Mass. Healthcare Law Did Not Contain Healthcare Costs

July 25th, 2011
in econ_news

health_costs Econintersect: A new study of the healthcare reform enacted by Massachusetts and its then Gov. Mitt Romney five years ago offers an ominous warning about the likely effects of the Patient Protection and Affordable Care Act on the nation as a whole.

Researchers at the Beacon Hill Institute (BHI) at Suffolk University in Boston found that the Bay State healthcare reform plan has led to increased healthcare expenditures and private health insurance costs, as well as additional payments for Medicare and Medicaid, for a total of $8.5 billion in new outlays.

Follow up:

In 2006, Massachusetts enacted healthcare reform legislation that promised to extend healthcare coverage to all citizens while significantly lowering costs. The law imposes mandates on residents to obtain health insurance and on employers to provide it if they have 11 or more employees.

It also expands Medicaid coverage, establishes a health insurance subsidy program, and creates an insurance exchange that helps those who are ineligible for Medicaid buy competitively priced health plans.

The BHI report states: “Now that the law has been in effect for more than five years, we can begin to assess its impact on the state of Massachusetts.”

Among the findings:

• State healthcare expenditures have risen by $414 million over the five-year period.

• Private health insurance costs have risen by $4.31 billion.

• The federal government has spent an additional $2.41 billion on Medicaid in Massachusetts.

• Medicare expenditures increased by $1.42 billion.

The total cumulative cost over the period is just over $8.5 billion.

But the state has been able to shift the majority of the costs to the federal government, which continues to absorb a significant part of the cost of healthcare reform through enhanced Medicaid payments and the Medicare program — meaning Americans outside Massachusetts are helping to pay the bills for the healthcare plan.

In analyzing the study’s results, the researchers observe: “Cost‐containment is often a major goal of health reform plans. However, this particular healthcare reform legislation did not provide an effective means for containing costs.

“The promise of cost‐containment rested on a vague hope that the newly insured would seek preventive care, access their primary care physicians earlier in their illness and avoid costly emergency room visits. Yet the number of emergency room visits rose from 2.351 million in 2006 to 2.521 million in 2009, or by 7.2 percent over the period. The total cost of emergency visits has soared by 36 percent over the period, or by $943 million.”

The large number of newly insured residents in the state has increased demands on the primary care system, forcing patients to visit emergency rooms at a rate significantly higher than expected.

The BHI report also states that “by increasing demand for healthcare services without an equal increase in their supply, the universal healthcare law guaranteed that the price of healthcare services and health insurance would increase.”

The researchers point out that the Patient Protection and Affordable Care Act signed by President Barack Obama in March 2010 is “essentially identical” to the Massachusetts law.

Obama claimed the law will lower healthcare costs. But the researchers conclude: “If the federal law is modeled after the Massachusetts law, it stands to reason that Massachusetts’ experience with healthcare reform provides an idea of what is in store for the country under the federal law.”

Editor's note: The mission statement from the website of the Beacon Hill Institute:

Grounded in the principles of limited government, fiscal responsibility and free markets, the Beacon Hill Institute engages in rigorous economic research and conducts educational programs for the purpose of producing and disseminating readable analyses of current public policy issues to voters, taxpayers, opinion leaders and policy makers.

 









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