The Roosevelt Institution

The State of Healthcare in Wisconsin

The State of Healthcare in Wisconsin

by rithvikb@gmail.com (not found in user database)

            During the last several years, the percentage of Americans who are uninsured has steadily risen.  While Wisconsin can boast that it is among the states with the lowest percentage of uninsured residents[1], this percentage increased from 6% in 2003 to 7% in 2004, echoing the national trend.  At present, healthcare spending comprises a record 16% of the national GDP[2].  These statistics illustrate the key problem with the current health care system in the US- healthcare costs have increased to such a high level that employers, who provide 75% of all healthcare coverage to Wisconsin residents under the age of 65[3], are becoming increasingly unable to afford providing healthcare to their employees.  Consequently, the percentage of uninsured Wisconsin residents under the age of 65 is increasing. 

            Those who cannot afford to purchase private insurance do have the option of using Medicaid, but even with the presence of Medicaid, an unacceptable number of Wisconsin residents remain uninsured.  Given the importance of access to affordable and quality healthcare, the State of Wisconsin has created several safety-net programs to limit the number of uninsured Wisconsin residents.  The first is BadgerCare, which provides healthcare coverage to uninsured families under a certain income level.  Badger Care has been supplemented by BadgerCare Plus, which aims to increase healthcare coverage of children by merging and streamlining the Medicaid and BadgerCare programs.

            Understandably, health insurance does not represent the sum total of all healthcare spending; a substantial amount of money is spent purchasing often expensive prescription drugs.  Thus the governor has created his “Prescription Drug Resource Center,” which is aimed at providing consumers with enough information so that they can assess available options for prescription drugs and make an informed decision.  Most notably, it provides an avenue for consumers to procure prescription drugs from Canadian pharmacies, and also offers the services of a “Pharmacy benefit manager” to search several countries to find the lowest available price for prescription drugs.

            The Wisconsin governor’s most ambitious proposal involves the creation of a statewide e-health infrastructure, (see description and arguement for e-health on the Center on Health homepage) which would use make medical records accessible to physicians (and thus help to prevent the occurrence of medical errors or unnecessary treatments) [4]. and would streamline the bill payment process, eliminating administrative costs.   Reducing administrative costs reduces overall costs and would help to reduce premiums.

Unfortunately, this e-health plan does not address the problem of “adverse selection.”  Adverse selection occurs when healthy people who can afford health insurance choose not to purchase it in the belief that they don’t need it; consequently, the only people who purchase health insurance are those who are less healthy and require its benefits.  When fewer people purchase health insurance, the pool of money used by insurance companies to pay for medical expenses shrinks.  In order to compensate, insurance companies must charge a higher monthly premium.  Thus, a vicious cycle ensues.

Massachusetts has proposed to minimize the problem of adverse selection by requiring all residents who can afford healthcare to purchase it, penalizing those who elect not to purchase it.  Thus, the size of the overall pool of money is maintained and the cost of monthly premiums stays manageable.

New York and Arizona have addressed the adverse selection problem by providing reinsurance (insurance for insurance carriers) in the event that medical costs for an individual or for a group exceed their estimates.  Specifically, New York’s plan (termed HNY for Healthy New York) pays 90% of all costs for an individual’s healthcare between $5000-$75000.  The 10% liability held by the insurance company is substantial and provides the insurer with the incentive to manage the individual’s care when his or her medical expenses begin to exceed $5000[5].