The Independent Investor: Is Massachusetts Health Care Reform Working?
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Clearly the state's claim to fame is the decline in the rate of the medically uninsured to 2.6 percent. That feat should be applauded since the national average is closer to 15 percent. The Connector Board, an independent state agency, steers consumers to six private insurers that offer four different levels of coverage.
Coverage is mandatory ($1,000 penalty per year for noncompliance). The state subsidizes individuals earning $32,500 or less ($66,000 for a family of four) and no one can be denied insurance or charged higher rates because of their health or pre-existing conditions. Residents who cannot afford even the lowest-priced plan can apply to the board for a penalty waiver.
Today, rising medical costs are threatening the viability of the program. A Payment Reform Commission has been created to address this issue. In July, the commission released a report making a first stab at moderating costs through pursuing a "global payments" system. How such a system would be implemented or the time period required was not clearly delineated. Still, don't blame the state for going slow since even the best minds in the nation have yet to come up with a solution to medical cost containment. It's one of the issues that have stalled progress on the national level.
Another unanticipated problem with the Massachusetts reform is the lack of affordability among many individuals and families earning above the subsidized income level, especially for residents aged 50 to 64. Quite a few residents have been able to prove that the plan choices are simply not affordable at their income level while others opted to pay the penalty because it was cheaper than paying the insurance premiums.
In addition, the law allows insurers to raise premiums as people get older. In some cases, older folks can be paying twice the rate as a younger person. That makes sense on an economic basis since generally the older one gets the more health care one requires, but what if you can't afford it? This can be a very real problem here in the Berkshires where the population is generally older than the state's average. Given the current recession and the high rate of unemployment, being forced by the government to buy insurance that you can't afford is the stuff of which nightmares are made.
Speaking of unemployment, the bill was passed in boom times (2006) when the state was enjoying full employment, so linking your job and insurance coverage seemed sensible. Today, an increasing number of our citizens are out of work and out of insurance without applying for state subsidies. That raises the costs of the program, thus the recent warning that the program will run out of money by the first of the year. To date, spending for the program has doubled from $630 million in 2007 to estimates of as much as $1.3 billion this year.
Dr. Susanne King, a child psychologist based in Lenox, is an outspoken advocate for a single-payer system of health care and has written frequently on the problems of the Massachusetts health-care system. Single-payer is a system whereby a single organization (the government, for example) would collect all health-care fees and pay out all health-care costs.
"We could save $8 billion to 10 billion if we moved to a single-payer system. You see it's not the distribution system — the doctors, hospitals, treatment — that needs fixing, it's the administration of this system that needs to be rethought," argues Dr. King.
Given the mounting fiscal troubles Massachusetts is facing, will the taxpayer be asked to make up the difference or will it be levied on the business sector? One thing is for sure, health-care reform is here to stay in Massachusetts but that doesn't mean it can't be remodeled to answer the challenges we face.
Bill Schmick is a registered investment adviser and portfolio manager with Berkshire Money Management (BMM), managing over $180 million for Americans in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or at wschmick@berkshiremm.com. Visit www.afewdollarsmore.com for more of Bill’s insights.
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