Obamacare

Defending the Massachusetts Health Care Reforms (Or Not)

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Did you ever notice how much Mitt Romney looks like Mr. Fantastic?

The New Republic's Jon Cohn, one of the smartest health reform advocates working today and a journalist whom I greatly admire, has taken up the challenge of defending the Massachusetts health care reforms, which currently serve as a model for national reform proposals. One of the things I admire about Cohn is that, in part because he views the business of legislating as an ongoing process, he frequently admits the problems with what he supports.

But such admissions can be telling. Here, for example, is a list of points I compiled from his piece on MassCare:

  • Both liberals and conservatives agree that "Massachusetts hasn't figured out a way to restrain the overall growth in health care costs. If national health care reform fares no better, the country could be in serious fiscal trouble."
  • The system is not the single payer plan some liberals might prefer, but nevertheless constitutes "a large expansion of government, even by Massachusetts standards."
  • Under the current system, "by law, anybody living in Massachusetts must obtain health insurance or face a penalty, which this year will be as much as $1,068."
  • As it currently stands, "Massachusetts has the nation's highest premiums, at more than $13,000 a year for the average family policy."
  • Insurance coverage in the state is now the highest in the nation, but "coverage by itself is meaningless if it doesn't translate into more access to medical care or less financial hardship because of medical bills. And there is evidence, mostly anecdotal, that some people are really struggling under the new scheme, either because it's tough to pay the insurance premiums or because, even with coverage, their medical bills are a burden."
  • "Massachusetts reforms haven't brought down prices on the whole. In fact, premiums for people who get insurance through employers are rising a tad faster than they are in the country at large. If costs continue to skyrocket, the state's health care reforms will become unsustainable, requiring either large cuts or tax increases."
  • When Massachusetts, which the article calls "the ObamaCare laboratory," enacted its reforms, "the goal was simply to expand coverage and, perhaps, deal with costs later."

In making the list above, I've obviously left out a number of points that Cohn makes in the system's favor (administrators are making a big push for new cost control measures; there's some evidence that fewer people are avoiding care due to lack of insurance). But while I've cut out what he believes is the good news about MassCare, I don't think I've quoted Cohn's piece out of context, or been misleading in the way I've presented any of his statements. Indeed, I'd encourage people to read the piece in its entirety for themselves. But if this is a defense of the Massachusetts reforms, imagine what an attack would look like.

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  1. “a large expansion of government, even by Massachusetts standards.”

    That’s enough to make you crap yer pants right there.

  2. Massachusetts hasn’t figured out a way to restrain the overall growth in health care costs.

    The only way true way to restrain health care costs is to take steps to lower the demand for health care, which is completely out of control in America today. And the bigger the population grows and the longer people live, the higher the demand will continue to grow.

    Since people aren’t going to voluntarily do this on their own, it will have to be the government that does it, which ultimately means either some form of rationing, getting people accustomed to paying their own way, or some combination of both. There is simply no other way.

    1. Re: Mike M.

      The only []true way to restrain health care costs is to take steps to lower the demand for health care, which is completely out of control in America today.

      The TRUE way to lower demand is THROUGH the market, and that would be allowing people to KNOW the true cost of what they’re buying. Unfortunately, the overregulated system that exists today hides the cost of health care from the buyer, increasing demand, outstripping supply.

    2. Massachusetts hasn’t figured out a way to restrain the overall growth in health care costs.

      The way to restrain the overall growth of health care costs is to make what you pay for health care depend to some extent on how much health care you consume. If you pay a flat rate for health care and then get as much as you want, you’ll try to consume as much as you can. If you have to pay something resembling the actual cost of your health care, you’ll shop around, look for the best deals, and consider critically what you need and what you don’t need. This is not a difficult concept — virtually everybody does this with every aspect of their life that involves spending money.

      Imagine if you payed a fixed fee every year to a “comprehensive food insurance” company. Then you were reimbursed for all food you bought for the whole year. How much would you eat? Would you eat more hamburgers or prime rib? Would you shop around to get a good deal for the food insurance company? How much would the food insurance company have to charge to stay in business? Would you expect your yearly fee to be more or less than you pay for food now?

      The only way true way to restrain health care costs is to take steps to lower the demand for health care, which is completely out of control in America today.

      The Massachusetts health plan and the house bill require pay once, consume all you want insurance and disallow insurance that connects consumers with the actual cost of what they consume. Is it really any surprise that costs spiral out of control?

      And the bigger the population grows and the longer people live, the higher the demand will continue to grow.

      It’s not a fixed size pie. Population doubles. GNP doubles. Number of doctors doubles. Spending on health care doubles. There is nothing wrong with this.

      Since people aren’t going to voluntarily do this on their own, it will have to be the government that does it, which ultimately means either some form of rationing,

      Sadly, rationing is where we are headed.

      getting people accustomed to paying their own way,

      There you go.

      or some combination of both. There is simply no other way.

      The best combination is high deductible catastrophic care insurance. People can mostly pay their own way, but insulate themselves from disaster. Sadly Massachusetts and the house bill don’t allow us this option.

      1. Excellent analysis, Billy. I agree with everything you said here, and can’t think of anything to add.

      2. If you pay a flat rate for health care and then get as much as you want, you’ll try to consume as much as you can.

        I’m not sure this is universally true, or true enough to act as a foundation for your otherwise solid argument.

        I’m lucky to be healthy and to know a lot of people who are very healthy. We talk a lot about our health-consumption habits, and one theme rings out — there is no need to “get” more health care just because you can. What’s the point? Your argument is that temptation (availability) necessarily leads to use. I’m saying only that there are perhaps many more level-headed non-abusers than you might think.

        The flip side of this is throwing your argument at broadband use, where the model is one with which I’d mostly agree. Most of us pay a fixed rate for broadband and consequently stream movies and exchange ginormous documents with no care in the world for self-restraint. But consuming unlimited internet goods because we can — is that like going to the doctor more often because we can? That doesn’t sound any more intuitive than countering that a lot of people with serious broadband power just aren’t heavy users (or abusers) of the bandwidth.

        1. there is no need to “get” more health care just because you can.

          Do you know any women?

          Anecdotally, I know a lot of my female friends who go to the dr for every owie they have “because they can”.

          There was one gal I know who incessantly used that alcohol-based hand sanitizer. When her hands (inevitably) started drying out, she ran to the dr thinking she had a degenerative skin condition. If she paid out of pocket everytime she went to the dr. something tells me she’d “discover” her ailments weren’t as bad as she previously thought.

          1. Sadly, we’ll come to no revelation through anecdotes (sorry, I started it). I’m confused…we don’t yet have national health care, but you’re citing “get more because you can” under the current insurance system(s). I’d like to understand how that would change for your gal friends if they are drafted into a new system. Do girls all have the same kind of abuse-enabling health plans? Are “owie” girls a significant enough benchmark to suggest that the rest of us will begin to abuse health care, because we can? That is the point I was trying to make in my response to Billy’s post.

            1. It’s about third-party payment at the point-of-service. Prices send signals to suppliers and consumers. It helps both make rational choices. When someone else is paying (or so it seems) people spend more than then they would if they were paying themselves. Make sense?

              1. Yes. Isn’t the idea of 3rd-party payment the legacy of the nanny state? I ask because it seems that if one is accustomed to taking care of oneself and paying for all one’s own needs, then the 3rd-party goggles that distort perceptions of price don’t exist. If some abstract taxbase was paying a significant portion of my mobile bill, I guess, Joe (and Billy earlier), you’re arguing that I’d be inclined to talk more on the phone because the price points would be less clear, less direct, and less meaningful. In the real world, there’s nothing more meaningful than getting a mobile bill that shows precisely how much overage I now have to pay for. That’s clear.

                I just struggle with the idea of anyone using medical services more than they have to. The argument from owie-ness boggles me.

                1. Isn’t the idea of 3rd-party payment the legacy of the nanny state?

                  It’s actually the legacy of World War II wage and price controls. Shortage of labor. Wage controls. Figure out some other way to compensate employees to get them into your workplace. Health insurance as a benefit!

                  1. Did FDR’s government directly create this condition? I’m aware of a lot of New Deal prestidigitation, but my knowledge of price/wage controls is slight. Just reading your response as is, it leads me to believe that private industry adopted health insurance as a benefit to attract employees. What is wrong with that?

                    1. Private industry adopted health insurance as a benefit to get around government interference in wages. That interference continues today in that employer provided health insurance is untaxed while wages are taxed. In other words, individual health insurance is taxed.

                      This is a huge distortion to the health care market. See my comment below for an example of what a modest (!) 50% marginal tax rate means for the incentives both to you and your employer.

                    2. I’ve been self employed for a decade, so I’m out of touch with the taxless status bestowed upon my company-employed fellows, other than to say that I am aware that I lost special tax status once I became a self-sustaining entrepreneur. Thanks for your explanation, I better understand how it all ties (or rather knots) together.

                2. The point isn’t that third party payment makes the price less clear to the user; you get a statement of benefits every time you use a service, even if you don’t owe anything in my plan at least. The point is that you have no reason to look at the amounts because you’ve already paid for the all-you-can eat buffet.

                  Mobile phones are a very different story. Even if it isn’t clear to you before you go way over your plan, a couple of large bills quickly help you to understand the cost of the heavy usage.

            2. Under the current health care paradigm, most people are insured through their employers.

              Three main issues here:

              1. This puts them even one step further from the point of sale, making it that much harder to tie supply to demand.

              2. Most importantly, the money that pays for health insurance provided as an employee benefit is not taxed as wages, so more elaborate insurance will be bought than is actually desired by employees’ budgets.

              3. Unions love issue 2 and consider it a point of pride to retain it against all argument and evidence that these pre-tax comprehensive plans are the main factor driving health care costs.

              1. Everything written here is true: if you don’t know the price, you can’t know the value. Simply ask yourself: is there ANY other good (food, car, clothes, rent, etc., etc.) that you would buy/use VOLUNTARILY the way we are asked to buy/use medical care? And the various proposals for reform all share the following attribute: they would, sooner or later, replace the options of choice for those with some resources with no options for all. Not an attractive outlook!
                And have I mentioned the “tragedy of the commons”: when something is owned by all, it is owned by none and there is NO incentive to use it (or care for it) wisely!

        2. I am one of the underinsured (major medical only) who has a cronic degenerative problem. If you have a cronic condition, you go from one doctor to another searching for a cure. Trust me, I would make max use of “free” health care as much as possible. Right now I pay out of pocket a thousand a month, plus my insurance premium of $400. Obamacare would save me lots of money, but I don’t support it because I know I will be paying for everyone like me in my taxes. I am limited now by my ability to pay, but if its a buffet, I’ll eat as much as I can. If you are healthy, of course you won’t go to the doctor just because its free. But there are millions of Americans like me that you healthy people will support. I oppose Obamacare because its going to be so darn expensive for everyone.

  3. Mike M.,

    I dunno. If we had a real market in medical services, then supply would likely meet demand, and we wouldn’t have to worry about rationing.

    What can we do to increase the supply of healthcare providers and insurers? That’s the real question that no one in Congress seems interested in asking.

  4. Pro Lib,

    That question has an easy answer. Get rid of those pesky “licensing” requirements.

    1. Get rid of those pesky “licensing” requirements.

      Hear, hear!

      1. Wait … what?

  5. Or at least loosen the regulations and remove some barriers to entry. Ditto with insurance.

  6. Both liberals and conservatives agree that “Massachusetts hasn’t figured out a way to restrain the overall growth in health care costs. If national health care reform fares no better, the country could be in serious fiscal trouble.”

    Seriously?

    *makes surprised face*

  7. What can we do to increase the supply of healthcare providers and insurers? That’s the real question that no one in Congress seems interested in asking.

    I’ve got an idea- price controls!

  8. P Brooks,

    Well, only if you agree that everyone must be forced to take the public option first.

  9. If we press-gang “promising young minds” into the Ministry of Healthy Lifestyles, and then pay them what they could make as high school teachers [a FAIR WAGE] to care for ailing citizens, that should fix the problem.

    1. I wish I got paid what high school teachers make.

  10. One of the things I admire about Cohn is that, in part because he views the business of legislating as an ongoing process, he frequently admits the problems with what he supports.

    I’m not getting a real warm feeling about your journalists view of legislating healthcare.

    “Gee, I know that healthcare reform will fuck up healthcare, but I support it anyway, because someone has to do something.”

  11. If everyone gets healthcare via any government plan, healthcare costs will rise. That is all…

  12. But if this is a defense of the Massachusetts reforms, imagine what an attack would look like.

    Write an article so I don’t have to imagine. C’mon now, pile on while the piling is good.

    1. We don’t have to imagine, we can see what’s happened in Massachusetts and Washington. Costs go out of control, the state coffers become overwhelmed, and they have to start cutting coverage.

      1. The “imagine” reference was to what an article-length Reason-pitbull-style attack would look like. Yes, obviously there is plenty of material from the Massachusetts experiment to work with, as noted above.

      2. Washington might start by removing hypnosis, massage, and aromatherapy as part of their “Basic Health Care” system.

        I’m just saying…

  13. Under the current system, “by law, anybody living in Massachusetts must obtain health insurance or face a penalty, which this year will be as much as $1,068.”

    Next year, you will be knee-capped.

    1. Are they building concentration camps for offenders? Tune into Glenn Beck to find out.

      1. Tell you one thing: we don’t know for sure they’re not.

  14. To infinity, and beyond!

    1. Mitt – I predict your Republican opposition is going to (justifiably) rip you to pieces in 2012 for coming up with this bankrupt train wreck. You can kiss the White House bye-bye.

  15. We were arguing about the Mass Healthcare disaster over at Megan McCardle’s blog a few months ago and I took the liberty of running some numbers. I took the most recent average cost of yearly premiums before the program started in Massachusetts and multiplied it by the number of people who were uninsured in the state. I don’t have the numbers in front of me, but the answer was about what the cost was for the MassHealth program to cover the same uninsured.

    Point being, Massachusetts could’ve just bought the uninsured regular policies from private insurers, and the end result would have been the same.

    By now, the numbers suggest it would have been a lot cheaper to just buy those uninsured private policies.

    Taxachusetts never fails to amaze me. I am so glad I grew up there but even more glad I don’t live there anymore.

    1. By now, the numbers suggest it would have been a lot cheaper to just buy those uninsured private policies.

      Not that I’m arguing the point, but keep in mind that had they bought all those people insurance, they would have started putting demands on the healthcare system causing a supply shortage which would have ultimately resulted in increased cost of insuring those people.

      Either way, gov’t involvement in healthcare = increased costs.

      Vicious cycle keep on toinin’…(taxpayer keep on boinin’).

      1. NAL,

        I agree. It was a hypothetical argument to begin with, in use to show the complete stupidity behind the thinking that a Government-run healthcare system could both insure the uninsured and control costs.

        But even with your valid point about the strains on the healthcare system, at least the market would have a chance to try and deflate some of the rising costs.

        A government-run system will not. As we are seeing with Massachusetts, the costs are growing exponentially beyond the amount of tax revenue coming in, and at the same time private insurers are getting squeezed out whilst hospitals are getting short-changed and understaffed.

        I have this dream where Congress wakes up and says- “Oh shit! Do you see what’s happening in Massachusetts? We can’t do that! It will bankrupt the entire nation faster than social Security already is!”

        Tis better to have dreamed than not I suppose.

    2. Point being, Massachusetts could’ve just bought the uninsured regular policies from private insurers, and the end result would have been the same.

      Often times government programs run into this reality at some point. See: Bailouts. The gov’t could simply write checks to all the affected parties it’s claiming to “help” and spend the same amount or even less.

  16. The biggest defense for MassCare actually works against a federal plan.

    If states are capable of handling this issue on their own, then a federal plan is unnecessary.

    1. Excellent point. Except of course as MassCare fails, that will be proof that the deeper pockets of the Federal Government are needed. Costs are out of control, and interstate commerce keeps getting its peanut butter in Mass’ chocolate.

      Since healthcare costs know no borders, only the feds can put into place a national plan.

  17. With insurance premiums at $13,000 per year, I find it difficult to believe that it’s actually worth the financial burden. Just by anecdote, A friend of mine who got breast cancer ended up with some $80,000 in medical bills. But that’s only about 6 years worth of premiums for a family.

    Ergo, if your disease expectancy for the next six years for your family (husband wife, 2.5 kids), is no worse than one case of breast cancer, insurance simply isn’t worth it.

    And yes, by expectancy I’m talking statistics here. Something like the mean cost of likely medical expenses, averaged over the whole population.

    It seems rather unlikely to me that even for a family of four, annual medical expenses are likely to average anywhere near $13,000.

    1. But that wonderful comprehensive coverage may be worth, say, $6,500 to you.

      If you are married, filing jointly, and earning a taxable $70,000, then your marginal tax rate is 25% (for US) + 8% (for California) + 12% (for Social Security) + 3% (for Medicare), or 48%.

      So your employer has the choice of giving you that awesome $13,000 health insurance benefit or giving you an after-tax $6,500. Which makes more sense?

  18. The problem lies in that none of the government plans actually increase the healthcare supply.

    If we had a food shortage, it’s like suggesting the solution is to increase the food rations instead of encouraging new farms to open up.

    1. But if the supply of healthcare was increased, the various medical personel, clinics and hospitals wouldn’t be able to charge as much money as they do now. They would have to work harder and see more patients to make the same kind of money as they presently make. Boo Hoo. 🙁

      1. I was thinking more of encouraging more people to become doctors and nurses. Also lowering licensing requirements for the basic stuff. Do you really need 11 years of schooling to diagnose an ingrown toenail?

  19. The push for healthcare reform is motivated by our current financial disaster from all government promises. Congress has promised Medicare, Medicaid, Prescription Drug, and Social Security services over the next 75 years that are underfunded by $88.6 trillion ($88,600 billion).

    The public discussion is about the burden of $1 trillion ($1,000 billion) in extra taxes over 10 years. The true shortfall is 12 times as much, more than $1 trillion per year.

    The Democratic “solution” to this political and economic problem is to put everyone into one medical care pot. We then all get equal amounts of services at whatever high tax rate the government can levy. The young must be coerced into this system, to extract as much money as possible to serve the old.

    Our politicians want to obscure their part in this disaster. Or, at least delay the day of reckoning until they can leave office with more money. Even if this makes the eventual collapse much worse.

    Obamacare Bails Out Medicare

    Joke: We lose money on every patient, but we plan to make it up on volume.
    I think this is funny, but ObamaCare thinks it is a plan.

  20. “Ergo, if your disease expectancy for the next six years for your family (husband wife, 2.5 kids), is no worse than one case of breast cancer, insurance simply isn’t worth it.”

    You don’t get it: The husband, wife, and kids are irrelevant. Their premium is needed to subsidize, e.g., breast cancer lady.

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