Is Massachusetts Healthcare Reform "Obamacare's" Bellwether?

Last Updated Apr 7, 2010 9:40 AM EDT

Six non-profit insurance companies are suing the state of Massachusetts, which blocked requests for rate increases of up to 32 percent. The companies say that they need the increases to stay in business. These include Blue Cross and Blue Shield of Massachusetts, the state's largest health insurance company.

The lawsuit says that the Insurance Commissioner acted wrongly for three reasons:
1. It has not authority to impose a rate cap.

2. It tried to match the rate increase to an index that does not project future costs.

3. The companies have the right, by statute, to cover their costs. The companies predict losses without the increases; Blue Cross as well as two other larger insurance providers had losses last year.

Massachusetts Governor Deval Patrick (pictured) has proposed a bill limiting how much providers and insurers could raise their prices. The bill amounts to price controls, something that fellow BNET blogger, Ken Terry, has called "a Bad Idea, If an Understandable One". Arbitrarily limiting prices does not reduce inflation, Terry pointed out, "because inflation returns as soon as the caps are removed." The Commissioner's ruling was, in effect, a regulatory cap that does the same thing as the legislative one that Patrick has proposed.

Massachusetts introduced its own health care reform in 2007. Known as MassCare, one key element (picked up by Congress in the federal version) was to mandate that all people in the state be covered. If residents could not get the insurance through their employer then the state managed plans provided by private insurance companies with subsidies based on income. Residents who did not get insurance then would have to pay fines. Companies that did not provide insurance also had to pay up. The reform was championed by then-Governor Mitt Romney, who later ran for the Republican nomination for President.

The state has increased coverage but spending on health care has risen faster than projections, as have insurance premiums. There have also been shortages of doctors able to take on the high number of new patients, limiting visits and care. The RAND Corporation analyzed ways to lower cost; it concluded that doing so would require "investments in infrastructure and in fundamentally changing the way health care is delivered." It is not clear whether the citizens of Massachusetts want to shift the whole concept of how care is paid for.
Or, indeed, Americans as a whole. The big question, then, is whether ObamaCare will run into the same problems as MassCare -- specifically, wrong projections, ineffective cost controls and resistance to further change. If it does, fasten your seatbelts: It's going to be a bumpy ride.

http://www.flickr.com/photos/nabeel/ / CC BY-SA 2.0

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.