Rational Arguments

Ezra Klein has a great post up about others now introducing Massachusetts into the debate to show why health care reform should fail:

Markos Moulitsas takes a look at Massachusetts and concludes that the individual mandate isn’t working well, because Massachusetts’s costs have merely improved from “the worst in the nation to merely one of the worst in the nation.”

The Massachusetts bill (as I’ve argued often about this bill) is not about cost.  It was meant to improve coverage.  And it did.  It’s not how I would have done it, it wasn’t the most efficient way to do it, but it did increase coverage.  Not only that, but Massachusetts seems to have improved its standing in terms of cost, even if it’s a small amount:

But they are, in their own way, working. The prudential purchasing has brought costs down in the individual and small group markets where it exists. The individual mandate has forced a focus on cost control far beyond anything operating in any other state. A commission created to control costs recently recommended that the state begin to end fee-for-service medicine — which is far beyond anything that any other state, or the country, has explicitly begun doing. As most in Massachusetts agreed, there would never have been the impetus to do cost control if the universal plan and the mandate hadn’t deposited the problem squarely in the legislature’s lap.

Massachusetts is now in crisis and will likely have to introduce much more comprehensive reform (such as ending fee-for-service) in order to lower costs.  It’s worth watching what happens.

Ezra also believes that the bill currently under debate has cost controls that Massachusetts lacks:

If you go back to my post on the five cost controls in health-care reform, you’ll see that Massachusetts didn’t have three of them. There was no bundling, no excise tax, no Medicare Commission. And of the dozens of small cost projects, from the Payment Innovation experiments to the creation of a comparative effectiveness process, Massachusetts had none of them. Most of the pages of the health-care reform bill are dedicated to experiments and mechanisms trying to change things that happen in hospitals. Massachusetts was about changing the workings of the insurance market. And though those reforms were effective at creating a better insurance market and cutting the number of uninsured, they were not sufficient.

If you’ve been reading this blog, you know I’m less impressed by these than Ezra.  The Medicare Commission applies only to Medicare and not to private insurance.  Same with many other projects.  I don’t disagree with the implications of the excise tax, but I don’t know how much impact it will have on overall costs.

If many of these work, they will work on Medicare only.  And – here’s where I will acknowledge politics – I don’t think the government will be able to squeeze Medicare if private insurance doesn’t come along for the ride.  I can just imagine the headlines about preferentially killing the elderly.  I think those screams will come from whichever party is in the minority at the time, so it’s not partisan based.

I think we need cost controls for the entire system.  It’s one of the reasons I think a single payer (at least a basic one) would have more power to try and lower costs.  It asks for shared sacrifice.

But people like me who thought more radical reform was necessary were told it just wasn’t possible.  Only incremental reform could be accomplished.  And incremental reform required a mandate, it required less potential for cost control, it meant keeping private insurance around, and it necessitated accepting less than 100% coverage as “universal”.

If you were OK with that, then so be it.  You weren’t alone.

But here’s the deal – that meant you were OK with a mandate, you were OK with less cost control, you were OK with private insurance, and you were OK with less than 100% covered.  In other words, you were OK with Massachusetts.

I’m frustrated this week because many of the same people who shrugged off my concerns about the downsides of Massachusetts-style incremental reform when we started this process are now using those same arguments to “kill the bill”.  That strikes me as a bit… political.

A reader writes:

A friend of mine has been arguing against the Baucus bill by pointing to the downfalls of the current MA health care framework.

His basic argument is that gov’t fixed prices decreases competition and efficiency. This in turn leads to higher premiums and reduced choices. What is a good response to his claim?

First of all, I agree that looking at Massachusetts is a decent way to figure out what will happen with reform as currently proposed. Although the specifics differ, basically, what the Massachusetts plan does is increase the coverage of the safety nets, institute community ratings, make coverage mandatory, provide subsidies, and put insurance in an exchange. Sounds familiar, right?

What happened? Coverage went way up. Quality is sort of unchanged. And the cost is getting too high. Which is exactly what I have said will happen with national reform.

It’s not that government fixed prices decreases competition and efficiency. I’ve talked about that previously. What is leading to increased costs is a focus on universal coverage while maintaining quality. It’s patching the system under the constraints of the iron triangle. Costs are going to go up.

No one is addressing costs. No one was in Massachusetts. And so now in Massachusetts they are realizing they need to take drastic action to save money.

The same doesn’t have to happen nationally. We could choose to work on costs right now. That takes shared sacrifice, though, and no one seems willing to tackle it.

Bottom line – Massachusetts is a good example of what will happen with national reform. But it’s not because of increased government involvement; it’s because we aren’t addressing costs.