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Analysis: Can Mass. plan stay solvent?

By OLGA PIERCE, UPI Health Business Correspondent   |   July 6, 2006 at 11:54 PM
WASHINGTON, July 6 (UPI) -- Rapidly rising healthcare costs threaten to bankrupt the universal coverage plan recently enacted in Massachusetts, a new study says.

"Massachusetts healthcare is addicted to more money for business as usual," said study author Alan Sager, director of the health reform program at the Boston University School of Public Health.

"This is starkly unaffordable. In a few years -- perhaps at the bottom of the next recession -- there will not be nearly enough money to finance the types of care our hospitals, doctors, and other caregivers have become accustomed to giving.

"And failure to contain cost will make it much harder to implement the already under-funded promises of the new Massachusetts health insurance law."

Though healthcare costs are rising everywhere in the country, the Massachusetts cost crunch is particularly acute. The state's health costs will pass $62 billion this year, one-third above the U.S. average, the study says. Family health insurance premiums are about $14,000 yearly in greater Boston, up an average of 10 percent yearly for the past decade and if the trend persists, family premiums will be over $22,000 in 2011.

The Massachusetts plan has garnered the most attention for its requirement that all citizens of the state have healthcare coverage.

Subsidies have been established for very low-income families, but a $22,000 per year premium will be difficult for even a family earning $60,000 -- several times the federal poverty level -- to afford, Sager said.

It is also not clear how the state will finance higher Medicaid payments to hospitals and the program's overall expansion and state subsidies to individuals who buy insurance, the report says.

A better solution to making both health insurance and healthcare more accessible is lowering cost by reducing waste, according to the report.

"There's more good news than bad," Sager said. "Half of current health spending is wasted. Much of the waste can be squeezed out and recycled to protect uninsured and under-insured people, hold down premium increases, and boost quality of care."

The suggested way to reduce that waste is to fundamentally redesign the state's relationship with doctors, whose incomes drive healthcare spending, especially for supply-sensitive services like MRI scans.

When the state pays doctors, it should change the rules to give them incentives to squeeze out waste and hold down costs, the report says. The state should also, if necessary, seek to waive federal ERISA laws if necessary to enable it to dictate benefit.

In addition, all actors in the state healthcare system need to develop plans to save money and cope with future fiscal crunches, like a 10 percent drop in healthcare revenue -- and then recycle that money back into the state's healthcare coffers.

Doing that may require a dramatic change in attitude, Sager said. Thus far, justifications for high healthcare costs have been tolerated. What is needed in an approach that recognizes the crisis-like proportions of the cost problem.

"All parties must adopt a fiduciary outlook toward health care in Massachusetts," Sager said.

© 2006 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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