For Immediate Release

Contact: John Taylor

(703) 994-5632 mobile

(703) 753-5900 office

VAInstitute@aol.com

Study shows proposed national health-care reform would weaken Virginia economy, cost taxpayers

RICHMOND (September 8, 2009) – A study concluding that federal health-care proposals would weaken the Virginia economy and increase taxes on Virginians was released today by the Virginia Institute for Public Policy. The study shows that the cost of funding health-care reform based on President Obama’s priorities will average $4,176 for every man, woman, and child in Virginia.

Donna Arduin, coauthor of the study and a partner with Arduin, Laffer & Moore Econometrics, explained why the plan pending in Congress would cause more harm than good, and discussed the specific effects it would have on the citizens and economy of Virginia.

“Current proposals based on President Obama’s policies would worsen the health-care system, increase costs, further escalate medical-price inflation, and add more than $285 billion to the national deficit in the next ten years,” said Arduin.

The report, titled The Prognosis for National Health Insurance: A Virginia Perspective, shows that:

• Funding health-care reform based on President Obama’s priorities will be $4,176 for every person in Virginia. This comes to $32.4 billion in total costs that Virginians will have to bear.
• In addition to federally-funded expenditures, Virginia government expenditures through 2019 that will occur as a result of a federal health-care reform is $2.1 billion, or a $275 bill for every person in Virginia.
• Virginia would see reduced economic growth in 2019 by 4.5 percent.
• If the federal government pushes the financial responsibility for covering the expansion of lower-income individual’s health-insurance coverage off to the states, Virginia’s costs will increase by a total of $6.8 billion, while the federal costs will decline.

According to Arduin, legislation that would provide an additional $1 trillion in federal health-care spending would not only slow both the Virginia and the national economy, but also leave 30 million Americans uninsured.

Arduin urged Virginia’s Congressional delegation to work toward a solution that will not penalize the 70 percent of Americans who currently are happy with their health-care arrangements, and that will not increase the federal deficit while only reducing the number of uninsured Americans by roughly one-third. Instead, Arduin emphasized the need for patient-centered reform.

The study indicates that reforms need to focus on reducing costs by closing the “health-care wedge” – a separation of effort and reward by which a patient understands the true costs of his health care and is therefore driven to be more efficient in his spending. This separation is actually the reason health-care costs are skyrocketing.

“When the government spends money on health care, the patient does not,” Arduin said. “The patient is then separated from the transaction in the sense that costs are no longer his concern. Health-care reform should be based on policies that diminish this wedge rather than increase it.”

Health-care costs have risen over the past 50 years, while the patient’s out-of-pocket contribution has plummeted: half of all medical expenditures in 1950 were paid by patients in the form of out-of-pocket expenses; today only 10 percent of expenditures are paid the same way.

John Taylor, president of the Virginia Institute for Public Policy, said that the study offers alternative reform solutions that are more patient centered and free-market oriented, without destroying what already is good in the system. These solutions include:

• Provide for individual ownership of insurance policies – the tax deduction that allows employers to own your insurance should instead be given to the individual
• Better leverage Health Savings Accounts (HSAs) – HSAs empower individuals to monitor their health-care costs and create incentives for individuals to use only those services that are necessary.
• Allow interstate purchasing of insurance – policies in some states are more affordable because they include fewer bells and whistles; consumers should be empowered to decide which benefits they need and what prices they are willing to pay.
• Reduce the number of mandated benefits insurers are required to cover – empowering consumers to choose which benefits they need is only effective if insurers are able to fill these needs.
• Reallocate the majority of Medicaid spending into simple vouchers for low-income individuals to purchase their own insurance – an income-based sliding scale voucher program would eliminate much of the massive bureaucracy that is needed to implement today’s complex and burdensome Medicaid system and produce considerable cost savings.
• Eliminate unnecessary scope-of-practice laws and allow non-physician health-care professionals to practice to the extent of their education and training – retail clinics have shown that increasing the provider pool safely increases competition and access to care, and empowers the patient to decide from whom they receive their care.
• Reform tort liability laws – defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients.

Congressman Randy Forbes attended the news conference to speak about the votes in Congress for the current reform bills. The Republicans in the House need 38 Democrats to side with them to stop the bills. Although the conservative Blue Dog Democrats are being counted on to prevent the current “public option” bills from passing, according to Forbes, “You can’t put a lot of stock in them... I can’t think of a situation since the Democrats have come back in control of Congress when the Blue Dogs held when the pressure really came.”

Forbes stated he thinks the town halls will change some votes in Congress. He also said that those pushing for significant government control of health care are doing it because it is a control issue where politicians are “much more interested in feeding their constituent groups that helped get them in office” than creating real reform.

If you would like a copy of the full report, visit www.VirginiaInstitute.org. A four-page executive summary can also be downloaded from the Web site.

Interview Contacts:
Congressman Randy Forbes
(202) 225-6365

Donna Arduin, study author and partner
Arduin, Laffer & Moore Econometrics
(850) 459-6128

John Taylor, president
Virginia Institute for Public Policy
m (703) 994-5632
w (703) 753-5900
e-mail: VAInstitute@aol.com

About the Virginia Institute for Public Policy:

The Virginia Institute for Public Policy is an independent, nonpartisan, education and research organization committed to the goals of individual opportunity and economic growth. Through research, policy recommendations, and symposia, the Institute works ahead of the political process to lay the intellectual foundation for a society dedicated to individual liberty, dynamic entrepreneurial capitalism, private property, the rule of law, and constitutionally limited government.

www.VirginiaInstitute.org

# # #