When MassCare passed, it was supposed to lower the average cost of healthcare by getting relatively cheap young people into the system, and ending the inefficiencies of caring for the uninsured. Unfortunately, it hasn’t quite worked out that way. The bill for the uninsured only dropped by about 40%; the young, cheap people turned out to almost all need subsidies, and worse, some of them figured out how to game the system by buying insurance, getting a bunch of expensive procedures, and then dropping the insurance again. There was a brief improvement in insurance prices for the individual market, because Massachusetts, with its community rating and guaranteed issue, had had a pretty sizable problem with adverse selection. But after a few years, insurance costs were still marching briskly upward, rates were among the highest in the country, and the system was putting heavy pressure on a budget that was already strained to the limit by the recession.
The Massachusetts governor’s answer to this problem was to
simply deny the Massachusetts insurers the right to raise their
prices. Then, when they refused to quote prices on the exchange at the
old, controlled prices, the government essentially argued that they
were a bunch of whiny liars who didn’t need all that extra money, and
commanded them to list their insurance at the old prices. As far as I
know, they never did find an actuary to sign off on the mandated
prices, but the insurers lost their hearing.
Well, now the whiny liars have upped the ante, claiming that they lost a bunch of money in the first three months of 2010,
mostly thanks to the extra money they had to reserve against the losses
they anticipate under the new rates. It will be interesting to see
whether we get another War on Accounting, where Deval Patrick accuses
the state’s biggest insurers of the dastardly use of Generally Accepted
Accounting Principles in order to embarrass his awesome government
program.
And indeed, it’s not impossible that there’s a
strategic element to this; there’s always discretion in how companies
reserve for losses. There is also always the possibility of accounting
error. But those possibilities are not unlimited, because financials
have to be signed off on by auditors who are keenly alive to the
possibility of ending up on the wrong side of a lawsuit if they wink at
obviously misleading representations. And four different companies
probably didn’t all make the same accounting error.
There’s a
depressing possibility, even a likelihood, that this is our future.
It’s hard to simultaneously expand demand, while lowering the
incentives for supply (i.e. Medicare reimbursements), without having
some pretty dramatic mismatches between the two. There’s an old adage
common in restaurants and engineering that goes “Good. Fast. Cheap. Pick Two.”
Change that middle word to “Universal” and you’ve got a pretty good
summation of the problem that Massachusetts now faces–and that the
rest of us soon will.
Insurance – Deval Patrick – Massachusetts – Health care – Governor of Massachusetts
