When health care reform does not control costs, the Massachusetts (and ultimately the U.S.) experience

I recall in 2008 speaking with a Congressional aid about health care reform. I told him the Massachusetts model might expand coverage but it wouldn’t control costs. This PhD basically told me I didn’t know what I was talking about.

Read on …

But while the 2006 health care reform was successful at providing near universal coverage, Gonzaleaz said, it didn’t control costs.

The state has reduced its health-care costs for the current and next fiscal years by about $1.5 billion, he said.

Through an active re-enrollment and targeted incentives, the Group Insurance Commission enrolled a third of state employees in limited network plans, saving the state more than $20 million and those employees hundreds of dollars, Gonzalez said.

The Health Connector Authority also reduced per-member premiums by 10 percent over the last two years, saving more than $100 million, he said.

The state also has helped municipalities reduce their health care costs through landmark legislation last year to establish an expedited process for municipalities and their employee unions to modernize benefit plan designs to achieve savings, Gonzalez said. Nearly 100 communities have leveraged the law to achieve more than $100 million in premium savings in the first year.

Here is the full story.

Now take note of what he is really talking about. I’ll translate for you. To “modernize benefit plan designs,” to provide “targeted incentives” and to enroll in “limited network plans” is benefit speak for cost shifting.  In other words to lower premiums (mistakenly taken for health care costs) each employee takes on more health care cost risk. Obamacare is no different. In fact, with expanded mandated benefits premiums will be forced higher even as other cost shifting occurs.

The people who like Obamacare point to such things as coverage for children to age 26, “free” preventive services, guaranteed coverage, “affordable” health care meaning subsidized premiums or artificially forcing premiums lower without regard to the underlying costs.  But none of that makes health care truly affordable. Proponents point to all the programs that are trying to change the system such as accountable care organizations, changes in fees to doctors and hospitals, etc., but these programs do not affect anyone except those Americans covered by Medicare, roughly 15% of the population. In addition, putting the squeeze on Medicare means those costs are likely to end up in the private sector.  You simply can’t change one part of the system and think there will be no impact on the rest of the system.

Obamacare may provide direct benefits to millions of Americans, but in doing so it also sets the stage for growing, not shrinking costs.  The federal government has committed to ever-growing subsidies for Americans with family incomes up to $85,000 or so, it has expanded Medicare benefits even while claiming to cut Medicare payments to insurers and providers.  Unless you fundamentally change the health care delivery system for all Americans within the same timeframe as these expanded benefits, you have set in place a liability that grows at more than twice the rate of general inflation.

Whether you are for or against Obamacare, you need to ask; what is the next step when costs continue to escalate along with government spending on health care.