Final Study Results: Health Security Plan Most Cost Effective

Governor's Reaction—Study Results Don't Matter

On Thursday, June 21, The Governor's Health Coverage for New Mexicans committee received the final results of a study that it had commissioned comparing the cost of the existing health insurance system to four (now five) very different health care reform models over a five-year period.

Well before the results of the study became public, the Governor announced that he did not like any of the models and that he was committed to a solution that includes the private insurance companies.

Once again, the Health Security Act proves to be the most cost-effective approach to solving the problem of the uninsured and containing rising health care costs. It is the only model that costs less than the current system in the first year. By 2011 the estimated savings range from $700 to $900 million compared to the current system. The other models still cost more than the current system - even after five years of operation.

On Thursday, June 21, Michelle Welby, the Governor's health policy advisor, announced the Governor's plan to introduce an omnibus bill during the 30-day session. She pointed out that since the Governor believes that the private insurance system is not broken, his legislation will focus only on the 20% who are uninsured. He wants to create a new structure, an "authority," that will be in charge of all public plans and setting policy. The authority will also have other responsibilities. He expects to have the legislation ready for review within 90 - 120 days.

What is Clear

• Once again taxpayer dollars have been spent and the results ignored of a study that shows the path taken by the Health Security Plan is the most cost-effective, provides comprehensive coverage and freedom of choice of provider. (In 1994 the Lewin report came up with the same conclusions for New Mexico.) These savings occur because the Health Security Act creates an old-fashioned risk pool that includes most New Mexicans, shifting the role of the private insurance industry from a primary to a secondary payer (like Medicare), and reducing provider administrative burdens.
• The path the governor is choosing is simply more of the same, adding another layer of bureaucracy. The governor appointed "Authority" would have to rely on more and more taxpayer dollars to subsidize the private insurance system so uninsured New Mexicans not eligible for Medicaid could afford insurance. The study results, in fact, show that such a model will not solve the problem of rising health care costs, simplify an extraordinarily complex private and public health insurance system and provide comprehensive coverage.

The Study Results

The following five models were analyzed by Mathematica, the company hired to perform the analysis.

Model 1. Health Security Act, Version 1: Our plan, which sets up a cooperative to provide health insurance to almost all New Mexicans. This version assumes urban provider administrative savings.

Model 2. Health Security Act, Version 2: This second version assumes no provider administrative savings.

Model 3. Health Choices, Version 1: A health insurance marketing alliance that provides vouchers to all New Mexicans, paid for with taxpayer dollars.

Model 4. Health Choices, Version 2: A version of the health insurance marketing alliance that allows employers who provide insurance to opt out.

Model 5. Health Coverage Plan: Expansion of the current system, assuming greater enrollment in Medicaid and other public programs.

Below are Mathematica's final numbers. Please note that these numbers exclude the over-65 (Medicare) population and the institutional population--populations that the Health Security Act would cover. The numbers also assume that under each model all New Mexicans are covered (a questionable assumption with all the models except the Health Security Act).

Projected Total Health Expenditures in 2007 and 2011

What these numbers mean:

• In 2007, only the Health Security Act costs less than the current system even when assuming no provider savings. The other models cost more than the current system.
• In 2011, the Health Security Act, Version 1 saves $887 million (health expenditures are reduced by $887 million). Health Security, Version 2 saves $700 million. The Health Choices models cost $336 million and $383 million more than the current system. This amounts to over a $1 billion difference when you compare the cost of the Health Security models to the cost of the Health Choices models. (For example, Health Security, Version 1 costs $7,878 billion in 2001 while Health Choices Version 1 costs $9,101 billion in that same year.)
• In 2011, the Health Coverage model costs $70 million more than the current system. If you compare the difference in costs between the Health Security models and the Health Coverage model, Health Security, Version 1 amounts to almost $1 billion dollars in savings and Health Security, version 2 amounts to $800 million. (For example, Health Security, version 1 costs $7,878 billion in 2011 and Health Coverage costs $8,835 billion.)