Wednesday, July 07, 2010

Seeing our future - and it's not a pretty picture

President Obama touted his health care plan as a duplicate of Massachusetts' plan. So now we can look at the mess that is Massachusetts health care and see what our entire country will be undergoing in a few years. First of all, Massachusetts citizens pay the highest premiums of any state. As Joseph Rago reports today, people did exactly what you'd expect.
In a new paper, Stanford economists John Cogan and Dan Kessler and Glenn Hubbard of Columbia find that the Massachusetts plan increased private employer-sponsored premiums by about 6%. Another study released last week by the state found that the number of people gaming the "individual mandate"—buying insurance only when they are about to incur major medical costs, then dumping coverage—has quadrupled since 2006. State regulators estimate that this amounts to a de facto 1% tax on insurance premiums for everyone else in the individual market and recommend a limited enrollment period to discourage such abuses. (This will be illegal under ObamaCare.)
So since rates were skyrocketing, the only answer that the political class in Massachusetts has had is to impose price controls. But unluckily for the politicians, they had no basis for price controls except for their own desires.
s events are now unfolding, the Massachusetts plan couldn't be a more damning indictment of ObamaCare. The state's universal health-care prototype is growing more dysfunctional by the day, which is the inevitable result of a health system dominated by politics.

In the first good news in months, a state appeals board has reversed some of the price controls on the insurance industry that Gov. Deval Patrick imposed earlier this year. Late last month, the panel ruled that the action had no legal basis and ignored "economic realties."

In April, Mr. Patrick's insurance commissioner had rejected 235 of 274 premium increases state insurers had submitted for approval for individuals and small businesses. The carriers said these increases were necessary to cover their expected claims over the coming year, as underlying state health costs continue to rise at 8% annually. By inventing an arbitrary rate cap, the administration was in effect ordering the carriers to sell their products at a loss.

Mr. Patrick has promised to appeal the panel's decision and find some other reason to cap rates. Yet a raft of internal documents recently leaked to the press shows this squeeze play was opposed even within his own administration.

In an April message to his staff, Robert Dynan, a career insurance commissioner responsible for ensuring the solvency of state carriers, wrote that his superiors "implemented artificial price caps on HMO rates. The rates, by design, have no actuarial support. This action was taken against my objections and without including me in the conversation."

Mr. Dynan added that "The current course . . . has the potential for catastrophic consequences including irreversible damage to our non-profit health care system" and that "there most likely will be a train wreck (or perhaps several train wrecks)."

Sure enough, the five major state insurers have so far collectively lost $116 million due to the rate cap. Three of them are now under administrative oversight because of concerns about their financial viability. Perhaps Mr. Patrick felt he could be so reckless because health-care demagoguery is the strategy for his fall re-election bid against a former insurance CEO.
And there is our future. Health insurers going out of business and the government having to take them over. And perhaps that was the long-term goal for ObamaCare. They might have denied that they were voting for a full government takeover, but what is going to happen when the insurers go out of business?

And this is why Mitt Romney should save himself some money and time and forget about getting the GOP nomination in 2012. He just won't be able to rise above his championing of this disaster for Massachusetts health care.