High Medical Costs In Part Are Supply Driven

The Massachusetts experiment in health care reform is all about expanding access. But it doesn't try to control costs. This, in a nutshell, is why it's running into trouble.

Since the plan went into effect in 2006, 439,000 people have signed up for insurance -- a number that represents more than two-thirds of the estimated 600,000 people uninsured in the state two years ago. This surge in coverage has reduced use of emergency rooms for routine care by 37%, which has saved the state about $68 million. But even with these savings, Massachusetts is having trouble funding its plan.

Massachusetts as of 2007 had the highest annual health care costs per employee in the country: $9,304304 -- significantly more than the national average of $6,881. That's a lot more than the $295 a year penalty that the state charges employers for not providing coverage. For employers, to opt out of coverage and instead pay the penalty is an attractive option.

The state wants employers to pay more either by covering a greater share of health care costs or paying more in penalty fees. Yet when employers have to pay a lot for health care, they take the cost out of employees' paychecks. Many households could not afford to take a pay cut -- especially when you consider the cost of housing in Massachusetts.

True, big corporations might have deep enough pockets to pay more for health care without adjusting workers' wages. But you’d need laws that strictly regulate the correlation between business health care costs and workers' wages.

Ultimately, the only way to make a universal health care system sustainable both for employers and employees is to tackle the high cost of health care in Massachusetts.

This cost is not because insurers are profiteering. It’s because Commonwealth citizens consume more health care than people in many other states. High consumption of care is driven by the crowd of academic medical centers, specialists, and equipment needed to perform tests. The Bay State has one doctor for every 267 citizens -- versus one doctor for every 425 people in the nation as a whole. Supply drives demand.

Bringing down costs means getting the flu vaccine to everyone who needs it, or creating systems so everyone with elevated cardiac risk is on statins. These interventions are low innovation but save money. To rechannel money from innovation to access and basic interventions would probably make the state and country a whole lot healthier.

Luckily, steps are being taken: in June, the state's biggest insurer and the state itself said that they would stop reimbursing doctors and hospitals for 28 medical errors.

Punishing doctors isn't the key to sustainable health reform. Yet some errors are more "preventable" than others. The key is changing patterns in the types and volume of treatments and procedures made available to patients, making health care run smoothly in the long-term.

Universal coverage is wonderful and necessary. But it's only one piece of the health care puzzle.

MO: If a non-profit national-scale health insurance system is really the best alternative, then rather than force everyone to join it as a monopoly, why not just remove the laws that currently prevent a national-level non-profit health insurance organization from forming to offer affordable health insurance?

Also, introduce a health insurance voucher, so that each person can choose between the national non-profit organization and any other health insurance organization. E. Emanuel and V. Fuchs, based on their 2005 articles in the New England Journal of Medicine, propose healthcare vouchers as an alternative to a single-payer government monopoly.

The main criticisms that people have made of their proposal and other healthcare voucher proposals would be answered by repealing restrictive laws. Different states have different insurance laws, which prevents a national-level non-profit health insurance organization from forming. This campaign season, at least one or two candidates mentioned the need to change that.

Also see:

Just Where Do America's Health Care Dollars Go?
http://www.progress.org/2008/medical.htm

Does an autopsy count as a second opinion?
http://www.progress.org/2008/doctors.htm

The Cutting-Edge Science that Promises Hope
http://www.progress.org/2008/immune.htm

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High Medical Costs In Part Are Supply Driven

Even Advocates Say Universal Health Coverage Is No Silver Bullet

by Niko Karvounis

High Medical Costs In Part Are Supply Driven Even Advocates Say Universal Health Coverage Is No Silver Bullet

by Niko Karvounis

High Medical Costs In Part Are Supply Driven

Even Advocates Say Universal Health Coverage Is No Silver Bullet