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Don’t mimic the Massachusetts Way on health care reform - Pacific Research Institute

Don’t mimic the Massachusetts Way on health care reform

The Examiner (Washington, D.C.), July 6, 2009

In 2006, Massachusetts governor Mitt Romney was hailed as a visionary for signing one of the most expansive health reform bills in the country. “MassCare” aimed to expand health insurance, achieve universal coverage, and bring down costs through a complicated set of government controls and subsidies.

Just over three years later, many lawmakers are pointing to the Bay State as a model of success — and pushing for similar policies at the national level.

The reform packages put forward by both the President and Democrats in Congress contain many of the essential elements of MassCare, including an individual mandate requiring most residents to purchase insurance; a “pay or play” rule forcing businesses to contribute to employee health insurance or pay a tax penalty; expansions of the public insurance system; and new restrictions on the insurance underwriting process.

But implementing the MassCare model nationally would be a mistake. While the percentage of uninsured Bay Staters has dropped to 2.6 percent (from about 6 percent), the state has never adequately addressed what causes people to go without insurance in the first place: the cost of health care.

In fact, a substantial portion of Massachusetts’ newly insured still can’t afford to purchase even basic medical services, and are effectively no better off than before the law’s passage. Meanwhile, government health spending is spiraling out of control, adding to the state’s already massive public debt.

The numbers are staggering. In seven of the last eight years, per-capita health spending in Massachusetts has increased faster than the national average, according to Alan Sager, a professor of health policy at Boston University.

Overall health insurance costs in Massachusetts are almost a third higher than the national average, with a basic plan costing almost $17,000 for a typical family of four. Nearly 30 percent of Massachusetts residents report that their medical costs have increased since MassCare’s implementation.

It’s a similar story for government healthcare spending. Public health insurance expenditures are expected to be up 42 percent, to roughly $595 million, this year compared to 2006.

The centerpiece of Massachusetts’ 2006 health reform bill is Commonwealth Care, a government program that provides free and subsidized insurance plans to low- and moderate-income patients. It’s spending has doubled in the last two years, jumping from $630 million in 2007 to an estimated $1.3 billion in fiscal year 2009.

Last year, rising costs lead Commonwealth Care officials to approve a 12 percent rate increase, meaning that basic insurance costs will cut even deeper into the incomes of most participating patients.

The national recession has brought added financial stress to MassCare. As State Treasurer Timothy P. Cahill recently put it, the system “was expensive, even in good times. In tough times it just doesn’t seem doable. We’re all still waiting for the savings.”

And employers, now required to contribute to employee coverage or pay a tax penalty, are drowning under ballooning healthcare costs. Indeed, businesses that sponsor high-quality insurance plans have seen annual rate increases of 10 to 15 percent since MassCare’s inception. This has made it harder and harder for businesses to stay in the state. And it’s made the state less attractive for entrepreneurs and investors.

So what are Massachusetts residents getting for all that money? About 432,000 people previously without insurance are now covered, dropping the state uninsured rate to just 2.6 percent — the lowest in the nation.

But many of the newly “insured” still can’t access medical care. In fact, over the last 12 months, about 10 percent of state residents failed to fill a prescription, missed a payment on a medical bill, or skipped essential medical care.

The reason? As Harvard Medical School professor Dr. David Himmelstein explained, “Many of the policies out there have such huge copayments and deductibles that people can’t afford care.” In other words, many patients are nominally “insured,” but they’re spending so much on coverage that they can’t afford the most basic medical services.

Indeed, the least expensive policy for a young family of four costs about $9,500 annually. But that family will have to pay a $3,500 deductible before many of their benefits kick in.

Because of these costs, 23 percent of the patient population still relies on emergency room (ER) care for basic medical treatments, the same percentage as before MassCare was implemented in April 2006.

Between 2005 and 2007, the number of ER visits increased seven percent, and total ER costs have gone up 17 percent over the last two years. Most disturbingly, patients on state-subsidized insurance use ER care 14 percent more than the average Bay Stater. Hospital officials have calculated that half of patients visiting the ER could have had their ailments addressed by a regular primary care doctor.

The bottom line is that expanding the Massachusetts model nationwide would be a disaster. It might reduce the number of Americans without insurance. But healthcare costs would become an even bigger problem, making medical care unaffordable for millions and resulting in denied care for many Americans.

Democrats eager to emulate the Bay State experiment on the national stage should think again. New government controls and spending won’t do the trick. If we’re serious about bringing down costs, we need to focus on patient-centered solutions to play a bigger role in our healthcare system.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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