Wednesday, February 21, 2007

Deja Vu in Massachusetts--We've Been Down this Road Before--The Massachusetts Health Care Plan and Health Care Costs

The good news is that the health policy world is full of new and exciting health care reform proposals.

The bad news is that while these plans focus on the all important access problems (the uninsured) they almost ignore the underlying problem that makes so many people uninsured in the first place--health care costs.

With the federal government (The National Health Statistics Group at CMS) projecting that we will spend 20% of GDP on health care by 2016 (from 16% today) it is clear cost is something we can not ignore.

Cost is the big elephant in the room none of these reformers seems to be ready to hit head-on. That came home last month when the Massachusetts Health Plan regulator announced that the average bids for its new plan came in at $380 per member per month—much higher than the original $200 estimate.

Even if the regulator can get the cost of their mandated plan down to $250 per month, that would mean a family of three would be expected to pay $9,000 per year. In Massachusetts, a family of three making more than three times the poverty level ($48,000 per year) is expected to pay the full cost of coverage. It is going to be very hard to implement this plan by forcing a family like this to pay almost 20% of its pre-tax income for health insurance. The regulator can get the price down by cutting benefits—but how do you help this family by putting a big deductible on the program, or otherwise cutting what they get, for their $9,000 per year?

There is this story about a Governor from Massachusetts who runs for president touting his role in passing a state universal health reform bill, when reform was stymied at the federal level. He boasts that his reform legislation will eliminate almost all of the uninsured in his state because it mandates coverage for everyone and is therefore a model for other states and the Congress to follow.

No, I am not thinking of Mitt Romney, I’m thinking about Michael Dukakis, circa 1988.

Just after Dukakis lost the presidency to George H.W. Bush, Massachusetts repealed the universal health care bill because mandating expensive health insurance coverage payers couldn’t afford made the whole system go tilt.

Sound familiar?

If Massachusetts doesn’t solve their affordability problem they are going to dump a big bucket of cold water on all of this new health care reform enthusiasm.

They will also remind us of what the cause of America's health care crisis is--it is cost.

The uninsured are just the biggest symptom.
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