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Costs Soaring After Bay State Health Change

Anyone wanting a preview of Obama-Care need just focus on Massachusetts, the state that provided the blueprint for Obama's plan. It makes a great case for making haste in repealing ObamaCare.

In Massachusetts, health care prices are out of control, emergency rooms are overcrowded, the government is at war with itself and private insurers are running in the red, refusing to enter critical markets on the government's unrealistic terms.

wait_til_its_freeThe party line now is that the Bay State's reform was not about cost control but rather expanding access to care. The program's backers claim that the price spiral they find themselves in was expected, anticipated, even if they didn't actually have a plan for it.

That's a revisionist's tale. In early 2006, the plan's backers led by then Republican Gov.  Mitt Romney adamantly asserted that his plan would in fact control costs, provide universal coverage and improve the quality of care. (If this sounds familiar, it's because Obama's team borrowed the marketing scripts.)

Disinterested outsiders predicted that both prices and total costs would most likely increase under the government-dominated system, since massive new demand, reimbursed at the lowest prices, would be forced on a fixed supply. They were shouted down by insiders vested in getting the reform passed.

Guess who was right?

Two data points are harbingers of collapse. First, an academic study "The Effect of Massachusetts' Health Reform on Employer-Sponsored Insurance Premiums" by professors John F. Cogan, R. Glenn Hubbard and Daniel Kessler, confirmed the prediction.

Massachusetts' reform not only did not decrease prices and spending, as promised, but prices are increasing at rates greater than national trend lines and greater than rates in the Bay State prior to reform.

Three years prior to reform, insurance premiums for employers were increasing 3.7% more slowly in Massachusetts than in the rest of the country.  Today, the opposite is true.  Prices in Massachusetts are increasing 5.7% more than in other states. In Boston, prices for employer-provided family plans are increasing 8.2% faster than in other large metropolitan areas.

"Because the plan's main components are the same as those of the new health reform law," the study's authors note, "the effects of the plan provide a window onto the country's future."

Post-reform, prices are up, more people have insurance, and more people are headed to the emergency room.  If this sounds odd, it should. Among former Gov. Romney's favorite arguments for reform was that it would shift dollars from inefficient emergency room care to the more efficient venue of the primary care doctor.

The Obama administration passed its reform on the backs of health insurers couching the reform as health insurance reform rather than the actual remaking of health care delivery.  

In this election year, Gov. Deval Patrick's administration has torn this page from Obama's playbook. He demanded the right to approve insurance prices in February and then had his bureaucrats deny necessary increases in April. Prior to reform, rates had to be actuarially sound. Post-reform, it's more important that they be politically sound.

Those in his own bureaucracy charged with making sure that insurers can pay their bills called this a "train wreck" and put three insurers under solvency watch. The Patrick administration stood resolute in its election-year pandering. "It's unacceptable for consumers to be treated this way and it will not be tolerated," thundered Massachusetts Insurance Commissioner Patrick Murphy, in April.

Last week, the administration's own hearing officers sided with the first insurance company whose case made it through the process. The increased rates, it determined, were fair and necessary.

The Patrick administration's political folks, like Romney's before, will not be swayed by inconvenient facts. Insurance commissioner Murphy "strongly disagrees" with his own hearing officers' ruling.

Is it any wonder then that the state's bureaucracy responsible for managing its health care cannot entice any of the state's major insurance carriers to offer plans to small businesses?  Carriers representing 90% of the state's insurance market share are refusing to offer plans to small business through the state's Connector. 

"Given the rate cap that the administration has imposed on the health plans, none of them is in a Position to enter into any new endeavors with the state at this time," explains Eric Linzer, a spokesperson for the industry association.  State officials have responded by sending letters to insurance carriers threatening legal action.

Get ready to wait, America unless ObamaCare is repealed and reversed.

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Sally C. Pipes is president and CEO of the Pacific Research Institute. Her next book, The Truth About ObamaCare  (Regnery Publishing), will be released in August.

 

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