Arnold Kling  

Massachusetts Health Reform Failure

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Steffie Woolhandler, Benjamin Day, and David U. Himmelstein write,


Meanwhile, few of the near-poor uninsured seem able to afford even the newly subsidized policies, and the federal funds providing the bulk of the subsidies are set to expire in 2008. The unsubsidized coverage mandated for middle-income individuals (most of whom have incomes between $30,000 and $50,000) offers a bitter choice between unaffordable premiums (at least $7,200 for comprehensive coverage for a single 56-year-old) or plans so skimpy (e.g., a $2,000 per person deductible with 20% coinsurance for hospital care after that) that they hardly qualify as insurance. The religious coalition that was key to passage of the legislation has already called for a delay in enforcement of the individual mandate, fearing that it will place unbearable financial stress on many of the uninsured. In sum, neither government, nor employers, nor the uninsured themselves have pockets deep enough to sustain coverage expansion in the face of rising costs.

Re-read the last sentence. That diagnosis is spot-on, in my view. Their prescription is a full government takeover a health finance, to eliminate the administrative overhead and profits of private health insurance.

I would like to see that tried, but only in some states. I would like to see other states try radical health reform of the opposite kind, with health insurance deregulated and major rollbacks of licensing requirements. Then we'll see which performs better over the long term.

The benefit of experimenting at the state level is illustrated by the findings in the paper. The reforms that are failing at the state level are the ones that many folks are advocating at the national level.


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TRACKBACKS (3 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/882
The author at Health Care BS in a related article titled MASSACHUSETTS HEALTH REFORM IS DEAD writes:
    That’s the conclusion Steffie Woolhandler, Benjamin Day, and David Himmelstein have reached. Why? Because Romneycare expanded coverage to everyone while making no serious adjustments to the other dynamics that affect cost. The¬†inevitably result ... [Tracked on August 15, 2008 3:46 PM]
COMMENTS (13 to date)
liberty writes:

Haven't TennCare and Mass already taught us? What about Canada? Why do we need to keep experimenting on people?

floccina writes:

I hate when people use the word afford (each man's affordable is different) in these discussions or say things like:

The unsubsidized coverage mandated for middle-income individuals (most of whom have incomes between $30,000 and $50,000) offers a bitter choice between unaffordable premiums (at least $7,200 for comprehensive coverage for a single 56-year-old)

So does this mean that people making $22,800 all die?

Worse

or plans so skimpy (e.g., a $2,000 per person deductible with 20% coinsurance for hospital care after that) that they hardly qualify as insurance.

In my mind anything that pays more than that is what cannot be called insurance. Prepaid healthcare maybe insurance no way!

Brad Hutchings writes:

Law of unintended consequences. The key phrase in there is "religious coalition". I don't see a single social problems on the horizon today where religious thinking is anything but totally unconstructive.

Matt writes:

Krugman simply declared the Massachusetts experiment a success and demands the same at the national level. Did that guy really go to economic school?

Libra writes:

Coming from Massachusetts, I was originally a fan the plan. It seemed pretty close to my ideal plan:

1) provide a set of health care plans for those people who did not belong to a large pool

2) have a mandate to fix the moral hazard problem

3) subsidize the costs for the poor.

There was just one teeny problem. The actual cost of the insurance was set at a price 5X what I reason is necessary to provide good health care ( I'm basing this off the costs of healthcare in Singapore, Costa Rica, and Japan).
Moreover, because I am required by law to buy insurance from a "creditable" provider ( where creditable means needlessly expensive ), I am forced to pay these high costs. And as an entrepreneur, there's no way for me to start a competing insurance company that is more efficient, because I could never get classified as creditable. The law ended up being a giant giveaway to Massachusetts massive healthcare complex.

That said, I'm not necessarily opposed to just socializing the whole thing. I'd much rather have a completely free market of course. But as long as we have price floors, we might as well have a system of price caps too.

Matt C writes:

Libra, it is not reasonable to think that the U.S. health care costs can be brought to match your favored other countries in any short period of time.

Our high costs are built into the structure of our system. The only way to get big changes in costs is to tear up the system we have now and do something substantially different.

Unfortunately, nationalized healthcare looks like the only serious-reform proposal that has any chance politically.

I think nationalized healthcare is going to be worse that just "price caps", and I think there is a good chance that, after nationalization, health care costs will continue to rise as quality declines. We will have the amusement of watching the left defend the high costs they used to rail against though.

Libra writes:

Matt C-

You are probably right. After my experience with the Massachusetts healthcare reform, I became quite pessimistic that any bill would make healthcare better for the common person. Political democracies are oligarchies of the factions, not rule of the people. Any bill will be captured by interests in some way, and will end up making things worse. So until we find some way to get rid of politics altogether, I don't have much hope.

I agree with Prof. Kling and disagree with commenter "liberty" about the value of experimenting at the state level. I hope the empirical/experimental meme overtakes the reflexive libertarian meme in this space.

Dr. T writes:
I would like to see that tried, but only in some states.
I dislike Massachusetts, too, so I hope it moves to a fully state-provided, state-run health care system. The failure will be spectacular.

My main concern is for my sister-in-law's family in southern New Hampshire. The migration of Massholes (a commonly used pejorative in New Hampshire, which was the most libertarian state in the east until the recent influx of Massachusetts refugees) would increase many-fold.

md md writes:

Our costs are ridiculously high compared to other countries for a number of factors, but the one that will make this problem unsolveable is paying countless billions for people that don't care about their health and make horrible choices.

I am a physician, and I could show you case after case where our resources are squandered on the undeserving. Take the example of a young man involved in a crime, runs from cops, and crashes his car. Now his parylyzed, and after the two months of acute care and surgeries save his life (well over $1 million), he now needs total care (>100k +/yr), which will be taken care of so he can serve his 25-50 years in the penal system.

Or how about the illigeal Mexican mother who crosses the border to have here premature baby. It's got a number of defects, and requires 6 surgeries before it's first birthday ($3 million + for year one), all to get the child to a level where it will never survive without constant care and intervention (200k +/yr).

Or take the simple case of the fat, diabetic smoker. Because of choices they made, they're now on disability, with all the time in the world to go to the doctor with complaints, racking up tens of thousands in medical expenses every year.

I could go on and on, and cases like this happen in every hospital every day of the year. You can do all of the fiscal fancy footwork you want, but until we address the issue that if you want a social safety net, you have to be willing to hold up your end of the deal and participate in society. Until we're comfortable saying "No, sorry, you don't qualify to receive the accrued benefits of all of the human effort and financial resources devoted to providing medical care (because it costs lots of real money to train and employ personnel, and to invent and build and maintain medical facilities)", we'll never right the ship.

Me, Myself and I writes:

People who think that government can eliminate administrative overhead have been spending too much time with Mrs Palmer!

larry writes:
Until we're comfortable saying "No, sorry, you don't qualify to receive the accrued benefits of all of the human effort and financial resources devoted to providing medical care (because it costs lots of real money to train and employ personnel, and to invent and build and maintain medical facilities)", we'll never right the ship.

mdmd is right. But the electorate in this country is unlikely to ever say this. Most Americans increasingly think everyone in the country should have a right to even the most expensive healthcare. They will continue to believe this unless they are forced to pay the bill. They will be content with things if they can shift the bill to someone else (preferably business or "the rich").

Larry writes:

I don't see Mass as a failure at all. It has gotten alot of uninsured people on the rolls. The cost problem is real, but fixable. The key to lowering costs is eliminating many of the cost-boosting coverage mandates. Easy move: allow plans sold in any other state to be sold in Mass. There are lots of low-cost plans out there that are far better than being uninsured.

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