Reincarnating Failed Policies

The March 23, 2008 Colorado Daily has published the following OpEd by Linda Gorman of the Independence Institute:

Colorado Health Care Reform: Reincarnating Failed Policies

The Massachusetts plan requires everyone to buy health insurance. The reform plans from Colorado's Blue Ribbon Commission on Health Care Reform and Club 20 copy key elements of it. If everyone is insured, advocates say, safety-net providers will need far less support. Needless to say, Colorado hospitals and health plans eager to get paid have no qualms about lobbying lawmakers to make their fellow citizens pay for coverage designed by a government committee and legislators are happy to believe that less safety-net care translates into reduced state payments.

Massachusetts reformers were so sure this would be the case they eliminated the state's uncompensated care plan in 2007, replacing it with the Health Safety Net Trust Fund. According to Cambridge Health Alliance, the major result of the change was that reimbursement for providing care to the uninsured dropped from full cost coverage to only 60 to 70 percent of cost.

Stiffing providers after passing new programs with glowing promises of free health care, tax money for non-profit advocacy groups, and higher payments to providers is a health care policy tactic traditionally deployed by reformers seeking to reincarnate utopian plans from the wreckage of real world trials.

The Massachusetts plan reincarnates significant elements of TennCare. A 1994 coverage-for-all experiment featuring guaranteed issue, premium subsidies, and a choice of state selected managed care plans, TennCare lasted less than a decade.

By 2000, TennCare benefits were more generous than those of the most expensive private plans. Financial controls were so poor that thousands of enrollees were either dead or living out of state, and TennCare was a major source of prescription drugs for sale in local black markets.

To make ends meet, the state cut provider reimbursement. A 1999 audit estimated that general hospital revenues from Medicaid in 1993 were 100 percent of cost a year before TennCare started. After that, general hospital payments decreased steadily, hitting a low of 60 percent of cost in 1996 and reached 61 percent by 1997. Safety-net hospitals went from being reimbursed at 106 percent of costs in 1993, to 57 percent of costs in 1995, and 71 percent of costs in 1997. State authorized managed care providers failed, leaving physicians and hospitals with millions of dollars in unpaid bills. People in TennCare had insurance and a difficult time finding adequate care.

Judging from the Tennessee experience, the Massachusetts Commonwealth Connector Authority, the agency that administers the Massachusetts plan, is proposing reimbursement cuts right on schedule. Already over budget and looking to cut expenditures, its head proposed physician reimbursement cuts of 3 to 5 percent. In the Massachusetts legislature, State Senate President Therese Murray is proposing draconian controls, including hearings for any insurer announcing a premium price increase of more than 7 percent or any premium that is 7 percent more than the market average. She considers neither inflation nor the possibility that consumers might prefer to pay more for more expensive benefits.

So much for the Massachusetts promise that making people buy insurance leads to less uncompensated care and better reimbursement rates.

The Massachusetts plan is all the rage in the Colorado health reform circles. Reformers blame the uninsured for uncompensated care, willfully ignoring the fact that the majority of uncompensated care is generated by the government run Medicaid and Medicare programs. In Colorado, data from the Blue Ribbon Commission on Health Care Reform suggest that the uninsured pay for 45 percent of the care they receive. The Veterans Administration and Workers Compensation pay another 9 percent. The rest, about $647 million, comes from charitable sources. It amounts to 2 to 3 percent of total statewide health care spending.

As Cambridge Health Alliance and various Tennessee hospitals have seen, public program expansion that encourages people to stop paying for their own health care and health insurance may worsen provider financial stress. When providers do not get paid, they reduce the amount of care they provide.

With so many promising reforms on the horizon there is no excuse for reincarnating failed policies. Reforms that work save up to 20 percent by limiting people's ability to spend other people's money. Reforms that work encourage people to use their own money for small expenses, reserving health insurance for large ones. Reforms that work would save an estimated 10 percent annually by freeing private medicine from unnecessary government regulation. Reforms that work reduce the role of government in health care.