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Monday, December 10, 2007

Uninsured will grow under RendellCare

Pop quiz: The Rendell administration has estimated that 800,000 Pennsylvania adults are currently uninsured. If Governor Rendell's "Cover All Pennsylvanians" were implemented as designed - costing up to $1.4 billion - how far would the number of uninsured fall?

A: Between 100,000 and growth of 85,000.

How can this be? Aren't Governor Rendell and House Democrats promising to cover all Pennsylvanians?

1. Cover All Pennsylvanians (CAP)- Despite the dramatic increase in spending, CAP does not approach covering 800,000 persons. In 2007-08, Governor Rendell has estimated 106,000 new CAP enrollees, growing to about 370,000 in 2011-12 - less than half those currently uninsured.

2. Natural Increases in Uninsured - From 1999-2006, US Census data finds that the number of PA uninsured adults grew by an average of 6% annually (this in spite of, or because of, increases in those on government insurance programs). At this rate the number of uninsured will climb by 270,000 by 2011-12.

3. Crowd Out - Many of those covered under CAP will be either (a) those currently insured dropping private insurance to go onto CAP, (b) those losing private insurance for other reasons and joining CAP (e.g. changing jobs, divorce), or (c) those not currently counted in insurance data (e.g. under 18, new PA residents). One study puts the "Crowd Out" effect of SCHIP at 60%.
The chart below shows the amount of coverage under CAP, the costs, the anticipated natural increase in uninsured, and the net effect of CAP (both with Crowd Out and with none). The conclusion is the CAP will not reduce the absolute number of uninsured, or will only reduce it by a small fraction.

Now wait, you say (if you are a defender of RendellCare and paying close attention), CAP would reduce the number that would be uninsured were it not for RendellCare. True - but is it worth $1.4 billion annually?

Our answer - solutions such as allowing families to purchase lower cost insurance from out of state providers, offering tax credits for HSAs, reducing the number of mandates and allowing individuals to purchase basic insurance, making health care costs more transparent, etc (see proposals here and here) are more affordable and would do more to reduce the uninsured.

By reducing the costs of health care, these reforms would not only allow the currently uninsured to afford private insurance, but would reverse the trend of those losing or dropping private coverage (i.e. the "natural growth").

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