Massachusetts Health Care Reform Results

About two years ago, Massachusetts implemented a health care reform scheme very similar to the one being proposed in Washington. Everyone would be forced to buy insurance. If they couldn’t buy insurance, the taxpayers would pay for it. Since everyone would now be insured, health care providers wouldn’t get stuck with expenses for the uninsured anymore. This was supposed to result in cost reductions. A hospital wouldn’t have to charge paying customers more to compensate for those who didn’t pay. Insurance rates would fall but the total amount of money collected by insurance companies would remain about the same (more customers times less money).

How did it work out? Todays Boston Globe story “Health costs to rise again” show that we succeeded in getting more people into the system as paying customers. Prices, however, will rise by about 10 percent and will be the highest in the United States (and therefore the world). They will be double what they were in the year 2000:

“State health care reform has had some unexpected results,’’ suggested Tim O’Brien, senior vice president at Blue Cross Blue Shield’s headquarters in Boston. “The actual costs have been much higher than what were anticipated when health care reform went into effect in 2007.’’

The article mentions that a state commission proposes paying HMOs for annual care rather than for individual procedures, just as proposed in my personal health care reform plan. However, no steps have been taken in this direction.

In the discussion of the costs of the Massachusetts reform, no calculations are typically made of the costs incurred by each taxpayer in the state in securing a certificate proving that he or she has paid for insurance, the costs of organizing that certificate in with one’s tax filings, the costs of the people at insurance companies who have to prepare and mail out these certificates (and replacements as necessary), the cost of postage for mailing, the salaries of people in state government who try to figure out if someone is breaking the law by not buying insurance, the pensions for those people, the salaries of government workers who dispute with taxpayers as to whether or not they have complied with the law, the accountants and attorneys that taxpayers hire to defend themselves agains the public employees accusing them of not complying with the law by buying insurance, etc., etc.

7 Comments

  1. Joe Internet

    September 16, 2009 @ 4:48 pm

    1

    How well is “forcing everyone to buy insurance” going? Any statistics on that available yet? How is that done? How hard is it to forge the insurance documentation? Does the state even notice if someone fails to send in the state tax return? (Note: Here in Illinois the state doesn’t seem to notice, but with a 3% flat tax and the same withholding, people pay about the correct amount via withholding anway. I know this for a fact because I don’t bother to file and the state doesn’t bother to complain – they got paid.) How does the state enforce the fine if someone just doesn’t pay it? Withhold tax refunds? Send the police? Go to court and try to get a judgment and enforce it? Say, “stop, or I’ll say stop again!”? What? Just interested.

  2. George Murphy

    September 16, 2009 @ 5:22 pm

    2

    It completely amazes me that so many intelligent people are shocked that prices rise when the supply of available cash increases.

    Why is this basic truth ignored in any analyses that proceeds major proposed legislation?

    Costs of health care, education, and food have all increased due to government’s redistribution of wealth.

  3. Rick

    September 16, 2009 @ 11:17 pm

    3

    A friend recommended I read Zakarias “The Future of Freedom”. In this book,
    he paints a fairly depressing picture of how one unintended consequence of
    opening up Washington’s processes to the public enabled special interest
    lobbying. If I view healthcare in the context of the observations in this book,
    it is quite easy to conclude that no meaningful reform is at all possible until
    and unless we get the lobbyists out of DC, and allow some time for real
    political leadership to emerge. The medical industrial complex has too much
    money at stake and as such can so influence policymaking that it is, IMO,
    completely unrealistic to expect any legislation will get written which
    will threaten existing cash flow in the industry. Also, public opinion is
    something that I’m increasingly convinced should not play as direct a role
    in policymaking as it has. With the right press campaign, it seems clear
    enough that you can get people to say whatever a special interest wants them
    to say. And, end of the day, it isn’t at all clear that the public can
    reasonably absorb all the context of a complex issue like healthcare
    and articulate meaningful guidance a legislator might act on. The
    mess in CA is a good example of what happens when you let policy be
    written by referendum – as David Brooks put it, “..Californians have
    voted to tax themselves like libertarians and subsidize themselves like socialists..”.

    Anyways, in short, I’ve read some pretty decent proposals, I count Phil’s
    as one of them, but really the issue isn’t forming The Idea. To fix healthcare
    we need to fix some fundamental problems in DC first.

  4. philg

    September 17, 2009 @ 1:27 am

    4

    Rick: Thanks for the interesting comment. In response to that David Brooks comment, California actually has an average or higher than average tax burden than other states. http://www.ppic.org/content/pubs/jtf/JTF_TaxBurdenJTF.pdf is one carefully considered analysis. The other sources that I’ve found are consistent in that California collects a similar percentage of its residents’ income that other states do. If California were to raise taxes significantly it would become by far the highest tax state in the Union. California takes in plenty of cash. What happens to the money afterwards is the mystery. As a relatively new and growing state they should not have the legacy debt and pension burdens of a New Hampshire, for example, and yet New Hampshire is in vastly better fiscal shape.

  5. Joe Internet

    September 17, 2009 @ 6:57 pm

    5

    Rick,

    If you don’t want public opinion to affect the decisions that our representatives make, then I suggest term limits. Bump up the terms of both the Senators and Representatives to 8 or 10 years and allow one term only. Then they will never be running for reelection or needing to raise money from lobbyists and special interests. Of course, then we will be complaining that our representatives are not responsive enough to our gripes.

  6. e

    September 21, 2009 @ 9:10 am

    6

    The Atlantic has an informative article on the Health Insurance topic. The author accurately identifies a number of perverse incentives in the system, particularly the distorted perspective American consumers now hold. We have the expectation that health insurance should pay for every health cost, unlike every other form of insurance, which covers catastrophic events, not routine maintenance. Anecdotally, (I’m an MS4 at an established southeastern medical university) the this is most significant fundamental structural problem in cost-effective patient care and health promotion, and a distressingly common belief among my patients.
    http://www.theatlantic.com/doc/200909/health-care

    Phil & others: I know this topic has been discussed in recent posts on Health Care reform, but I think you’ll find the author’s discussion of incentives informative

  7. philg

    September 21, 2009 @ 2:14 pm

    7

    e: The Atlantic article is linked from my health care reform plan and has also been linked from a couple of earlier postings and comments in this blog. What is odd is that nobody in Washington seems to have noticed the Gawande article in the New Yorker or this Atlantic piece.

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