According to the implicit hypothesis underlying the rush to “health care reform,” the main barrier to ideal care for all at an affordable cost is the absence of universal “coverage”—payment and supervision—by an appropriate (governmental or government-credentialed) third party.

Without such a mechanism, some patients will avoid needed care or needlessly jam emergency rooms. Some clinicians and facilities will not get paid, or not provide care, or shift costs, or perform unnecessary but well-remunerated services. Insurers will avoid the sick.

The hypothesis is summarized by Linda J. Blumberg and John Holohan: “Some of the most prominent shortcomings of the U.S. health insurance market are rooted in the fact that the system is a voluntary one” (N Engl J Med 7/2/09). The market “segments” health risks, and avoids the sick rather than “managing” their care.

Massachusetts is the grand bipartisan experiment to test this hypothesis. The individual mandate—requiring purchase of insurance by law—brings in funds from “free riders” who use care without paying for it, or low-risk persons who decline to pay their “fair share” to subsidize coverage for higher-risk persons. (The latter phenomenon is called adverse selection—low-risk persons drop coverage rather than pay the high premiums resulting from community rating or guaranteed issue.)

To compensate for the perceived unfairness of forcing people to buy an unaffordable product, the Commonwealth subsidizes persons too well off to qualify for Medicaid but judged too poor to afford premiums. This expense is supposed to be offset by decreasing (“redirecting”) payments for uncompensated care.

The “Connector” is supposed to help people choose suitable coverage that meets all its requirements.

The results of the experiment, which took full effect on July 1, 2007:

• Premiums are approximately double those in many other states. Premiums in those states will double if Congress passes universal coverage with guaranteed issue and modified community rating (Council for Affordable Health Insurance).
• Premiums in Massachusetts are increasing twice as fast as the national average (Eagle Forum 7/3/09).
• Only 18,000 people have used the Connector to buy insurance during the past 3 years (ibid.).
• The number of uninsured decreased, almost entirely because of subsidies rather than the mandate, but 200,000 remain uninsured (Michael Tanner, Cato Briefing Papers No. 112, 6/9/09).
• The number of people receiving uncompensated care declined only 36% (ibid.).
• State spending on all health programs has increased 42% since 2006. There are huge deficits despite tax increases. Eligibility reviews have already removed 25,000 people from the subsidy program (ibid.).
• Substantial adverse selection is taking place; the combination of subsidies and mandates may actually be making the insurance pool older and sicker (ibid.).
• Instead of unifying and rationalizing two dysfunctional regulatory schemes, the Connector has become an aggressive new regulatory body, adding more mandates plus a 4% increase in administrative costs (ibid.).
• Insurers were ordered to cut payments to providers by 3% to 5%, and a cap on total spending (global budget) is under consideration.
• Utilization has increased; supply of services has not. People are having more difficulty finding a physician and must wait longer for an appointment (Merritt Hawkins, 2009).

Already called the New Big Dig in May 2008, “the Massachusetts nonmiracle should be a warning to Washington.” The Obama plan, however, is “Massachusetts on steroids” (Wall St J 5/21/08).

Additional information:

• “Magical Thinking,” AAPS News, May 2006.
• “Massachusetts Resorts to Group Visits with Doctor,” AAPS News of the Day 12/3/08.