It was only a matter of time before this story appeared, as it did in yesterday’s New York Times.
Having promised lavish subsidies for expansive health insurance, it seems state officials in Massachusetts have finally begun to admit that their health-care reform program, passed in 2006, is unaffordable for the state’s taxpayers.
This should surprise no one.
Whatever else might be said about the Massachusetts plan, it was clear from the get-go that it would overwhelm the state’s budget—it was just a matter of time. All the state really did was buy hundreds of thousands of residents into heavily regulated insurance plans by moving around some existing pots of money and raising taxes. They didn’t build a functioning marketplace with cost-conscious consumers, nor did they pursue—initially—the kinds of heavy-handed, government-imposed cost controls that many Democrats actually favor. In short, there was never any reason to expect health-care premiums in the state to escalate less rapidly after the “reform” than they did before the plan was adopted.
But, just as predictably, now that it is difficult to turn back and start over (hundreds of thousands of Massachusetts households are now enrolled in newly-subsidized insurance), the state wants to impose cost controls. There is much talk of new whiz-bang systems for paying doctors and hospitals, devised by government officials, which reward more efficient ways of delivering care. Don’t count on it. Inevitably, when the government tries to micromanage payments and prices, the result is indiscriminate, across-the-board cuts, protection of incumbents, and strong disincentives for innovation. Indeed, Massachusetts’ Democratic Governor Deval Patrick has already signaled where this is all likely to head: state-imposed caps on private health insurance premiums.
There are lessons here for the unfolding debate in Washington.
The Obama team is essentially pursuing the Massachusetts political strategy—cover everybody first with a massive new entitlement program and worry about imposing cost controls later. In fact, Sen. Ted Kennedy’s top lieutenant assigned to pulling together a health-care bill was a principal architect of the Massachusetts’s approach. And, on costs, the Obama administration keeps touting the same benign-sounding initiatives—like expanded use of health information technology—that Massachusetts officials used to cite, even though the Congressional Budget Office (CBO) has already said these kinds of steps won’t come close to solving the cost problem. It is obvious that the administration is hoping it can get a bill passed without endorsing the kinds of measures which would rightly be attacked as rationing care.
But make no mistake: If President Obama succeeds, he and the Congress will be back in a year or two or three—when the coverage train has already left the station—to say the financial future of the country depends on agreeing to government-imposed cost constraints, just as Massachusetts officials are doing today.
Even the Times story hints at what’s really at stake here. If we don’t rely on market principles to allocate health-care resources, the country will inevitably turn to the government to keep premiums in line with income. And, as some anonymous “experts” candidly admit in the Times piece, government-written “payment practices” are highly unlikely to do the trick. Instead, these “experts” say, “the state and federal governments may need to place actual limits on health spending, which could lead to rationing of care.”
[Cross-posted at the Corner]