What If Each State Handled It’s Own Healthcare?

This is the first article to follow up on the general articles about federal distribution of powers and talk about a specific example.  That example is healthcare. Healthcare is a big problem in the United States – the cost is high, access isn’t universal (though it isn’t quite as bad as we sometimes think), and the political energy it takes distracts us from many other important issues.  

There has been a lot of talk about the relative merits of a private vs public vs hybrid system and what various solutions might look like.  But a working solution has eluded us. And I’d like to argue that we are fighting a fight we don’t have to have. Instead of fixing Medicare or Medicaid, we could just eliminate them and the taxes that pay for them.  Then the states could pick up the slack.

This is probably not an idea you’ve heard before and it probably sounds extreme, but hear me out.

Let’s consider the following facts:

  1. The poorest state by median income is West Virginia, with a median income of $44,000, and the poorest by GDP per capita is Mississippi, with about $32,000.
  2. The smallest state by population is Wyoming, with a population of about 580,000.
  3. The poorest nation in the European Union is Bulgaria, with a GDP per capita of about $15,000 and a median income of about $4,000.
  4. The smallest nation by population in the EU is 460,000.  The smallest affiliate state is Liechtenstein, with 38,000.
  5. The lowest life expectancy by state in the US is Mississippi with 74.5 years, and the EU is Lithuania with 74.3 years.  At the high end it’s Hawaii with 81.5 years and Spain with 82.8 years respectively.

So then, it looks like the poorest US states are still much richer than the poorest EU countries (let alone European countries not in the EU) and that the EU countries have populations at least as healthy.  Now contrary to popular belief, healthcare in Europe is not all public. Some countries have an entirely public system, others have basic public insurance with supplemental private insurance, and some – like Switzerland – are entirely private with a mandate to carry insurance.  

In other words each European country has its own unique solution that is working for them.  And the comparison in size and wealth of the US states to EU nations should show that there is no practical reason that a US state couldn’t manage healthcare through their own funding – the only barrier today is that states have much less revenue than the federal government.  

Today about 25% of the federal government spending is on healthcare in one way or another.  Income tax is about 50% of federal government revenue. So, mathematically we could cut out all federal healthcare spending, and cut federal income tax by half.  Then the states could raise their taxes by the same amount (or less if desired or if they thought they could do healthcare better than we’ve been doing it so far).  Citizens would not pay any more taxes in the end, and the states could have full control of health policy.

I think the benefits of that are many.  There are significant cultural, religious, and economic differences between the states that could then be expressed in different systems just as they are in Europe.  A poorer, more rural state could decide they want a system with different trade-offs than a rich urban state. One state could have all public, and another a hybrid, another private insurance with a mandate, and then all states could actually compare the real life results instead of relying on rhetoric.  The politicized aspects of coverage, such as abortion, contraception, or addiction treatment, could be removed from poisoning the national debate and allow it to focus on issues that have to be solved at the federal level.

In this model, the nation-wide role would be one of enforcing reciprocity.  For example, a citizen could be required to be covered by their current state until they have lived in another state for 1 year, and then be put on that system without the possibility of rejection.  There might be other details about people moving around that need to be worked out, but we know they aren’t a barrier because European national systems are working even though their citizens can move from one country to another.

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