CONTRIBUTORS

Maine should learn from Dirigo Health’s high-priced lessons

Posted Jan. 12, 2014, at 3:04 p.m.
Jonathan McKane
Courtesy photo
Jonathan McKane

After 10 years of paying for the Dirigo Health program, the Maine taxpayer is finally off the hook. As of Dec. 31, the Dirigo tax on health insurance has been repealed.

Yes, indeed, some taxes do get repealed but, in the case of Dirigo, not until we had spent hundreds of millions of taxpayer dollars for a ideologically inspired program that accomplished few of its goals.

Dirigo was the signature program of the Baldacci administration. It was implemented with great fanfare, and the Maine press was on board. The Portland Press Herald called it “a bold plan.” The Bangor Daily News did, too. In fact, it seemed as though every Maine journalist, columnist, newscaster, prognosticator and pundit referred to Dirigo as “bold!” We rarely heard it described, however, as smart, responsible or “well thought out.”

Even the word “plan” could be considered inaccurate. There was no real cost-benefit analysis, no previous program to use as a template, just a risky and wildly optimistic leap into uncharted health care territory. Dirigo was an experiment that morphed and changed with each legislative session. Even Gov. John Baldacci has said, “We looked at it as a laboratory.” As did chief Dirigo architect Trish Reilly in her Dec. 27 1,400-word BDN OpEd that reviewed Dirigo’s “accomplishments.”

And every year, wholesale changes were made to this experiment in a futile attempt to correct the disappointing results. Grand promises were made to bring unwitting Republican legislators onboard so that the enabling law could be called “bipartisan.” And an expensive public relations campaign kept the public believing that Dirigo could work.

We were told that Dirigo would insure 130,000 uninsured Mainers in five years and 57,000 in the first year alone. We were told that the more people that were enrolled in the program, the more savings we would see in health care costs and health insurance premiums. Dirigo was also going to “provide competition” with its subsidized DirigoChoice insurance. Finally, Dirigo was supposed to “stabilize” the insurance market and health insurance premiums.

But that was not the reality. DirigoChoice never insured more than 15,000 people at any one time. There were no real “savings to the system” even though Dirigo claimed there were and charged insurance companies that amount. There was no competition given to the Maine insurance markets because the provider for DirigoChoice insurance was also the monopoly carrier in Maine — Anthem. And the market was never stabilized, and premiums continued to soar.

As these disappointing results from the program continued to roll in, the accommodating press reported little of Dirigo’s bad news and instead told the Maine people that we only needed to give Dirigo more time and more money to bring about success.

Meanwhile, the funding streams — and several were tried — could not keep up with the expenditures, and enrollment in DirigoChoice soon had to be capped.

The first Dirigo tax was the Savings Offset Program, which calculated Dirigo’s “savings to the health care system” through a complex formula and then taxed the health insurance carriers that amount.

Then there was the beer, wine and soda tax passed by the Democrats on a party-line vote and subsequently repealed by a people’s veto the following year.

Finally, on another party-line vote, they passed a straight tax on health insurance claims — but there was never enough money or “savings” to grow the program, and Dirigo continued on its downward trajectory.

Ultimately, the program lasted almost 10 years. There were some good benefits to those who were enrolled in DirigoChoice and to those who received subsidies, but few real long-term goals were accomplished. Dirigo did, however, provide us with some hard lessons:

— Subsidizing a comprehensive insurance product with taxpayer dollars through a government middleman is profoundly expensive.

— No pre-existing condition exclusion creates adverse selection. People can wait until they are sick — and they do. One has only to imagine any other kind of insurance such as auto or homeowners to see why eliminating the exclusion won’t work.

— Taxing health care in order to make health care cheaper doesn’t make sense, and the opposite is true.

— Expanding Medicaid is a state budget buster. The original Dirigo law authorized an expansion of Medicaid to “non-categorical” adults, similar to what Obamacare is trying to do now. The claims for the expansion were also the same as what we are hearing now: More preventive care will save money; charity care will be reduced, and we’ll save money; ER usage will be reduced and money will be saved. The opposite was true in all cases, and our expanded Medicaid program became an impossibly expensive burden.

The Dirigo experiment is over. It took place instead of simple market-based reforms that had been successful around the country — and are now having success in Maine through PL 90. Big government experiments in health care can have disastrous consequences. We witnessed it first-hand in Maine and are seeing it again, though on a much grander scale, with the Affordable Care Act.

Jonathan McKane lives in Newcastle and served on the Maine Legislature’s Insurance and Financial Services Committee in the 122nd, 123rd and 125th legislatures.

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