The Wrong Road to Reform
Author(s): Michael Tanner
Source: The Hastings Center Report, Vol. 36, No. 5 (Sep. - Oct., 2006), pp. 24-26
Published by: The Hastings Center
Stable URL: http://www.jstor.org/stable/4625670
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ly insurancewith affordablemonthly expenses-and they will
not receiveone in Massachusetts.
Who Defines "Affordable?"
T
he board of the Connector is key. Although "stakeholders"are well representedamong its members,the board
nonetheless has little accountability,especiallyto uninsured
and low- to middle-incomeresidents.Boardmembersarenot
elected,and thereis little representationof thosewho arelikely to be most affectedby crucialdecisionsabout affordability,
subsidies, and what counts as "creditablecoverage."Reform
based on an individualmandate mustmake adequatehealth
It must also ensurethat the planshave
insurance"affordable."
real value. If they do not, then purchasinghealth insurance
might not be betterfor one's health than other spendingoptions, like healthy food or college tuition, leavingindividuals
to question the legitimacyof the mandate.The boardneeds,
somehow, to starta deliberativedialog about affordability-a
dialog that engagesthe bartendersand shop clerkswho might
wear "Define Affordable"'T-shirts.
If in the end insurersdo not offer affordableproducts,as
defined eitherby the Connector or by intendedpurchasers-or, better still, by the Connector as the mediatinginstitution
of public input-the state of Massachusettsmay not come as
close to universalcoverageas they and the restof us hope they
can. If near-universalinsurancebenefits providers,large employers,and the young and healthyat the expenseof employees, small employers,the old, and the sick, the reformwill exacerbateratherthan reduceinjustice.
The
to
Wrong
Road
Reform
BY MICHAEL TANNER
he roadto hell, it is said,is pavedwith good inten-
tions. So it is with Massachusetts'recent attempt at
health care reform.The legislation is an attempt to
deal with seriousand legitimateproblems in the health care
system, undertakenwith the best of intentions. But in the
end, it is liableto createfarmore problemsthan it solves,leaving health careconsumerswith fewerchoices and less control
over their health caredecisionswhile saddlingtaxpayerswith
significantnew costs.
In large part, this is because the Massachusettsreform
stems from a faultypremise.It assumesthat the primarygoal
of health carereformshould be to extend insurancecoverage,
with
an eventual goal of universal coverage. Having long
Acknowledgments
insurancecoveragewith accessto health careand acSusanDorr Goold'sworkwas supportedin partby an Eliza- equated
cess
to
better
health, many see an individualmandateas probeth C. CrosbyResearchAward.
ducing betterhealthoutcomes.In reality,the experienceof raunder national health insurance schemes in other
1. "Massachusetts
HealthPlana PoorChoiceforNewYork:
JustFol- tioning
NewYorkMetro countriesshows that insurancecoverageand accessto careare
low the Money,"a statement
by Leonard
Rodberg,
Chapter of Physiciansfor a National Health Program,at entirelydifferentthings.As the CanadianSupremeCourt said
13, recentlyin strikingdown part of Canada'snationalhealth in(lastaccessed
September
http://www.healthcareforall.org/mass.html
2006).
surance program, "Accessto a waiting list is not access to
2. K. Pollitzet al., "Fallingthroughthe Cracks:Storiesof How health care."
HealthInsuranceCan FailPeoplewith Diabetes,"February8, 2005, at
Moreover,evidence that insurancecoverageor access to
http://www.healthinsuranceinfo.net/newsyoucanuse/08.html.
health
care leads to better health outcomes is uncertain at
morethan$100,000received
3. In2004,families
27 percent
earning
best.
Evidence
suggeststhat those without health insurance
forhealthspending.
of thetaxbenefits
J. Carroll,
"Taxpayers
RejectIdea
receive
less
care than those who are covered. However,
do
Care
12
of LosingDeductionforHealthInsurance,"
no.
14,
Managed
(2005): 11-12.
there is also substantialevidencethat culture,education,and
4. G.E Andersonet al., "HealthSpendingin the United Statesand lifestyleareat least as importantas lack of insurancein deterHealthAffairs
the Restof theIndustrialized
World,"
24, no. 4 (2005):
mining outcomes. At the same time, there is evidence that
903-914.
of those with insuranceactuallyover-consumehealth
of the CitizensHealthCareWorking many
5. Seethe recommendations
carebecausethe true cost of careis hidden.
Groupatwww.citizenshealth
care.gov/recommendations/interimrecomOthers, includingeconomistsof all stripes,have tended to
mendations.pdf.
embraceuniversalcoveragefor anotherreason.When an individualwithout health insurancebecomessick or injured,he
Center
"TheWrongRoadto Reform,"
Michael
36, no.5
Tanner,
Report
Hastings
24-26.
(2006):
24
HASTINGS CENTER REPORT
September-October 2006
or she still receivesmedicaltreatment.In fact, hospitalshave a
legal requirementto providecare regardlessof ability to pay.
Physiciansdo not face the samelegalrequirement,but few are
willing to deny treatmentbecausea patient lacks insurance.
Such treatmentis not free.The cost is simply shifted to others:those with insuranceor, more often, taxpayers.Thus to a
large degree individualswithout health insuranceare "freeriding"on the rest of us.
But this problem is smallerthan commonly believed.At
the time the bill was enacted,total uncompensatedcarecosts
representedless than 3 percent of all health carespending in
Massachusetts,at the low end of the national average(estimated at 3 to 5 percent).In addition, those most likely to go
without health insurancearethe
young and relativelyhealthythose least likely to impose significant costs on society.For example, although 18- to 24-yearolds are only 10 percent of the
U.S. population, they are 21
percent of the long-term uninsured. For these young, healthy
individuals, going without
health insuranceis often a logical decision.
The larger problem here is
that this patternis a form of adverse selection: removing the
young and healthy from the insurance pool means that those
remaining in the pool will be
older and sicker. The result is
higher insurancepremiums for
those who are insured.The problem is even greaterin a state
such as Massachusetts,where a modified form of community
rating-an economic term referringto the mandatedpooling
of individualseven where an insurancecompany might do
otherwise-forbids insurance companies from pricing their
productsbased on age or health and requiressome forty distinct and often costly mandated benefits. These regulations
increasecosts dramaticallyfor young and healthyindividuals,
many of whom then decide, rationally enough, to forego
health insurance.The individual mandate attempts to solve
this problemby forcingyoung and healthypeople into the insurance pool. Massachusettsalso attempted to address this
issue by loosening some of the restrictionsand mandatesfor
those ages nineteen to twenty-six.
Massachusettschose not to tacklethe questionof universal
coveragedirectlythrough a single-payersystem. It also chose
not to rely on free-marketreformsand deregulationto lower
the cost of careand give consumersmore choice. Insteadit attempted to be a little bit pregnant on the issue through a
combination of an individual mandate, subsidies, and a redesign of the small-groupand individualinsurancemarkets.
Mandated Participation
M
ost mediaattentionhasbeenon thestate'scontroversial
mandate that every resident have health insurance.
Such an interventionon the part of the statein personaldecision-making is "unprecedented,"accordingto the Congressional Budget Office, representingthe firsttime a statehas required residents-simply by virtue of living in a state-to
purchaseany state-definedproduct.
Advocatesof a mandatearguethat if we can mandateautomobile insurancein orderto protect society from the costs
imposed by uninsureddrivers,we should be able to do the
same for health insurance.This
is an imperfectanalogy,however. First,it has long been recognized that driving is a privilege,
subject to all manner of regulatory requirements.If one does
not like the regulations,including an insurancemandate, one
can choose not to drive. A
health insurance mandate
would not generallygive people
such a choice. Second, the reason states mandate auto insurance is for the protectionof others rather than oneself. Most
statesdo not mandateyou carry
insurance for your own injury
or repair costs. However, auto
insurance does provide a cautionary tale of how difficult it
will be to enforce the mandate.
Despite fines and other penalties, roughly 7 percent of all Massachusettsdriversremain
uninsured-and this is relatively low compared to other
states. The health insurancemandate is likely to prove even
more difficult to enforce.
Having mandatedthe purchaseof health insurance,Massachusettshad to find mechanismsto make insuranceaffordable to low- and middle-income individuals. It did this
through a seriesof subsidieson a sliding scale for individuals
with incomes up to 300 percentof the povertylevel. Unfortunately,the bill'ssubsidiesarepoorly targetedand overlygenerous. Subsidieswould be availablefor those with incomes
rangingfrom $30,480 for a single individualto as much as
$130,389 for a marriedcouple with seven children.A typical
marriedcouple with two childrenwould qualifyfor a subsidy
if their income were below $58,500. Many of those eligible
for subsidieswere alreadyinsured.The subsidieswill encourage businessesto discontinue their health insurance,forcing
costs onto the taxpayers.And subsidiesat this levelwill extend
dependenceon governmentwell into the middle class.
Weshouldshift the
debateawayfrom its
single-minded
focus on
expandingcoverageto the
biggerquestionof howto
reducecostsand improve
quality.
September-October 2006
HASTINGS CENTER REPORT
25
A Controlled Market
France, 31 percent in Germany,28 percent in Canada, 28
percentin Australia,and 46 percentin New Zealand.
the legislationrestructuresthe individualand small
By making universalcoveragethe focus of their reformefFinally,
businessinsurancemarketsby creatinga new government- forts, the statehas injectedmore governmentcontroland regrun intermediary,the MassachusettsHealth Care Connector ulation into the health care system.The evidence, from both
Authority,to match buyerswith "approved"insuranceplans. at home and abroad, is that government control will ultiThe Connectoris designedto createa form of managedcom- mately erode those things that are best about the U.S. system
petition that providesfor privatesector insurancewithin an while doing little to solve the system'sproblems.Instead,we
artificial,government-designedand -controlled marketplace. should shift the health caredebateawayfrom its single-mindInsurersare prohibitedfrom competing basedon their ability ed focus on expandingcoverageto the biggerquestionof how
to price and manage risk, as plans must accept all applicants to reducecosts and improvequality.That will requirethe inand charge everyone the same price regardlessof individual troduction of market mechanisms to give consumers more
health risk. In addition, insurersare not able to adjustpremi- control over and responsibilityfor their health caredecisions.
ums on the basisof age, sex, or other riskfactors.
In doing so, we can actuallyincreasecoverageand reduce
These featuresof the new insurancemarket may appear the free riderproblem.If young, healthypeople can purchase
beneficialand fair,but they are outweighedby the unintend- low-cost catastrophicinsurance,they are more likely to think
ed consequencesof the regulation.Since the Connector has being insuredis in their self-interest.This will go a long way
the power to decide what policieswill be sold, it will limit in- towarddealingwith the adverseselectionproblem.And to the
surers'ability to reduce cost through benefit design. Conse- degreethat marketmechanismsmake health care and health
quently,competition will occur only at the margins.Insurers, insurance less expensive, more low-income people can be
unable to chargemore for an increasinglyexpensiveproduct, brought into the system.At the same time, we can maintain
will trim costs by cutting back on their reimbursementrates the qualityof the Americanhealth caresystem, and most imto hospitals and physicians.In the long run this can lead to portant,preserveindividualchoice, liberty,and control.
less availabilityof careand a decreasein the qualityof the care
that is available.Also, an inability to price accordingto risk
generallyresultsin an overprovisionof servicesto the healthy
and an underprovisionto the sick.
Overall, the Massachusettsreformheads down the wrong
road to reform.The first rule of health carereformshould be
taken from the Hippocratic Oath: First do no harm. We
should not forgetthat for all its flaws,Americanhealth careis
s
of the highest quality availableanywherein the world. Most
of the world'stop doctors,hospitals,and researchfacilitiesare
located in the United States.Eighteen of the last twenty-five
winners of the Nobel Prize in Medicine either are U.S. citizens or work here. U.S. companieshave developedhalf of all
the majornew medicinesintroducedworldwideover the past
twenty years.In fact, Americansplayed a key role in 80 percent of the most importantmedicaladvancesof the past thirty years.By almost any measure,if you are diagnosedwith a
seriousillness,the United Statesis the placeyou want to be.
Take prostate cancer, for example. According to OECD
BY JAMES SABIN
data, even though Americanmen are more likely to be diagnosed with prostate cancer than are their counterpartsin
11societies,no matterhowwealthy,mustsetlimitson
other countries,we areless likely to die from the disease.Less
health care. Rapid advancesin technology combined
than one out of five Americanmen with prostatecancerwill
with
an aging population make limits unavoidable.
die from it, but 57 percentof Britishmen and nearlyhalf of
The
fact
we in the United Stateshave not agreedon an
that
Frenchand German men will. Even in Canada,a quarterof
to
men diagnosed with prostate cancer die from the disease. approach setting limits and have lackedthe politicalwill to
Similar comparisonsare possible for other forms of cancer. come up with one is a centralimpedimentto the comprehenJust 30 percent of U.S. citizens diagnosedwith colon cancer sive reformwe so obviouslyneed.
In our 2002 book SettingLimitsFairly,Norman Daniels
die from it, comparedto 74 percentin Britain,62 percentin
New Zealand, 58 percentin France,57 percentin Germany, and I asked how societies can meet the health needs of the
53 percentin Australia,and 36 percentin Canada.Less than
25 percent of U.S. women diagnosedwith breastcancerdie JamesSabin, "'Disappointingbut Fair':The Connector'sChallenge,"Hastings
36, no. 5 (2006):26-28.
Report
from it, comparedwith 46 percent in Britain,35 percent in Center
but
"Disappointing
Fair"
The
Connector
Challenge
26
HASTINGS CENTER REPORT
September-October 2006