There was an item in WSJ's Political Diary that discussed a study by the Small Business and Entrepreneurship Council on ranking health care costs for small business across the 50 states. It is what I feared it was, an arbitrary summing up of a series of qualitative measurements, without any explanation of why the scale was chosen as it was. For instance, if you have no high-risk pool to handle the "medically uninsurable" in your state you get a 1 (getting points is a bad thing -- you want to be close to zero), since leaving those people in the general insurance pool leaves some uninsured and pushes up emergency room use. A mandate in your state health insurance law adds 0.05. So why do 20 mandates equal a lack of a high-risk pool? These are the kinds of questions we tried to get at in the book, and it's one of those things that drives me mad with these mystery meat indicators.

Still, the underlying raw data was interesting, and so with that big caveat here are the rankings for upper Midwestern states.


Thanks to HTML Tables for formatting. Here's a brief guide to the labels, and see the study for details:

• rank -- from least to most costly
• HSA deduct -- are contributions to health savings accounts deductible from state income tax? (0 = yes, 1 = no)
• GI/SE -- are insurance companies required to issue health insurance coverage to self-employed persons without any other employees? (no=0, yes=1)
• CR/SG -- community rating for small groups (can't very price within a region for a small group plan)
• GI/Ind -- guaranteed issue for all in individual (non-group) market
• CR/Ind -- community rating in individual market
• High-risk -- presence of high-risk pools
• Mandates -- # of mandates divided by 20
• Index -- sum of the elements. It's this number on which the rankings are made.

So you can see Minnesota's low ranking is almost all due to mandates, double or more of any of its neighbors. So what are those? SBEC's source is a study by the Council for Affordable Health Insurance, which finds 68 separate mandates for Minnesota. (This study was previously discussed on this blog.) Some of them are relatively rare: MN is one of five states that requires coverage for Lyme's Disease, though in that case I can see a case. In others, such as being one of only two states that mandates coverage of port wine stain elimination, one of two for reconstructive surgery or one of three for psychotropic drug therapy, one might see some places we could reduce costs. But any one of them has a small intense group that lobbies for coverage and nobody really interested in elimination because the change in the price of health insurance coverage might be less than 1%. The problem is, 20 such items -- which would get us to about the median -- would create some real savings. It's a classic Olson collective action problem.

There then is some use for this study: It focuses us on what the issue for health care costs in Minnesota is. It also suggests that reducing these will be hard. Alas, federal health legislation may reduce the differences in mandates between the Nebraskas and the Minnesotas before much longer.

Labels: economics, health care