Governor Schwarzenegger's proposal to provide health insurance to illegal aliens strikes us as a bad news, good news situation. The good news: health spending per illegal may decline. The bad news: there may be far more illegals—because of the message that the proposal sends.

Illegals in California already have access to Emergency Room care, thanks to a Federal law mandating hospitals to treat uninsured patients. The expense is born by California taxpayers (see California Medical Association, The ER Crisis: Impact of the Uninsured on Emergency Care, July 2004. PDF) who pay more than $5 billion a year to care for the uninsured, or insured individuals and their employers, many of whom can hardly pay their existing insurance premiums...

(Of course, some uninsured aliens notoriously proceed to run up multi-million dollar bills in long-term care—which doesn't show up as an ER expense.)

The rationale for the Schwarzenegger scheme: Forcing aliens to delay treatment until they are in crisis is more expensive than paying for preventive care. Chronic diseases like high blood pressure, diabetes, and asthma can be efficiently managed, or even avoided, by preventive care in a doctor's office. In crisis mode, they turn into hospitalizations that cost hundreds of thousands of dollars. Similarly, able-bodied aliens clog ERs with routine, easily treated maladies like earache and the flu.

More than 80 percent of all uninsured patient visits to ERs could have been treated in a non-ER environment, according to the California Office of Statewide Health Planning. Between 1990 and 2000 more than 60 ER's in California closed.

Fewer ERs plus more uninsured aliens equals an ER crisis for everyone—insured and uninsured alike. Hospital ERs have been forced to wave off ambulances because they are full. The diversion problem is measured by the hours a hospital ER is unavailable. Sacramento hospitals reported more than 6,000 hours of ambulance diversion in 2003. The situation in LA County, home to 45 percent of the state's illegals, is worse: Ambulances are diverted 25 percent of the time.

OK. So the Governator's plan could theoretically reduce healthcare costs and increase accessibility. At least in the short run.

But the prospect of universal health insurance may trigger a new wave of illegals. The most likely suspects: not illegal workers, many of whom would come even if health care were not available to them, but pregnant females and the elderly, who come specifically for treatment.

Medi-Cal paid for the delivery of about 107,000 illegal alien babies in 2004, about 43 percent of all deliveries under the state plan. Many of these were born to mothers who crossed the border for the express purpose of giving birth on U.S. soil. These ER deliveries involve considerable risk to mothers and their babies.

In Ahnold's brave new world, illegal alien mothers will have access to the full gamut of pre-natal care, obstetrical services, postnatal check ups, and pediatric care. Even fertility-enhancing drugs could be made available to them under the Governor's plan. These services could be a decisive draw for soon-to-be mothers contemplating a cross border delivery.

Some illegals are already getting this care at California's county clinics. But they have been relatively slow to use it and other programs—apparently because of the lingering effects of 1994's Proposition 187. As George Borjas puts it, "Although most of the provisions in the proposition were never enforced, its impact on the political and social climate of California is undeniable. It represented a seismic shift in the relation between the host population (i.e., the voters of California) and a particular segment of the immigrant population…." (The Impact of Welfare Reform on Immigrant Welfare Use, CIS, March 2002).

Borjas argues this chilling effect of Proposition 187 undoubtedly contributed to the drop in immigrant Medicaid usage. Outside of California, immigrant recipiency rates continued to rise. The Schwarzenegger scheme will unchill California's message. Any reduction in per recipient spending could easily be overwhelmed by a rising tide of alien recipients.

A modest proposal: cut off medical demand at the border. Simply enforce the laws against illegal immigration, systematically change the incentives that keep illegal aliens in the U.S.—and cut off legal immigration with a moratorium.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.