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Reason Foundation

Massachusetts Health Care Experiment: Right Questions, Wrong Answers

Shikha Dalmia
March 20, 2009, 1:33pm

There is both good news and bad news for advocates of market-based approaches to health care.

The good news is that there is a growing recognition across the political spectrum that Massachusetts’ experiment with TonySopranoCare – otherwise called universal health coverage -- is unworkable and unsustainable.

Three years ago the Bay State started forcing individuals and employers to purchase health coverage on the threat of penalties and fines. At the same time, it mandated insurance companies to sell Cadillac coverage (complete with in vitro fertilization and hair prostheses) to everyone regardless of health status. The first inflated demand for health care. The second diminished supply because not too many health care underwriters can do business under the prescribed conditions. The upshot? Massachusetts’ delivered a captive market to a cartelized insurance industry – something that some of us had predicted at the outset would lead to spiraling health care costs.

The first signs that this prediction was panning out appeared last year when the Boston Globe reported that the costs for the state-subsidized portion of the plan which helped poor people purchase coverage were going to double over three years.

And now earlier this week, first, the New York Times’ Kevin Sack reported that although the state has avoided a massive shortfall in the program this year by imposing new taxes and fees – which the then (REPUBLICAN) Governor Mitt Romney who authored the plan had said would never, ever be necessary – its long-term outlook was bleak. “Government and industry officials agree,” Sack wrote, “that the plan will not be sustainable over the next 5 to 10 yeas if they do not take significant steps to arrest the growth of health spending.”

The next day the Institute for America’s Future, a liberal think tank, issued another scathing indictment of the Massachusetts’ plan. Among its findings:

The bad news, however, is that the conclusion that the Institute and the liberal establishment is drawing is not – surprise, surprise! -- that we need less government involvement in the Bay State health market, but more. At a conference call on Tuesday, one of the Institute’s speakers made the jaw-dropping claim that Massachusetts’ problems all derived from its “purely private system.”

If the Bay State’s experience proved anything, they said,  it was that you can’t depend on a regulated private insurance industry to deliver affordable coverage. What is needed is for the government to itself jump into the insurance business with both feet and compete directly with private companies by offering its own Medicare-style health plan for Americans! This is what President Barack Obama and Senate Finance Committee Chair Max Baucus of Montana are supposedly now working on.

This will of course be a quick way of killing the private insurance industry and paving the way for nationalized health care.

Can anyone spell E-U-R-O-P-E?

Shikha Dalmia is Senior Analyst

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