Massachusetts governor Mitt Romney has signed a bill there into law which makes Massachusetts the first state in the Union to mandate universal health insurance:
BOSTON – By next summer, Massachusetts may cross a threshold that has eluded presidents, governors and other political leaders for generations by becoming the first state to require universal health care coverage.
Massachusetts took a major step toward that accomplishment Wednesday when Gov. Mitt Romney signed legislation designed to guarantee coverage for virtually all residents by July 2007, including an estimated 550,000 people who are now uninsured.
The law has set a standard for other states and thrust Massachusetts to the forefront of the national debate about how to dramatically expand health care coverage without creating a single government-controlled system.
Even as he signed the law amid fanfare at historic Faneuil Hall, Romney faced criticism for vetoing a key portion of the legislation: a $295 per employee annual fee on businesses that do not provide their employees with coverage.
The law also provides subsidies and sliding-scale premiums to get poor and low-income residents into health plans and require those deemed able to afford insurance to purchase a policy.
“We have found a way, collectively, to get all of our citizens insurance without some new government-mandated takeover or a huge new tax program,” Romney said.
I certainly wish the citizens of Massachusetts well in their state-wide experiment. Whether the measures Massachusetts has put in place will solve the problems with the the healthcare system in Massachusetts depends entirely on what the problems are.
The problem that the Massachusetts law solves is what’s called “the free rider problemâ€â€”the fact that the young and healthy (even those who can afford it) frequently don’t see the need to pay for health insurance. Until, of course, they’re wheeled into the ER on a gurney in which case the hospital is required to take them, regardless of insurance or ability to pay.
The assumption would seem to be that if you can increase the size of the pool of insureds enough the insurance effect of health insurance will reduce costs. I see no reason whatever to believe this. And without cost control the willingness to pay on the part of the citizens of Massachusetts will soon be sorely tried.
There are also provisions to subsidize the insurance of those unable to pay but from what I’ve seen the amounts set aside for the purpose aren’t adequate. And, as was seen with TennCare, taxpayers have a limited willingness to subsidize other people’s healthcare even when the effect of the subsidy is to effect savings.
I agree with this point of James Joyner’s:
The problem is that very few of Romney’s ideas actually impact the real problem: the exploding cost of health care.
However, I disagree with this:
Indeed, the plan will have the overall effect of increasing demand, since some people who would only go to the doctor in an emergency will now go more routinely.
I know that’s a closely-held belief among some free-marketeers but I’ve seen no real evidence to support the idea that the rising cost of health care is due to excess demand. My own view is that artificially-constrained supply is a significantly more serious problem.
I think we really need to have a change in attitude about health insurance. Do people really want insurance or a maintenance plan? In an insurance plan insureds pay a fixed amount over the term of the plan and are guaranteed a fixed payout if the terms of the plan occur. The risk of the insurance company having to pay out are spread across the pool of insureds.
That’s not how health insurance works and therein lies the problem. The risk of payout over the entire term of the plan (the life of the insured) approaches 100%. There are few limits to the amount of the payout. You can’t run an insurance plan that way.
I think what people actually want is a maintenace plan: pay a fixed amount and get whatever goes wrong fixed. But that absolutely can’t work unless the costs of maintenance can be controlled somehow and that’s impossible in our current non-market guild-based health care delivery system. That was the hope when HMO’s became widespread more than 20 years ago but that hope was frustrated for lots of reasons including that’s just not what physicians were trained to do and physicians, like everybody else, are strongly inclined to do what they’ve been trained to do.
If by “artificially-constrained supply” you are referring only to doctors I don’t think that can account for the bulk of the increase in medical costs, since I believe only about 20% of medical costs are related to doctor’s fees. The cost of hospitals, medicines, nurses, technicians, high-tech medical equipment, etc., would not be decreased by increasing the number and competition among doctors. Actually my understanding is that areas which have the highest numbers of doctors, and in particular specialists, per capita (such as Massachusetts) have the highest medical costs. Specialists tend to order more tests, and in particular, more expensive and newer “high-tech” tests, and newer and, thus more expensive, drugs than general practitioners in my experience. This is why HMOs use the strategy of “gatekeeper” primary care doctors to create hurdles for seeing specialists.
Every aspect of the supply of health care is constrained by law, Kay, including the number of doctors, the number and location of hospitals, what kinds of services are performed and by whom, the location of various different kinds of diagnostic and laboratory equipment, entry into the insurance business and how that business is conducted, and government-created monopolies for pharmaceuticals.
The number of physicians graduated per year is roughly the same as it was 30 years ago. If the number of physicians graduated per year had only kept up with the natural increase in population we’d have more than twice as many graduated per year as we do now.
I’ve posted pretty extensively on this subject.
With those kinds of constraints on the supply of health care services we can’t draw the conclusion that a significantly increased supply will result in increased costs. We can only draw the conclusion that a slight increase in the number of doctors in the tortured market conditions of the present health care system tends to do so. And we certainly can’t draw the conclusion that health care costs are increasing because there’s too much consumption.
I don’t think the differences in, for example, specialists per capita, or MRI machines per capita, in “underserved” versus “overserved” areas are necessarily slight. I think the differences we are talking about are more like 3X to 5X for some of these things. And I don’t know of any instances where increasing supply of these “higher end” things even to this degree is associated with lower overall costs. I’d be interested to hear of examples of this if you know of any.
Actually I do know that the increase availability of Lasik surgery and some cosmetic procedures are associated with lower costs for these procedures. But these of course are “non-medically necessary” things not covered by third-party payers and they represent a tiny fraction of overall health costs.
Within a system of third-parties doing most of the paying I don’t know of examples of increasing supply decreasing costs, but again if you know of some examples I’d be interested.
Of course the myriad regulations surrounding all aspects of medical care are very costly. Almost all are at least ostensibly for “patient safety” and many are not really necessary. I do agree with you on this and also assume that you do not take the extreme position that ALL of these regulations should be eliminated. After all, if we are unexpectedly severely injured in a strange city it’s nice to know the hospital we’re taken to and the lab from where our blood transfusion comes are subject to regulation.
As to what would constitute too much consumption, I don’t know. It’s not just a matter of how many people there are and how old they are getting. A newer medical procedure or drug may be 10X as expensive as the previous standard while offering only a slight improvement in “quality,” however that is measured. So the sky seems to be the limit.