In its first year, the Bay State’s subsidized insurance plan — Commonwealth Care — was supposed to cost $472 million. The bill came in at $630 million.
The $158 million overrun hasn’t phased state lawmakers, however. If anything, they seem hellbent on making the plan even more expensive. They’re interested in outlawing certain high-deductible plans and forcing all policies to cover prescription drugs. Gov. Patrick proposes to raise funds for this project by “collecting” more from businesses. These measures would effectively guarantee that thousands more Bay Staters will end up on the state dole next year.
Massachusetts can’t expect to tax and mandate its way to universal coverage, much less a better health system. Instead, policymakers must relax their regulatory stranglehold on private insurance and address the state’s bloated government healthcare programs. Such reforms, which would improve “health ownership” in the state, would also enhance the quality of care.
States with higher levels of health ownership spend just a fraction of what Massachusetts does on health care each year. In the Pacific Research Institute’s annual state-by-state ranking of health ownership, Massachusetts placed near the bottom for the second year in a row.
Lawmakers can start their reforms by cutting the number of burdensome benefit mandates. Today in Massachusetts, no matter a policyholder’s age, medical condition, or behavior, every insurance policy is required to cover hair prostheses, in vitro fertilization, chiropractics, and a host of other extraneous medical procedures and providers. Massachusetts has 43 of these mandates, and they significantly drive up the cost of insurance, pricing many families out of the market.
States at the top of the health ownership rankings, by contrast, don’t overload private health plans with onerous benefit mandates. Alabama, which has the highest level of health ownership in the country, imposes just 19 of them.
In addition, Massachusetts health plans are both required to accept all applicants for insurance — without taking their health status into account — and limited in their ability to set prices, thanks to the twin policies of “guaranteed issue” and a form of “community rating.”
That may seem necessary, given the state health insurance mandate, but it means that young and healthy individuals are forced to pay more than they otherwise would, in order to subsidize the old and sick. If premiums go too high, many Bay Staters — particularly the young — will decide to forego insurance while their employers pay the modest penalty for not offering coverage.
At the same time, outlawing the low-cost, high-deductible plans that are perfect for many of these young and healthy individuals — as the Commonwealth Connector authority proposes to do — will either drive up the number of uninsured or force more people into government-funded programs. Neither outcome is a good one.
All told, the monetary burden of excessive health regulations like these amounted to $169.1 billion nationally in 2002. In fact, 4,000 more people die per year thanks to excess regulation than do because they lack health insurance.
With such examples of government over-reach in mind, it’s no surprise that Massachusetts has among the highest private insurance premiums in the nation.
Private coverage is prohibitively expensive for many, so the state is forced to subsidize insurance policies for thousands. Bay State officials love to congratulate themselves for extending coverage to 439,000 previously uninsured residents since the mandate law went into effect in 2006, but 248,000 of those went straight into a government program.
Massachusetts’ leaders must do more to rein in health spending if they want to avoid bankrupting the state. Tax increases and regulations won’t do the job.
That’s why lawmakers should work to improve health ownership. Only by granting Bay Staters greater control over their healthcare decisions and freeing the insurance market from high-cost regulations can policymakers simultaneously cut costs and improve health care in the state.
John R. Graham is Director of Health Care Studies at the Pacific Research Institute. He is also the author of the U.S. Index of Health Ownership, an annual report published by PRI.