In 1994, the Kentucky Democratic Governor Brenton Jones signed HB 250 into law--otherwise known as Kentucky Kare. Identical to Obamacare, it mandated Kentucky residents purchase health care insurance or face a fine. It also prohibited denying coverage to patients based on pre-existing conditions. Intended to lower insurance costs for Kentucky families and reduce the Commonwealth of Kentucky’s healthcare costs, none of it happened. Insurance premiums costs skyrocketed as did the price for taxpayers. What happened unfolded like a classical political debacle that should have prevented Obamacare from ever being seriously considered, but the lessons from history became ignored and forgotten.
Because the law was so naively crafted, consumers could game the system. They would drop their insurance premiums when they were healthy and wait until they became ill to resume coverage and still pay the prevailing rates. Because of the constant rise in insurance premiums Kentucky Kare caused, it was more economical to pay fines when one was ill than the insurance. Kentucky residents discontinued paying into insurance companies as much as prices dramatically mounted. On average, premiums increased between 36% and 165%, 4 years following the healthcare “reform”—exponentially higher than the national average. 40 insurance companies fled the state. Anthem Blue Cross and Blue Shield and the state owned Kentucky Kare nearly became insolvent. Kentucky Kare eventually did in 1999.
In 1998 Kentucky Kare was so ruinous, Kentucky voters did something they had not done since 1967—elect a Republican Governor, Ernie Fletcher. In the end, the bill received a robust bi-partisan repeal. Joining the ranks to abolish it were many Democratic lawmakers which had originally legislated it. Insurance companies returned to the state and insurance premiums reseeded back down to the national average. This is not to say the national average is acceptable, but my healthcare reform plan will be a topic for another decision.
Former Republican Governor of the commonwealth of Massachusetts Mitt Romney’s Masscare is another unfortunate exemplar and a warning to those who oppose the repeal of Obamacare. During the Obamacare debate, Obama’s advisor Davis Axelrod said Masscare was “the template” for the Obamacare program. The Obama administration is working under the assumption that Romneycare decreased insurance costs and decreased government spending—an assumption that couldn’t be more wrong. Like Obamacare, it features the government mandate to buy health care (…or else) and prohibits the denial of coverage to those with pre-existing conditions. And just like Romneycare, Obamacare is also likely to produce dismal results.
At first in 2008, Romneycare enjoyed a robust support from Massachusetts voters. 70% of them approved and only 20% disproved. Recently, a Suffolk University poll cited the fact nearly half of Massachusetts voters did think that Masscare has not helped, and only 38% said it did. Over the past five years, residents of Massachusetts have seen their premiums double. New England denizens pay out higher healthcare costs than the rest of the country. Because Romneycare’s penalty for exercising one’s personal choice not to acquire healthcare are lower than paying Massachusetts abnormally higher healthcare coverage rates, individuals have been terminating their healthcare plans and only resuming them only upon becoming infirm, driving up the costs healthcare insurance just as what happened in Kentucky and will happened nationally if Obamacare isn’t reigned in.
Romneycare made its citizens more dependent on the government and caused the government spent more money on healthcare. The percentage on the state’s healthcare dole has doubled. In 2006, 85% of Massachusetts residents were privately insured. Now, it is 79%. Six non-profit insurance companies are curently suing the commonwealth because Masscare regulations are driving them into insolvency. Romneycare supports often omit the fact that Massachusetts already had one of the lowest rates of uninsured prior to its passage.
Massachusetts tax payers now expend $2.5 billion more on their state’s healthcare budget. In 2006 when Romneycare was passed, the Massachusetts commonwealth estimated the costs to be $88 million a year. Now, it exceeds $4 billion a year. The plan has drowned Massachusetts deeply in the red. Early this year, Governor of the commonwealth Deval Patrick announced a $294 million healthcare shortfall. The only reason Massachusetts didn’t go under was because of a federal bailout. Federal Medicare reimbursements and some propping up from Washington was what kept the commonwealth from going under.
The states are often called the laboratories of democracy. From them, we received the welfare reform of the 90s and the public school system. The experiments of Kentucky Kare and Masscare and their dismal results should have taught us all a valuable lesson. They offer a bleak preview for what Obamacare has to offer unless it is replaced with a more market oriented planed based in the realities of the market system and solid economics instead of mawkish bromides. There is still time. We can learn from history because the only thing inevitable about history is that it will eventually happen.
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