Health Care Reform Follies

HAWAII just had a vivid les son in health-care eco nomics, learning that if you offer people insurance for free – surprise, surprise – they’ll quickly drop other coverage to enroll.

That’s the opener to the NY Post’s article on the demise of Hawaii’s free children’s health insurance policy. The rest is here. Bill Leonard (hat tip) summarizes the story: Just a few months ago Hawaii implemented its Keiki (Child) Care Plan to provide medical insurance to children whose parents could not afford private insurance yet did not quality for other publicly financed programs. The only payment was a $7 fee for each office visit. Governor Linda Lingle has cancelled the program after initial data showed that 85% of children registered for Keiki Care had been previously covered by a private, nonprofit plan that cost $55 per month. Dr. Kenny Fink of Hawaii’s Department of Human Services explained, “People who were already able to afford health care began to stop paying for it so they could get it for free.” Most important, the article points out:

All this is a lesson for political leaders in Washington who are drafting plans now to expand SCHIP to children in families earning up to $82,000 a year or more. That expansion would wind up doing what Keiki Care did: mainly crowd out the private coverage that millions of middle-income kids already have.