Fascinating commentary on human nature. Thanks to Grace-Marie Turner at the Galen Institute (this excerpt is part of an article published in the NY Post today):
HAWAII just had a vivid les son in health-care economics, learning that if you offer people insurance for free – surprise, surprise – they’ll quickly drop other coverage to enroll.
As a result, Hawaii is ending the only state universal child health-care program in the country after just seven months.
The program, called the Keiki (Child) Care Plan, was designed to provide coverage to children whose parents can’t afford private insurance but who make too much to qualify for other public programs (such as Medicaid and Hawaii’s State Children’s Health Insurance Program). Keiki Care was free for these gap kids, except for a $7 office-visit fee.
But then state officials found that families were dropping private coverage to enroll their children in the plan. “People who were already able to afford health care began to stop paying for it so they could get it for free,” said Dr. Kenny Fink of Hawaii’s Department of Human Services.
In fact, 85 percent of the children in Keiki Care previously had been covered under a private, nonprofit plan that costs $55 a month.
When Gov. Linda Lingle saw the data, she pulled the plug on funding. With Hawaii facing budget shortfalls, she realized it was unwise to spend public money to replace private coverage that children already had.
Yet Lingle is facing a political firestorm in the state from critics who say that she’s denying children health insurance – notwithstanding the fact that children in Hawaiian families earning up to $73,000 a year are eligible for Medicaid…
The Hawaiian debacle should also be a caution to Barack Obama, who wants to mandate that all children have health insurance. This would plainly not only require penalties for those who didn’t comply but also new programs to help parents get their children covered. The risk of crowd-out will be great.