Massachusetts Gov. Deval Patrick just exhorted legislators to overhaul the way the state pays for health care. He’s pushing for an end to the traditional arrangement of compensating doctors and hospitals for each service they provide.
It’s not yet clear what will replace this “fee-for-service” payment system. But there’s growing support for a “global budget” model, under which primary care physicians would receive annual lump sums for each of their patients - regardless of how little or how much care they needed.
The move toward global budgets highlights the failure of Massachusetts’s 2006 health reform plan to make health care more affordable. Because the Bay State’s plan served as the template for President Obama’s health reform package, the consequences of that failure could soon be felt nationwide.
A new report from researchers at the University of Minnesota details the magnitude of Massachusetts’ health reform catastrophe. They interviewed more than 3,000 state residents in 2010 and found that “Massachusetts continues to struggle with escalating health care costs, reflecting the decision to defer addressing costs in the 2006 legislation.”
The study revealed that the share of insurance premiums for family coverage paid by the average worker jumped more than 10 percent since 2006. Half of respondents said that they were spending more on health coverage in 2010 than 2009. And a quarter weren’t confident that they could afford care the following year.
About 1 in 4 respondents reported delaying treatment because of concerns about cost. That share is up from 2006. And 1 in 5 adults had problems paying medical bills - the same percentage as in 2006. “There was no sustained improvement in problems paying medical bills,” the researchers wrote.
The Bay State reform effort did expand coverage and improve access to preventative care. But the rapidly rising cost of care has counteracted these benefits. As the researchers politely put it, it’s “likely that the economic downturn and the continuing increase in health care costs … dampened any gains in coverage and affordability that might otherwise have been achieved under health reform in the state.”
The employer-sponsored insurance market in particular has suffered. That’s bad news, as it’s how most Bay Staters - and most Americans in general - get their coverage.
Between 2006 and 2010, average employer premiums increased from $1,011 to $1,200 for single coverage, and from $3,128 to $3,444 for family coverage. If premiums continue to rise at this rate, state residents will see their take-home pay dwindle even more.
The researchers concluded by stating that the “pre-2010 status quo is not a sustainable option for Massachusetts or the nation.”
Some policymakers believe that global budgets are the answer to this problem. Because doctors would receive a flat annual fee for each patient, they’d have a direct financial incentive to keep their patients healthy - or more cynically - to limit the care they provide.
That’s exactly what has happened in Canada, which implemented such budgets in the 1970s. Last year, Canadians were waiting to receive more than 941,000 procedures. The average total wait time between referral from a primary care physician and treatment by a specialist reached 19 weeks in 2011. That’s more than double the wait time in 1993.
If global budgets take root in Massachusetts, residents can look forward to similar waits for necessary care.
In 2006, then-Gov. Mitt Romney assured his constituents that “the costs of health care will be reduced” if his health reform package passed. President Obama made essentially the same assurances prior to the passage of his reform package, pledging that it would “bring down premiums by $2,500 for the typical family.”
Mr. Romney’s promise has proven false. And there’s little doubt that Mr. Obama’s will end up similarly untrue.
Half a decade into its health reform experiment, Massachusetts is flailing under unsustainable health costs. Absent change, the Bay State offers a preview of what the rest of the country has to look forward to.
Sally C. Pipes is president, CEO and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is “The Pipes Plan: The Top Ten Ways to Dismantle and Replace Obamacare” (Regnery 2012).