The Massachusetts prototype for ObamaCare is running into a little trouble. Costs are spiraling out of control, and so Deval Patrick is proposing to rein them in – with mandated price controls. This is what we can expect when Obama's plan kicks in.
Last month, Democratic Governor Deval Patrick landed a neutron bomb, proposing hard price controls across almost all Massachusetts health care. State regulators already have the power to cap insurance premiums, which Mr. Patrick is activating. He also filed a bill that would give state regulators the power to review the rates of hospitals, physician groups and some specialty providers. Those that are deemed too high "shall be presumptively disapproved."
Mr. Patrick ad-libbed that he had "a whole bunch of pals here who are in the health-care field, and I saw the color drain out of their faces." Little wonder. The administered prices of Medicare and Medicaid already shift costs to private patients while below-cost reimbursement creates balance-sheet havoc among providers. Now the governor wants to import these distortions to save the state's heavily subsidized insurance program as costs explode.
t doesn't even count as an irony that former Governor Mitt Romney (like President Obama) sold this plan as a way to control spending. As with all new entitlements, the rolling cost crisis began almost immediately. For fiscal 2010 taxpayer costs are $47 million over budget, in part due to the recession, and while the $913 million Mr. Patrick requested for 2011 is a 5% increase over 2010, spending has grown on average 6.7% per year.
Meanwhile, average Massachusetts insurance premiums are now the highest in the nation. Since 2006, they've climbed at an annual rate of 30% in the individual market. Small business costs have increased by 5.8%. Per capita health spending in Massachusetts is now 27% higher than the national average, and 15% higher even after adjusting for local wages and academic research grants. The growth rate is faster too.
Those data come from granular studies about the Massachusetts health markets published recently by the state.
Why do we have to keep learning these lessons over and over again?
The goal is to engineer a cheaper system through brute force so government can pay for health care for all. What inevitably suffers is the quality of care for individual patients. Thirty states imposed hospital rate setting in the 1970s and 1980s. Except for Maryland, every one of them eventually eliminated it—including Massachusetts, in 1991—partly because it didn't control costs.
And partly because it killed people. A 1988 study in the Journal of New England Medicine found that the states with the most stringent rate-setting had mortality rates 6% to 10% higher than those that didn't.
Silly me. I lapsed for a moment. I shouldn't speak as if this government health care industry takeover has anything to do with health care. This is about political reform. This has always been about building an enduring progressive majority. ObamaCare will drive health care costs through stratosphere.
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