Massachusetts Takes Another Run at Cost Control

Massachusetts Takes Another Run at Cost Control
March 29, 2013

Kenneth Artz

Kenneth Artz (iamkenartz@hotmail.com) is a freelance reporter for The Heartland Institute based in... (read full bio)

During the 2012 legislative session, Massachusetts passed its third law to address health care spending since the state’s landmark health insurance coverage reforms in 2006. The inability to curb the rising costs of insurance premiums and health care in the state whose system most resembles President Obama’s law could serve as a cautionary tale for the national level.

The 2012 law lacks strong mechanisms to enforce the new spending goals, but it does create a framework for further increases in regulation on providers if spending is not curbed. The health care cost control bill sets annual state spending targets, encourages the formation of accountable care organizations (ACOs), and establishes an independent commission to oversee health care system performance.

Josh Archambault, director of health care policy at the Pioneer Institute in Boston, said the new law grants the state greater control over the oversight and delivery of health care, but that this may be a step in the wrong direction.

“The state will now collect reams of data from everyone in the health care industry. I wouldn’t say it’s a direct route to a single-payer system, but if this does not work, then there are some in the state legislature that will move to introduce that,” said Archambault.

Central Planning in Boston

Archambault notes the central planning of health care cost controls may not make a difference.

“You are expecting eleven people on the commission that oversees health care in the state, or the others that sit on various state health care boards, to get their information from various sources fast enough to make correct decisions that affect the health care of millions,” Archambault said. “Our experience is that it’s almost impossible for government to do this in a timely manner without causing distortions in the health care market.

“Further, you would think that a bill that impacts 20 percent of state gross domestic product would be allowed to be debated and revised as needed, but that was not the case here—they passed it 14 hours after it was introduced,” he added.

Finally, tying health care spending to the state’s economic growth is dubious, said Archambault.

“Linking these two things together seems kind of arbitrary. The cap in health care spending only applies to small businesses and individuals, but if you‘re self-insured, the law does not affect you. Basically, the state is asking [small businesses and individuals] to zero out their health care spending for the next 15 years to hit the state’s cost target. This is unrealistic. Another concern is that if hospitals are not hitting their economic goals, then they will lay people off, and this could make it harder for them to meet their economic goals, causing a vicious circle and a downward spiral,” Archambault said.

Uninsurance Rate Rose

Although the original focus of then-Gov. Mitt Romney’s health care law was on universal insurance, the latest data released by the Massachusetts Center for Health Information and Analysis shows that in this arena, too, the reform moved in the wrong direction. The data show an increase in the number of uninsured to 3.1 percent in 2011 from 1.9 percent in 2010. The report also shows a 7 percent annual increase in monthly premiums, from $977 in 2005 to $1,384 in 2011 for an average family plan.

Market consolidation has been another concern, according to Archambault. If this latest plan fails, there is no “Plan B.”

“Many of these things have already been tried before, and they have a mixed record. If this fails, I expect the political conversation will turn to rate costing [price controls]. ACOs are similar to HMOs during the ’90s. The only thing that’s new in this law is the cap on growth. Basically, we’re repeating the same mistakes as before but expecting different results. If this law fails, it could have a negative impact on the health insurance market in Massachusetts,” said Archambault.

Adding More Bureaucracy

David G. Tuerck, executive director of The Beacon Hill Institute at Suffolk University in Boston, says the new health care law is all about the government determining the levels of doctor pay, to squeeze providers.

“I believe it is an exercise in rationing and will lead to a shrinkage in the quality of care in our state. It’s best explained by the failure of the system to deliver on its promise to reduce costs. The legislators are not going to figure out how to deliver with this new law. By pushing more people into the health care system with the same amount of limited resources, the only way to pay for it is through rationing,” said Tuerck.

Devon Herrick says the new law will probably just worsen the state’s health care landscape.

“This is further evidence that Massachusetts hopes to control their runaway health care costs—largely caused by bureaucratic meddling—with even more bureaucratic meddling,” he said.  

Costs Keep Going Up

There have been no estimates yet on the cost of compliance with the new law. Implementation is to take place over multiple years, so the cost of compliance will be difficult to determine, especially after the implementation of Obama’s law begins, Archambault says.

“There’s a lot of overlay, so it will be hard to determine which law is causing health care premiums to go up,” he said.

Kenneth Artz

Kenneth Artz (iamkenartz@hotmail.com) is a freelance reporter for The Heartland Institute based in... (read full bio)