Last week the news leaked out from the Patrick administration that public spending for the health reform plan in the coming fiscal year will be about $400 million over the original projections. This follows a $146 million cost overrun in the current year.
Why are such miscalculations the norm? Are the costs of health reform unknowable? Or did politicians (and the media) listen only to the “experts” who told them what they wanted to hear?
As I wrote here several months ago, the Census Bureau has been saying for years that there were far more uninsured in Massachusetts than state leaders cared to admit. But politicians and the economists who advised them stuck to their guns. It turns out the Census Bureau was right. The result is that many more people are eligible for the subsidized coverage than the legislature or governor planned for. And, by the way, the demand for free care from safety-net hospitals and clinics is not dropping as fast as projected, again a result of undercounting the uninsured and ignoring the large number of immigrants who are mostly ineligible for insurance under the reform.
Of course, the economic advisors also underestimated the impact of rising medical costs, taken in by claims that that the “Quality and Cost Control Council” would rein in costs, and that the computerized health records and improved prevention touted in the bill would save money. I laughed those off last May in this space.
(By the way, the same health economist who advised the legislature as it was drawing up the original budget, recently told a real whopper in the letters section of the Boston Globe – claiming that a single payer reform “would cost many multiples of the current Massachusetts reform effort.” He chose to ignore the reams of evidence that single payer would save vast sums on bureaucracy and profits. Indeed, the CBO, the GAO, and even the Lewin Group, a consulting firm which is owned by a health insurer, have all projected that single payer would cover everyone without any increase in total costs).
Unfortunately, any reasonable forecast sees more fiscal trouble ahead for Massachusetts’ health reform. The $400 million overrun estimated for the coming year doesn’t account for the recession that looks to be headed our way. If we’re lucky, it’ll be no worse than the fairly mild downturn in 2001-2003. Back then, the number of working age people who didn’t have jobs climbed by 167,000, and the number of uninsured rose by 168,000 – presumably including many of those who lost jobs, as well as some of their dependents. So a modest downturn is likely to swell the ranks of the low-income uninsured by about 165,000 – adding perhaps $400 to $600 million to the bill for public subsidies.
So as we plan for the next year or two, let’s factor in the real costs that lie ahead, not the fantasy projections politicians would like to believe. If those realistic cost estimates look unsustainable, then lets get ready to talk about a reform that we can afford – like a single payer program.
David Himmelstein is an associate professor of medicine at Harvard Medical School and Co-founder of Physicians for a National Health Program
Thank You Doctor Himmelstein your honesty on this blog is refreshing.Some powers that be think because we don’t have insurance we also must be stupid.Beleive me most the citizens writing on this blog know more about this law than the lawmakers.I watched Michael Moore on Larry King and I agree with his ideas also.”Getting rid of insurance companies entirely.”The state also needs to do away with Commonwealth Connector Authority and Health Care for All that are bureaucracies that are wasting taxpayers money.All people would benefit not just the uninsured.
Dr. Himmelstein’s comment repeats a meme that is rapidly spreading and absolutely false.
For the record, health reform spending is not estimated to be $400 million over projections next year. The Governor’s budget expects total spending to grow next year by $400 million, but that is entirely different than a $400 million cost overrun. Much of the increase was totally expected, due to enrollment growth and medical inflation.
The original legislative budget estimates, which did not use the lower DHCFP estimates of the number of uninsured, projected a $325 million increase between FY08 and FY09.
And of course, the cost to the state is estimated to be $156 million, since with increased spending comes increased federal revenue.
Slowly the national media are starting to get this, see this column by Paul Krugman.
No, Brian, Dr. Himmelstein’s post is not absolutely false. You and others at HCFA, DHCFP, MAHP, BCBS, and others within the medical industrial complex can try to spin the numbers in an effort to prop up this harmful and wasteful law, but sooner or later “The Emperor Has No Clothes” will catch up with you and your ilk. The many people who will be hurt in the meantime is a disgrace…
It’s a tragedy that so much money and effort has been poured into this terribly flawed reform law – isn’t it time to seize the momentum and re-chart the course toward real reform? And please don’t tell me “but what about all the newly insured?…” Yes, that’s VERY good for the short term but not if it comes at such a high cost to the state that we can’t sustain it, largely due to the wasteful financing mechanism (that Romney and Bush & CO. were so pleased with), and if it abandons and punishes those who remain uninsured. That is NOT A GOOD THING.
Slowly the national media are starting to get this, see this [Wall Street Journal piece http://online.wsj.com/public/article_print/SB120173996744030445.html
Note that the dimensions of the law that deserve closer scrutiny go FAR FAR beyond the budget numbers to address the core values and principles (or lack thereof) of the individual mandate policy that is a centerpiece of the MA Plan.
and while we’re on the topic of national publications “Getting it”, take a look at this
[The New England Journal of Medicine
http://content.nejm.org/cgi/content/full/358/6/549?query=TOC
“…Relentless medical inflation has been attributed to many factors — the aging population, the proliferation of new technologies, poor diet and lack of exercise, the tendency of supply (physicians, hospitals, tests, pharmaceuticals, medical devices, and novel treatments) to generate its own demand, excessive litigation and defensive medicine, and tax-favored insurance coverage.
Here is a second opinion. Changing demographics and medical technology pose a cost challenge for every nation’s system, but ours is the outlier. The extreme failure of the United States to contain medical costs results primarily from our unique, pervasive commercialization. The dominance of for-profit insurance and pharmaceutical companies, a new wave of investor-owned specialty hospitals, and profit-maximizing behavior even by nonprofit players raise costs and distort resource allocation. Profits, billing, marketing, and the gratuitous costs of private bureaucracies siphon off $400 billion to $500 billion of the $2.1 trillion spent, but the more serious and less appreciated syndrome is the set of perverse incentives produced by commercial dominance of the system….”
For those who share the commitment to create a humane and effective healthcare system to provide quality affordable care for all, please join the growing movement at http://www.HealthCare-Now.org
Candidates proposing universal health care are inspiring. However, we need
to fix the health care system as well.
As a patient and a former employee (I used to work at a famous hospital on
Long Island) of the health care system – I have first-hand knowledge on how
the care system works in America.
Close to 100,000 people die each year in hospitals due to medical errors.
The hospital I worked at had too much administrative waste. There was
endless paperwork in processing patient information.
Many of the positions, especially in the non-medical areas, were filled
through nepotism. Many of the supervisors and mid-level managers at this
hospital were concerned about how they looked to top administrators, rather
then perform thier jobs effectively. (CYA was the major activity).
A question I would like to ask the general public, particularly doctors -
How come doctors never challenge other doctors?
Right after I graduated college I was “confused,” doing drugs, and getting into trouble; so my parents sent me to psychiatrist. The psychiatrist said I was “mentally ill” and he sent me to neurologist for my tests. (Our family doctor stated at first I did not need any tests, and then he changed his mind.) The neurologist examined my brain and said I was fine. I just needed to “grow up.”
I am beginning to hear that a number of community health centers can no longer accept new patients. I’m wondering if anyone can answer for me:
What does this mean for the poor and underserved for whom CHCs have been designed; and, Will this situation lead to overuse of expensive ED usage as an alternative, one of the situations health care reform was supposted to address?
Hi Agnes – which CHCs did you hear are turning away new patients?
thanks, Martha Bebinger
No, Brian, Dr. Himmelstein’s post is not absolutely false. You and others at HCFA, DHCFP, MAHP, BCBS, and others within the medical industrial complex can try to spin the numbers in an effort to prop up this harmful and wasteful law, but sooner or later “The Emperor Has No Clothes” will catch up with you and your ilk. The many people who will be hurt in the meantime is a disgrace…
[...] an expert consensus that the CPS numbers overstate the uninsured, Drs. Steffie Woolhandler and David Himmelstein write frequently that the Census Bureau numbers are the right measure of the uninsured. This leads [...]