The Massachusetts Experiment

Posted by John LaPlante in Health Care, Massachusetts on Oct 21st, 2009 | no responses

What can we learn from the Massachusetts attempt to provide universal health insurance? The Los Angeles Times weighs into the debate.

The subheadline hints at the problems that result from relying on ambitious government plans: “Thanks to the state’s overhaul three years ago, 96% of residents are covered. But lawmakers avoided taking on cost controls, and people are paying the price.” There are several ways of paying–premiums; copays, coinsurance and deductibles; taxes; decreased economic growth; and increased weight times for service or declined services (rationing).

You don’t have to get far into the story to see problems with the design: “The state’s system, like the proposals moving toward votes in the House and Senate, focused on three goals: making medical insurance almost universal, fostering competition through a regulated insurance exchange, and helping low-income workers pay for coverage.”

“Fostering competition through a regulated insurance exchange,” eh? Regulation is all around us these days, but once you get beyond a certain amount of regulation, you’re not taking about a competitive market anymore. That’s because regulation can erect barriers to entry, thus putting a big damper on competition. So can government rules that shape what kinds of products a company can offer, can’t offer, and must offer. So much for competition.

The article finds that RomneyCare offers little benefit to the middle class, who are spending more but “seeing little or no difference in the quality of their care.” Then again, even without the Massachusetts reforms, people were spending more each year.

So if the plan has done little to constrain costs, what’s the alternative? Imposing a pay cut on doctors, presumably: “Ralph Neas, of the National Coalition on Health Care, says that the few cost provisions focus too much on public programs, especially Medicare, and not enough on reducing what doctors, insurers and hospitals charge customers who get their coverage from the private market.”

[Here's a hint, Ralph: Public programs shift their costs onto private payers]

Price controls on health care are in the future: “The Legislature is going back and trying again, this time fashioning policies to govern insurers’ profits and doctors’ pay.”

Do you think that “governing” just might mean “limiting?” Bingo. Would you like to spend 12 years in college, med school and residency to become a doctor so that government can “fashion policies” to “govern” your pay?

Meanwhile, the overall program appears to be unsustainable. While some people have been able to get insurance (not the same thing as medical care!), the program is heading towards the cliff, with costs expected to double by 2011 from levels in 2007.

Finally, the story demonstrates some economic illiteracy. For example, it says “there is the problem of underinsurance — coverage by budget-minded plans that have high deductibles and leave consumers with a much larger share of their medical bills than the more expensive plans.” Have the authors never heard of health savings accounts, or simply buying cheaper and saving the difference?

A more comprehensive plan may leave you with fewer out-of-pocket expenses, but it will also cost more up-front. In fact, if you combine health insurance premiums with bills for medical service, you can easily end up paying more in “medical bills” for a comprehensive-but-expensive plan than a less-comprehensive-but-cheaper one.