By Jonathan McKane — A tax in Maine has been repealed.
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 As of Dec. 31, the Dirigo tax on health insurance has been repealed.
Yes, indeed, some taxes do get repealed but, in the case of Dirigo, not until we had spent hundreds of millions of taxpayer dollars for a ideologically inspired program that accomplished few of its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.
“A bold plan”
Dirigo was the signature program of the Baldacci administration and one of his campaign promises. 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 truly 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.”
We were told that Dirigo would insure 130,000 uninsured Mainers in five years and 36,000 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.
An expensive public relations campaign kept the public believing that Dirigo could work. But 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.
Funding and more funding
Meanwhile, the funding streams continued to pump money into Dirigo and several were used.
The first Dirigo tax was the Savings Offset Payment, http://www.dirigohealth.maine.
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, Democrats passed a straight tax on health insurance claims, but there was never enough money or “savings to the system” to grow the program and Dirigo continued on its downward trajectory. Revenues simply could not keep up with the expenditures and enrollment in Dirigo Choice soon had to be capped. At one point, Dirigo even had to borrow $25 million from the state’s general fund.
Ultimately, the program lasted almost 10 years. There were some good benefits to those who were enrolled in Dirigo Choice, and to those who received subsidies. Dirigo’s sliding-scale system was also a better way to fund healthcare subsidies than the all-or-nothing Medicaid system. In the end, however, few real long-term goals were achieved other than providing 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 creating hundreds of millions in state debt and squeezing all other programs and departments.
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.
Well, some people thought we had to start somewhere in getting people health insurance and thus Dirigo. Loved the remark about “unwitting” Republican legislators…however, the GOP will never agree to health insurance for the masses unless they are the architects and they’ve simultaneously appeased and pleased the medical establishment which treats healthcare as a commodity rather than a human (and humane) right. Why do we always find monies for war and killing and spying on/meddling in other countries affairs and we have so little REAL compassion for our fellow countrymen?
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