one seat margin in the Senate.

Despite Washington's state legislators best intentions,  the managed care system they devised was fraught with problems.  It gave no economic incentive to provide the best care to the sickest patients.  Just the opposite.  They had every incentive to provide the minimum care possible to these patients.  The managed care networks received the same capped, annual premium amount set by state officials no matter what quality of care they provided.   Despite incurring far higher costs when treating the sickest patients with the best care, they were paid as though they had provided minimum care.  You can see where this is going, not only would networks incur huge losses treating these patients, but the better the care they provided, the more they would attract the sickest patients, even further increasing their losses.

Numerous private insurance providers closed up shop in Washington, leaving only 16 insurers offering individual health insurance.  The remaining providers began losing money and had to raise rates on individuals and families to remain viable.  Insurance premiums in some cases soared by 40 percent or more.  Yet, the major insurers still were suffering large unsustainable losses.   The number of uninsured in the state rose by 20 percent  as people dumped their health insurance coverage in the face of these dramatic rate increases. 
Requiring insurers to guarantee coverage  resulted in  more people opting out of coverage.   The provision of the plan encouraged low cost, healthy individuals to drop coverage because they are assured they can get coverage when they need it, while the sickest people who require the most costly care join the pool up front.  The resultant higher costs of insurance cause even more healthy subscribers to drop out of the market when they recognize they are not getting their money's worth. Guaranteed issue increases both health insurance costs and the number of uninsured.

Washington State gave state legislators around the country an experimental taste of how an Obama-style health care plan would work—or fail to work.  The result was higher costs, burgeoning bureaucracy, and micromanagement.  Not surprisingly, the citizens of Washington State, through their elected representatives, decided that the state's health care "reform" plan had to be repealed.  Following the 1994 election, almost all of the heath care reforms were repealed.

So…. providers are incentivized to give us the minimum care to keep costs down, providers leave and insurance premiums go up.

To put it all in a nutshell  --  the experience of Washington State shows that the answer to health care policy problems lies not in concentrating power and control in government agencies, but in reforming the health system to open up the insurance market and promote real consumer choice and competition.  Such a policy offers the best hope for improving the health care system because it returns to individuals the power to make important health care decisions for themselves in a free marketplace.  These goal of any reforms should be to provide positive rather than punitive incentives for doctors, hospitals, and other health care institutions once again to be primarily responsible for and accountable to their patients instead of to corporate or government bureaucrats.  Perhaps most important aspect of any reform, they must be compatible with personal freedom, the overriding value at the heart of America's political institutions and as shown in Washington can have horrendous political ramifications.

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