price controls


Lessons of the Massachusetts Experiment

In a new column for Kaiser Health News, I ask what the Massachusetts health reforms of 2007 might warn us about what to expect from the new national reform:

The president himself has said that the national plan contains many of the features of the Massachusetts program, now operating in its third year. He is right. There are striking similarities between the reform plans, which is why what’s happening in Massachusetts today is very instructive....

After three years, no real progress has been made on rising costs. The program remains well over budget, with no end in sight. Further, state residents who now must buy state-sanctioned coverage are bristling at their rising premiums and the inability to find coverage which covers less and thus costs less.

State politicians are responding to the cost crisis the only way they know how: by promising to impose arbitrary caps on premiums and price controls for medical services. The governor and state regulators have disallowed 90 percent of the premium increases insurers — all of whom are not-for-profit — submitted for their enrollees for the upcoming plan year. The state says premium increases above eight percent are too high and unacceptable, though they themselves don’t have a plan to make health care more efficient in Massachusetts. They just want lower premiums. The insurers have responded by refusing to sell any coverage at the rates the state wants to impose.

The way out of this stand-off is predictable: more price controls. To hold premiums down, Massachusetts officials are already laying the groundwork to impose government-set payment rate schedules for services beyond the realm of public insurance.

The risk of cost overruns is even higher at the federal level than in Massachusetts....

You can read the whole thing here.

posted by James C. Capretta | 10:54 am
Tags: Massachusetts, costs, price controls
File As: Health Care