Lessons from Massachusetts Health care reform is
hot this election season and presidential hopefuls from both parties
appear weekly with promises of reforms that will supposedly solve our
system's problems with universal coverage at affordable costs. A recent
overhaul in Massachusetts that expanded taxpayer-funded health
insurance and requires individuals to purchase government-approved
policies is proving particularly compelling to many, not the least
because its architect, Mitt Romney, is a leading Republican candidate.
In reality, the Massachusetts mandate provides a poor model for
the rest of the country—unless we are looking for an expensive
expansion of government. It won’t achieve universal care. It has
increased government spending, bureaucracy, and regulation. It most
certainly will prompt increased taxes.
The outline of the Massachusetts law is politically seductive:
Require people to purchase health insurance, render it affordable, or
at least tax-deductible, and fine those who don’t comply. An increased
insurance pool, it is argued, will make insurance more affordable, and
costs will come down as people who rely on charity care at emergency
rooms will be redirected to more cost-effective venues. If this could work anywhere, Massachusetts is the place. The
Bay State started with a high level of the population insured--more
than 90 percent. It had already spent substantial sums reimbursing
hospitals for uncompensated care from state coffers. It already had a
guaranteed issue law, so anyone applying for insurance and able to pay
the tab could be accepted. If universal coverage was achievable by
government command, Mitt Romney’s Massachusetts was the place to issue
it.
It's one thing for politicians to promise that their mandates
will decrease costs, it’s quite another when it comes to implementing
the plan. In Massachusetts, the initial costs came in higher than
expected. Faced with this reality, the bureaucrats in charge of the
implementation at the Commonwealth Connector Board decided that
universal coverage didn't need to be universal after all, and it
promptly exempted 20 percent or one in five uninsured from having to
comply with the mandate.
The Connector Board also bowed to political pressure and agreed
to reduce the premiums, a move that boosted program costs by $13
million. Some plans are totally free--and have therefore been popular.
Other subsidized plans for people earning between 150 and 300 percent
of the poverty line will cost people as much as 9 percent of income for
just the premium. Not surprisingly, these plans have proven less
popular. Of the 79,800 people who've enrolled in the health plans as of
June 1 of this year, 59,816 signed up for the totally free plans.
This structure will produce a fiscal disaster. Considering the
high premiums for those who have to pay, many will opt to remain
uninsured. The fine of $216 will be more attractive than the premium.
Politicians will face strong pressure not to enforce the mandate if the
fines increase. Indeed, before the program started they exempted 20
percent of the target population.
At the same time, the premium subsidy makes the plans a bargain
for individuals who expect to consume large quantities of health care.
The insured will be older and less healthy than the average citizen.
Spending will skyrocket. The taxpayer will be forced to pay or services
will be rationed.
So far, this downward spiral appears to be well underway. The
average age for those enrolled in the free plans is far younger than
that of the plans for which a contribution is required. Not
surprisingly, usage is higher for the paid plans as well.
And the doctors, they may like the plan in the short run as
they will receive higher reimbursement rates for seeing Medicaid
patients but in the long run, the picture is not as bright. As costs
rise, they will be faced with payments being limited, rationed care,
more bureaucracy, and less freedom on how they want to practice
medicine.
Massachusetts may be able to limp its plan along for a few
years with a combination of tax increases on employers, restrictions on
enrollees, and price cuts to providers. It will not, however, achieve
universal health insurance or a meaningful structure for cost control.
Its most likely legacy will be to have created another government
health bureaucracy, ratcheted up taxpayer health spending, and
bolstered calls for a complete government takeover of health care.
By Sally C. Pipes
Thursday, August 23, 2007
Republican presidential hopeful, former Massachusetts Gov. Mitt Romney,
shakes hands with Mary C. Holmes during a campaign stop at the
Heritage-Heights Assisted Living Community in Concord, N.H., Wednesday,
July 25, 2007. (AP Photo/Jim Cole)
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