My auntie’s husband — I guess that would make him my uncle — baited me on Facebook into debating healthcare reform. I’ve been a bit coy discussing here what I would like to see in a healthcare reform package, preferring to lay out enough evidence to make my case plausible. But having been called out, I wrote a bit; and it makes sense to post it here.

Since the talk continues about nationalized health care, what about Gov. Deval Patrick in Massachusetts, where just two years into operation, the state’s mandatory health insurance plan is already costing $400 million more than budgeted? State run health care over budget in two years and many want National coverage… hmmmmm

The Massachusetts healthcare reform law was enacted in 2006, and almost immediately the number of uninsured people in the Commonwealth dropped to under 3%.* (The national average is over 15%.) It’s true that this includes an individual mandate with tax peanlties for adults who don’t have insurance through their employers and who also choose not to buy one of the options subsidized by state and federal money. It also requires companies with more than 50 employees to provide coverage or face a penalty. (But I don’t think it says how much of the cost the employer must pay and how much can be passed onto the employee.) The penalties for individuals and companies are modest — up to $912/year for individuals and $295/employee for businesses — and they are intended to get everyone into one insurance pool or another in an effort to lower premiums for everyone.

My uncle is correct about a budget shortfall. Most people can buy into a variety of private health insurance plans, as in most other states. They aren’t part of that shortfall. The Commonwealth Care plan provides coverage for people who make too much money to qualify for Medicaid or SCHIP but not enough to afford most private health insurance plans. I don’t know how much Commonwealth Care has experienced shortfalls, although it certainly has seen some. It doesn’t help that the statehouse sees Commonwealth Care as a place to make up shortfalls in other parts of the state budget, to the tune of $130M last year.

I don’t know if this is the $400M referenced earlier; that sounds a lot like the Medicaid/SCHIP defecit of $378M out of a budget of $8.7B for 1.2M people. That’s roughly 5% over budget, or $300/person in those low-income programs. (Last year the state cut $265M for this program.) Commonwealth Care only has a budget of $880M for about 160K people. But the state administers and subsidizes this low-cost plan, too, so it’s possible it is the program after all.

How much are Commonwealth Care premiums? For someone my age, 35, two-person plans start at $580 per month and run as high as $1,022 for something that looks a lot like what we have now through my employer. Here’s a comparison:

Seven different Commonwealth Care insurance plans


If we’re going to compare a hypothetical federal program with individual mandates to a Massachusetts plan, we should probably only really consider Commonwealth Care. It certainly is true that mandates haven’t really helped lower costs yet; that’s part of the yet-to-be-implemented second part of the reform program. And you may remember that the national economy tanked last year, which pushed a lot of people out of employer-funded programs into Commonwealth Care.

So what do I take from this?

  1. Even if we don’t have mandates for coverage, the government is already paying a lot for healthcare. But the mandate itself isn’t driving up the costs.
  2. Any program that involves individual/employer mandates needs to include cost control. Getting more people into the pool is necessary, but it isn’t sufficient to lower costs. Having people flee the pool does raise costs even more, though.
  3. Be wary of arguments that say insurance competition is all it takes to lower costs.
  4. We should focus a significant amount of our political capital on cost reduction mechanisms, but that’s pretty difficult since that’s where the hard choices have to be made: price caps for services and/or drugs; favoring the quality of outcomes over the number of services provided; focusing extra money on prevention and wellness instead of predominantly treatment; encouraging the entry of more physicians assistants and primary care physicians into the system; getting people out of high-cost ERs for primary care; maybe even penalizing people for poor health choices; etc.

But all of those topics are for another time. I need to find out how much they will cost, how much they will save, and how much they will improve our nation’s health.


* — I’m not going to source everything independently. I just don’t have the inclination tonight, since I’m watching the opening ceremonies of the Olympics. But here are the web sites I used to get my (hopefully correct) facts and figures: