Thursday, June 18, 2009

The Health of America, Part 10

UPDATE: below

President Obama made healthcare reform a top priority. So several draft bills are circulating in Congress.

For some, the mandates adopted by Massachusetts remain a widely-esteemed model. Unfortunately, the "Massachusetts miracle" may turn out to be a false prophet, as detailed in Michael Tanner's Massachusetts Miracle or Massachusetts Miserable: What the Failure of the "Massachusetts Model" Tells Us about Health Care Reform (footnotes omitted):
The proponents of the Massachusetts reforms also promised that those reforms would reduce health care costs. Governor Romney said that "the cost of health care would be reduced" and the plan would make health insurance "affordable" for every Massachusetts citizen. Supporters suggested that the reforms would reduce the price of individual insurance policies by 25-40 percent.

In reality, insurance premiums rose by 7.4 percent in 2007, 8-12 percent in 2008, and are expected to rise 9 percent this year. By comparison, nationwide insurance costs rose by 6.1 percent in 2007, just 4.7 percent in 2008, and are projected to increase 6.4 percent this year. On average, health insurance costs $16,897 for a family of four in Massachusetts, compared to $12,700 nationally.

The five insurance plans available through the Massachusetts Commonwealth Care program, which subsidized care for low- and middle-income individuals, are somewhat cheaper, roughly $2,460-3,460 for an individual policy before application of the subsidy, but those costs, too, have been rising--up 11 percent since the program began for the lowest cost plans. . .

The reforms . . . failed to create the type of consumer incentives that would encourage consumers to become more cost conscious. Since the bill was signed, healthcare spending in the state increased by 23 percent. And it generally retained the regulations and mandates that added to insurance costs. In fact, the legislation established a new health care bureaucracy, the Connector, which has actually increased insurance regulation, and may have helped drive up costs. . .

When the Massachusetts reforms first became law, they were projected to cost about $1.56 billion per year in total, with the largest component, the Commonwealth Care subsidies, costing roughly $725 million per year. As it turns out, those estimates were not even close.

By mid 2008, the state was projecting that Commonwealth Care would cost $869 million for FY2009, nearly a 20 percent increase, and more than $880 million in 2010. However, the state secretary of administration and finance says that she expects actual costs to be far higher--perhaps even as much as $100 million higher. The entire reform plan was projected to cost more than $1.9 billion in 2009, some $300 million above projections. State government spending on all health care programs has increased by 42 percent ($595 million) since 2006.
See also Tanner's summary in National Review.

The Administration claims its approach will cut costs, citing specific savings, though how they would be achieved remains on double-secret probation. Indeed, some suspect Obama's attempting the equivalent of squaring the circle--or selling a free lunch. As the Washington Post's Robert Samuelson says:
It's hard to know whether President Obama's health-care "reform" is naive, hypocritical or simply dishonest. Probably all three. The president keeps saying it's imperative to control runaway health spending. He's right. The trouble is that what's being promoted as health-care "reform" almost certainly won't suppress spending and, quite probably, will do the opposite.
Assistant Village Idiot agrees:
[T]his is the government. Even if they could legitimately find some places to streamline things and save some money, everyone knows that this is a government program. It is not going to ultimately cost less. It might do some other things that progressives like, such as guaranteeing care to people between jobs or getting dental care for lower-middle-class kids, but it is emphatically not going to save money, no way, no how. You know it. I know it. Obama knows it. If they could save money this way, they would have already done so with the VA and Medicare systems, because that would be a primo sales pitch.

All these great proposals where we could save money, if we just let the government do its thing are purely hypothetical. If everything goes according to plan, it will work. Dude. Not gonna happen.
Anyway, absent incentives for individuals to be cost-conscious and competition, I'm still skeptical. As Arnold Kling observes, we can't cut costs merely by "squeezing providers to take less money for the same services." No wonder the Congressional Budget Office has "scored" a proposal without any mandate at about $1 trillion dollars over the next 10 years,

Imagine adding an insurance coverage mandate, which the President hasn't ruled out. Even the New York Times admits that "moving to full universal coverage in 2010 would increase total national health spending by roughly $150 billion in that year [and] added government spending on health ranging from $1 trillion to $2 trillion over the next 10 years" (the current Senate bill would cost $1.6 trillion). Meaning Obama's reforms won't generate much cost savings--but will increase bureaucracy and taxes. Plus law suits.

As Jason Fodeman says, "Only in Washington could someone recommend treating a spending explosion with more spending." For progressives, that's a feature, not a bug.


Liberal Ezra Klein on his Washington Post blog:
[H]ealth reform has just gotten harder. The hope that we could expand the current system while holding costs down appears to have been just that: a hope. And CBO doesn't score hopes. It only scores plans. The question now becomes whether we want health-care reform that achieves less of what we say the system needs, or more. Doing less would be cruel to those who have laid their hopes upon health reform. But doing more will be very, very hard.
(via The Corner, Arnold Kling)


suek said...

Just a few links on the topic that I found interesting: The wsj one is from 2008, the nhs one is current.

Carl said...


Good articles; thanks! The first link from NHS Blog Doctor is particularly informative, i.e., scary.