The Massachusetts Health Care Cost Crunch

One lesson is already resoundingly clear: the growth of health care spending threatens the sustainability of every other public service, from education, to public health, to infrastructure, to defense.

That’s Zirui Song and Bruce Landon, writing in the New England Journal of Medicine about health care costs in Massachusetts, which has near-universal health insurance coverage.

Among the scary facts:

*In 2012, health care will consume 54% of the state’s entire budget.

*The monthly premium for the most bare bones plan sold in the state’s health insurance exchange increased 57% over the past 5 years.

*Massachusetts spent more than $61 Billion on health care in 2009, which makes it one of the highest-spending states in the country.

Those of us who believe that health insurance should be universal inevitably come face to face with Stanford Professor Victor Fuchs’ dictum that “The capacity of individuals to consume health care is essentially limitless”. The State of Massachusetts is confronting that reality now, and the many cost control initiatives they have underway could be highly informative regarding the feasibility of making universal coverage a reality in the US.

ht: Austin Frakt.

Author: Keith Humphreys

Keith Humphreys is the Esther Ting Memorial Professor of Psychiatry at Stanford University and an Honorary Professor of Psychiatry at Kings College London. His research, teaching and writing have focused on addictive disorders, self-help organizations (e.g., breast cancer support groups, Alcoholics Anonymous), evaluation research methods, and public policy related to health care, mental illness, veterans, drugs, crime and correctional systems. Professor Humphreys' over 300 scholarly articles, monographs and books have been cited over thirteen thousand times by scientific colleagues. He is a regular contributor to Washington Post and has also written for the New York Times, Wall Street Journal, Washington Monthly, San Francisco Chronicle, The Guardian (UK), The Telegraph (UK), Times Higher Education (UK), Crossbow (UK) and other media outlets.

46 thoughts on “The Massachusetts Health Care Cost Crunch”

  1. I’d welcome a further comment on just why there would be limitlees consumption of something no one actually wants (people do not vacation in hospitals). This isn’t meant to be sarcastic–I find this, maybe, puzzling.
    (The maybe is because I think I may know the answer–which is that the same issues apply as lead to too much defense and homeland security spending–but I’d like to hear from the experts).

    1. People don’t want to die. As one gets more and more sickly, (Which happens to all of us who don’t conveniently drop in our tracks, or get run over by a truck.) the expense required to keep you from dying rises without bound. Which is why most people consume most of their health care expenditures in the last year of their life…

      If elective procedures are covered, this opens another route for growth. For instance, my insurance covered surgery for my prostate cancer. It doesn’t cover anything to relieve the more frustrating side effects of saving my life this way, let alone the rather involved procedures necessary if I am to have another child. There are some people who think it should. (Not me, btw.)

      1. So, what do you propose, Brett, to control those extraordinary end-of-life costs? Nothing? Anything? Please be specific.

        1. I fail to see why they need to be controlled.

          During my per-operative physical for prostate cancer surgery, I was discovered to have a non-Hodgkin lymphoma. Sheer luck it was discovered then, the prostate cancer probably saved my life. Twenty years ago it was in the “Go home, make out your will, spend the next few months with your family. We’ll get you some pain killers for when it really kicks in.” category. Would have been quite cheap, though.

          Instead I went in for several months of chemotherapy. At the end of it my expensive insurance had paid out enough for bleeding edge medicine to have bought me a nice house. But I was cured.

          The increase in costs bought me something that was worth the money.

          What we call health care “inflation” mostly consists of more expensive, more effective treatments becoming available. An increase in options. Why should I find this objectionable?

          Sure, some people won’t be able to afford some of the newly available options. What’s your alternative? That people who COULD afford them be denied them, to make the people who can’t feel better? Sorry, but if that’s your definition of morality, I want nothing to do with it.

          1. OK, so the short answer is, “Nothing,” and the short reason is, because it’s a zero-sum game and somebody has to win. Thanks for the clarity.

      2. = = = People don’t want to die. As one gets more and more sickly, (Which happens to all of us who don’t conveniently drop in our tracks, or get run over by a truck.) the expense required to keep you from dying rises without bound. = = =

        Quite a few members of my family upon reaching that point at a reasonable old age have made the decision to stop further medical treatment. And those of us who have observed the outcome of some who continued with all possible treatments (again, at a reasonable old age, not the unfortunate 45 y.o.) have created living wills and advance directives. Nor is this uncommon among my peer group with aging parents/relatives. So you might need to modify your general rule a bit.


      3. That’s an important point, but end-of-life care is generally provided to recipients of Medicare (often supplemented by Medicaid), and should not have such a pronounced effect on the state’s expenses.

  2. DCA: People indeed do want health care. It’s not a question of where you would take a vacation, but what you would want when you are sick. Given the choice, people who for example needed surgery would want to be in the very best hospital, with a team of top surgeons and consultants, and 24 hour nursing, and supportive counseling as needed, and a private room and in home follow-up visits by a physician and physical therapist and and and..even if people don’t need all that to get well, if you say they can have whatever they want, they will consume all that and more. Another example is that in a typical primary care practice, at least 25% visits are for something for which there is no medical diagnosis, but the person wanted to come in anyway. Another example is how many people would have their DNA sequenced and a full body scan if it were free.

    1. But Keith, is your example of what people supposedly want actually the cause of why Massachusetts has to face this increase in medical costs? I think the problem is that RomneyCare, aka HeritageFoundationCare, aka ObamaCare has only an incentive for private insurers to get money and more power via forced premium purchases by consumers, with no real cost containment because the government is not really controlling costs, just paying the pipers–again private enterprise.

      Medicare for All does a better job of controlling costs, and its advantage over Medicare as it now stands in the US is that it puts everyone in the same health insurance pool, including the young and those in good health who don’t run up the rates Brett accurately describes for many people (I’ve been an exception for the past twenty odd years due to my heart conditions). As I say to doctor friends, the Medicare reimbursement will likely be better for them if everyone was in the same pool than now where Medicare works harder than private enterprise to cut costs where they rise, i.e. doctor’s fees and hospital fees for service. Medicare for All would also undoubtedly include the feds finally being able to negotiate with Big Pharma the way other nations do, and lower the ever expensive (and I know that from experience) medication costs. The current “reform” that Obama bequeathed to us from Orrin Hatch and Friends twenty years ago is only an example of a lack of political will to organize in a rational manner the delivery of insurance in the face of corporate power.

      Final point: Don’t France, Sweden, Denmark prove that if we really want to save costs, that would include doctors making house calls as part of healing involves the palliative of an interpersonal touch? I am addressing Keith’s point here about people wanting home visits as if that’s really a costly thing.

  3. I should note that I don’t believe health care inflation will continue like this indefinitely. Health care used to be relatively inexpensive because it couldn’t do much; It’s quite cheap to say “He’s dead, Jim.”, or tell somebody to go home and make out their will.

    It’s quite expensive to wait until somebody is desperately ill, and then be able to do all sorts of things to help them.

    However, we will eventually reach a point where we can keep the expensive things from happening in the first place, (There’s a vaccine in trials which is supposed to prevent arterial plaques from forming in the first place, for instance. Another which is supposed to prevent Alzheimer’s.) at which point health care will start coming down in cost again. We just have to get through the transition.

  4. As a self employed person who was forced (ok, “incentivized” by sharp premium hikes) to select a high deductible health care plan starting April 1, yesterday’s bout with gallstones, my first ever awareness of my gallbladder, was terrifying. My first response was “Crap, I can.not.afford.this,” even as I was writhing in pain and white as a ghost. I kept hoping it was just a GI tract issue that would clear itself up.

    Since we can’t do anything in America without a Rube Goldberg complexity to ensure that corporations are paid, getting the hsa (health savings account) account set up to go with my HDHP turns out to be quite difficult … So hard in fact that I haven’t done it yet, because the only credit union in town that even offers these hsa plans doesn’t actually offer them. Rather, they have a brokerage account salesman who comes from another state on certain days, and he will set up the account and help me do the rollover from my IRA inrto the hsa. If I have the laparoscopic surgery before funding the hsa (and I have no money with which to fund it except through this rollover), then I won’t be allowed to use the pretax money for the costs. As I frequently have cause to counsel people who are being crushed by medical bills, I have no illusions about what awaits me should we be unable to get this hsa funded before I actually can stop the pain (reduced today from excruciating 9 on a scale of 10 to just 5 or 6)… I will be forced to put the costs on credit cards with their absurd interest rates, or draw the money out of IRAs directly, not through the hsa, and thus enjoy paying all the taxes on the money but also a ten percent penalty because, after all, how wrong of me to give myself gallstones just for kicks.

    So, rather than simplification and cost reduction, we’re forcing people into even more accounting and billing nightmares, with even more bean counters looking at my grocery bills to make sure that I have an Rx for my Non-Rx medicines (or else you can’t buy them with your hsa money).

    The bottom line is that the health insurance industry has the morals of the Mexican drug cartels, and they would far rather you be immiserated or dead with them enjoying great profits than to allow Americans access to health care without undergoing the fear of bankruptcy and ruin thanks to Medicare for all. I know that I speak for millions of Americans when I say that the bastards who lavish cash on the bought and sold congress to keep this vicious non- system in place should drink drano and die, the sooner the better.

    1. Yes, I am so tired of the FSA bullshit. I spend hours on the paperwork each month, only to find at the end of the year, that I’m either under or over the amount I put into the account for that year. In the former event, I can go spend the memory on from-frous like prescription sunglasses or similar, and in the latter event, I just get to be incredibly frustrated that the expenses aren’t tax-deductible, as they would be if I had allocated more money to my unforeseeable, but legit, medical needs.

      Why aren’t medical expenses just deductible, period? Why can’t we adjust our HSA or FSA after we now we’ll need gall bladder surgery? Why can’ t we just treat ourselves as well as say, the SWISS,who think that a person being Swiss entitles them to a decent and supportable — even pleasant — existence?

      No, we are Americans, and we hate ourselves, and want us to be miserable, and to suffer at lessta little for an y benefit we might get. We simply cannot have a system that makes life easy for ourselves, and cuts the bullshit and the middleman out.

      1. I used to have a FSA, and remember Betsy’s frustration well, but since it’s April 16th I’m reminded that health care expenses over 7.5% of AGI (?) are deductible – is the advantage of the FSA that it includes (non-insurance) expenses below that 7.5% threshold?

    2. I’m now on Medicare, but had a HDHP and HSA for a few years. I too had a lot of trouble inding someone to handle the HSA, but accidentally discovered a trick. Send $15 to join the Friends of the Palo Alto Library and you become eligible to join the Stanford Federal Credit Union, which offers HSA plans. Not a lot of great investment options, but it’s cheap and convenient, even from across the continent.

      If you’re not set up already try it. If you are, you might still switch if SFCU’s fees are lower, which they likely are.

  5. Quick basic reminder: neither RomneyCare nor ACA/federal-RomneyCare is a really good system. They are attempts to devise reasonably good systems while meeting the perceived political need to continue shoveling massive amounts of money to unnecessary vested interests, notably private insurance companies. Every other developed country does better in terms of cost and results, using a variety of systems, but all more centralized and comprehensive than ours. That is all; resume arranging deck chairs.

  6. For-profit health insurance is a really bad idea. Making health insurance a felony would be a good start in any policy design.

  7. Why hasn’t Germany gone bankrupt with its quite-good-on-average, not infinite universal medical care?


    1. Mostly because it has been able to contain costs better than America (but the same can be said of just about any Western European country).

      The standard public healthcare plan in Germany is a comprehensive, no frills plan, with modest copays. If you get sick, you’re entitled to state of the art treatment. You can freely choose any GP you like who accepts public healthcare patients (which is the vast majority of them). If you have to go to a hospital, however, you are not entitled to be seen to by the chief surgeon or to have a private room, per Keith’s example (though you can get either through private addon insurances if you’re willing to pay for it). A wide array of useful preventive services is also covered.

      Public health insurance is currently paid through a 15.5% (I think) payroll deduction, paid in roughly equal parts by employer and employee (largely a historical relic and an accounting fiction — there’s no practical difference in who pays what part). This will cover you, your non-working spouse (both opposite- and same-sex) and children. The money goes to a sickness fund (Krankenkasse) that will then pay doctors, pharmacies, etc. for you. If one sickness funds takes on a large number of high-risk patients and incurs additional costs, that sickness fund will receive payments from other sickness funds to compensate for that imbalance. Costs of health services are set by a committee comprised in equal parts by representatives of sickness funds and physicians (with three additional neutral members if a tie needs to be broken). The contributions for the unemployed are paid for by the government. Health insurance is mandatory; if you did not enroll (difficult to arrange, but not impossible) and seek treatment, there is no penalty; you will have to cover your missing payments (up to a point) retroactively, though usually in installments, not all at once. Obviously, this is largely equivalent to a single-payer system, except that the government is less involved than in regular single-payer systems.

      If you’re a high income employee or self-employed, you can also opt for private health insurance (a relic of Bismarckian times, essentially). What you get in terms of benefits is largely between you and your insurer. You may, for example, be able to do without copays and instead take on a large deductible, but also get coverage for alternative medicine. The result of having a parallel private health insurance system is probably more harmful than helpful (and hard to defend given its obvious class-based roots), but may be difficult to overcome for various reasons, both practical and constitutional.

      Germany’s been using the following measures to cut costs. To be clear, I have no idea how effective they are, just that they’re being used:

      Copays are a fixed amount (10 Euro per day in a hospital) or a small percentage up to a fixed amount (10%, between 5-10 Euro for a drug prescription). They are capped annually at 2% of the part of your household income that exceeds a fixed exemption set by law (or 1% if you’re chronically ill). They aren’t meant to be a means of patients contributing to costs, but primarily to discourage “impulse purchases” of certain health services and goods.

      Copays for generics and other inexpensive prescription drugs are waived; in 2008, 85% of all prescribed drugs in Germany were reportedly generics as a consequence.

      There is a quarterly 10 Euro fee for seeing a doctor or dentist (with some exceptions, such as disease management programs, preventive dental services, etc. where it will be waived). You pay it the first time each quarter that you see a doctor, and can then see the same doctor again during the same quarter as often as you wish without incurring it again. The fee is also waived when being referred by your primary care physician. This is to (1) encourage making your primary care physician the first point of contact if you need treatment without making it hard or impossible to go to a specialist directly and (2) to discourage patients from seeing their doctors for trivial reasons.

      Costs of health services are heavily regulated (see above for details). Outside of primary care, there is also a large number of public and non-profit providers who have no profit motive and may also help with keeping prices down.

      The TL;DR version: it’s largely a single-payer equivalent system with a number of minor financial incentives to incentivize patient behavior that pays for all medically required treatment, but not for extras.

      All that said, German is also facing increasing costs, in large parts because of its aging population.

      1. I believe also that German pharmacists routinely override physicians who prescribe brand name drugs, replacing them with generics. This cuts cost (although sometimes the generics are not as good)

        1. I can’t say one way or the other, alas. As I mentioned before, I haven’t lived in Germany since I was a teenager. What I know is largely a summary of what family members and news sources tell me, verified by information on the web where I’m not sure.

          What I do know is that prescriptrion drugs used to be pretty expensive at a time due to the importance of Höchst AG in not only national R&D and production of pharmaceuticals, but international pharmacy R&D at the time. As the self-styled “pharmacy of the world” (“Apotheke der Welt”) it presumably lots of political pull, being fairly instrumental in keeping drug prices high.

          With the lessening importance of Höchst and the reduction of intra-European trade barriers, that became less and less of an issue (though, according to a TV report [1] I saw a few years ago, didn’t entirely disappear).

          [1] We have a separate satellite dish that allows us to receive most continental channels in addition to the British ones. While we don’t watch TV all that much, when we do, we like to have access to the German- and French-speaking channels also. Not only for news, but also for cultural stuff, such as opera performances at the continental theaters.

        2. I haven’t had a health plan since the 1970s (in the US) that didn’t require the default for prescriptions to be generic, and it to be a fairly extensive process to get a name brand instead of a generic when generic was available.


          1. In the United States, generics in 2011 accounted for around 75% of all prescription drugs, and the number is expected to rise.

            In the end, though, prescription drugs account for only a relatively small fraction of overall healthcare spending. It is still significant enough that we want to keep costs down in that sector, too.

            It is also not surprising that there is not a single big target that we can tackle easily. Budget problems, contrary to much of popular belief, rarely go away from just “cutting waste”. Most expenses in a budget are there for a reason, either backed up by actual needs, powerful influences, or because something has historically grown in a certain way (and thus is difficult to dismantle). Cutting expenses generally either hurts or is a time-consuming process.

            Let’s look at, say, hospital or physician/clinical services. A significant part of the cost that a healthcare provider typically has to deal with (and that patients unavoidably will have to eventually pay for, TANSTAAFL), is the bureaucratic overhead of dealing with health insurances, particularly billing. Physicians in America may employ a medical biller just for that purpose, causing significant costs, whereas in other countries billing may just be a small part of an assistant’s job.

            So, let’s say that we use a few years and significant political capital to simplify medical billing by heavily regulating how health services are being billed (which would be an enormously complicated process). It would most likely be worthwhile, but in the end we’d just reduce total healthcare costs by a few percent.

        1. In actuality, you probably do not want to model a healthcare system after Germany’s. German’ys healthcare system is full of historically grown artifacts (in part traceable back to the design of the original 1883 law); it was never fully reformed: what you see today is the result of a century’s worth of piecemeal amendment. Especially the interaction of the public and private healthcare systems creates a pretty big mess.

          Other countries have gone through far more thorough and fundamental reforms, ending up with overall significantly better and simpler systems, which should make for better models.

          At the same time, the German model indicates that imperfect systems can be gradually reformed. However, one also has to consider that Germany had a politically much easier road to travel — there was a broad cross-party consensus after WW2 that there should be a universal healthcare system (most of the German welfare legislation was actually passed by conservative governments). American healthcare reform is likely to be bumpier (even assuming it does not get completely derailed by either the Supreme Court ruling the PPACA unconstitutional or a president Romney and a Republican Congress repealing it through budget reconcilation).

  8. Let me see, if you can charge an amount for your product that allows you to maintain a certain profit margin then the amount you can charge depends upon the costs involved. Your cost are determined by how many employees you have and your overhead. In a normal business these are determined by what the consumers of your product will pay and what they can afford………..normal business.

    When the product you sell is also made from the consumers you sell to and the rates are determined by the state and by the NEEDS of those consumers, not wants but needs, and the result of being unable to pay for your needs means you might be bankrupted and in a system that no longer forgives the debts that bankruptcy might generate, and the state tells you you must under penalty purchase the insurance you need but that includes exclusions or high deductables…Then your consumers MUST purchase and the cost then can be raised way beyond to a level that is set not by normal business methods when there is NO Monopoly but by the same methods when there is a monopoly AND the incentives fro those you pay to also raise their prices so they can pay their professionals more and buy expensive equipment that remains expensive even given the advances in technology because they can sell to places that can afford the equipment and want can charge for the expensive equipment through the insurance companies that can then charge more.

    Add to this that the manufactures charge more because the rules and regulations and possible lawsuits force them too buy liability insurance just as doctors have to purchase malpractice insurance.

    Its not hard to see that the insurance companies make money from all ends and possible why Obama included a necessity to force citizens to purchase health insurance or the IRS would fine them, thus saving the insurance companies from a declining market place because of the recession AND the high fees for insurance they want/need to charge.

    Tell me this in not a classic Moral Hazard on Steroids problem and does not explain the exponential rise in medical costs…added to the advancing average age of the population..

  9. This fumbling around like a bunch of blind frogs is sickening.

    Other countries have solved this problem. Simply copy them.

    If the US government and political parties cannot solve a simple problem like this, let us hire the Swiss to choose a country to copy and freaking do it.

    1. It’s not quite that easy. So, let’s say you want to transition to a single-payer system. Let’s even assume that we have a Democratic president who is the second coming of RFK, a filibuster-proof majority in Congress that considers Bernie Sanders to be a center-left politician, and the political capital to push it through.

      So, first of all, we have a lot of insurance companies (plus quite a few not-for-profit insurance organizations) who suddenly are being made superfluous (or at least lose a huge chunk of their business). We’re talking about pretty significant layoffs here, just for starters. These people may be able to get employment in whatever agency is going to handle health insurance, but they may not, and for most average people, that’s a pretty big disruption.

      Second, when all is said and done, there will probably be quite a few Americans who will suddenly find themselves with a lower net income. We’d have a new payroll tax, employers would lose their tax benefits for providing health insurance, some will just pocket the difference for themselves rather than handing them to employees, and when all is said and done and a lot of money has been shifted around, then some people will have won, while others have lost. This may be relatively little or it may mean a couple hundred dollars less per month, which for a low income family can be a hell of a lot.

      Third, if you have successfully implemented your scheme, that doesn’t mean that it will actually have the desired effect immediately. There may be any number of issues with the implementation; you may inadvertently be causing more costs, or you may accidentally drive healthcare providers out of business.

      Simply put, you cannot just reorganize a two trillion dollar part of the economy overnight and not expect massive disruptions to occur. It’s not just a matter of feasibility, you may also be doing more harm than good.

      That, I think, is the main reason why the PPACA is designed as a far more gradual transition to a saner system. It may not do all we’d like it to be, but it’s also far less likely to upset the proverbial apple cart. I would have preferred a somewhat less cautious first step, but it IS first step. I would, for example, have preferred the public option, because injecting properly incentivized not-for-profit actors into markets that are corrupted by perverse incentives has been shown to have benefits before. But the PPACA provides a framework that can be refined later on if and when the PPACA has been accepted as the status quo.

      At the moment, however, we’re talking about political feasibility. The PPACA only made it through the Senate because Democrats had a (barely) filibusterproof majority, and even that required a fair amount of horsetrading (see: Cornhusker kickback). It passed the House on a razor-thin majority. Politics, in the end, is the “art of the possible”.

      1. It ought to be noted that the Cornhusker Kickback didn’t actually become law, partly because Nelson was roundly denounced from all sides and suddenly discovered he could vote for the ACA without it. It’s worth noting that Bart Stupak also tried a little expeditious blackmail- and got zip.

        Re: Massachusetts, this might be of some interest:

        “Massachusetts residents who participate in the state’s healthcare program are seeing their insurance premiums going down by 5 percent, officials say.
        While healthcare insurance premiums have gone up in other states, those participating in the state’s Health Connector Commonwealth Care program are enjoying a second year of reduced premium payments courtesy of the healthcare reform act signed into law by then Gov. Mitt Romney…”

        1. To be precise, the Cornhusker kickback technically did become law (for about a week) between when the original PPACA was passed and when it was amended through reconciliation. I believe Ben Nelson voted against the reconciliation bill, too.

          This caused a fair bit of a problem getting the Senate bill through the house; House Democrats had to be promised that the deal would be removed in the reconciliation bill (along with other amendments) before they’d voted for the unamended Senate bill (necessitated by the Scott Brown election, which made sending an amended bill to the Senate impossible).

      2. Note also that in the U.S. politically powerful groups have good insurance and thus like the status quo. This has been a challenge since World War II, and was made more so the case with Medicare, and even moreso with Medicare Part D. The political challenge is to ask people who like what they have to endure sacrifice and change for people who have little or nothing.

        1. There’s always the direct approach. Robert F. Kennedy was once asked by a medical student during a speech he gave at a university who would pay for all the social programs he wished to enact. RFK’s answer was blunt and direct: “You will.”

          Alas, while I give him points for not beating about the bush, I have my doubts that being direct would have overcome the power of lobbyists and other influential people, even if he had been elected.

          1. So maybe the edge of the omelet (where you start to be able to flip it as it cooks) is that a few of the bluer states will start a public option on their own, and the cost containment (through administrative overhead and other savings) will be so good that it renders the other (private insurer) offerings less competitive, and then slowly the political problem with the vampire-squid insurance companies will erode … or am I too starrily-eyed patriotic?

          2. Sorry, Betsy, my crystal ball is currently back at the magic store to be repaired, so all I could do is make wild guesses.

            The legislation specifically does allow for states to implement variations on the general scheme with the consent of the federal government. Specifically, section 1332 allows the Department of HHS to grant states waivers for programs for health plans that meet PPACA requirements. I know that Oregon and Vermont were interested in implementing even more radical changes than just adding a public option (Vermont is targeting a single-payer system).

          3. Katja, just a grateful word of acknowledgment: Your posts have been wonderfully informative. detailed, and patient — thank you.

  10. The US pays way more than any other country for health care as a proportion of GDP. I expect much of the difference relates to the share of private profit in the system. But health care costs are rising faster than the general rate of inflation just about everywhere in the world. Certainly the budgets of Canadian provinces (single payer public system, for the basics) are being eaten up by health care – approaching 50% in some, probably over 40% everywhere. Governments promise to (try to) balance their budgets by assuming that the increase in health care costs can match general inflation. So far no one has succeeded.

    Some of the causes and some of the attempted solutions have been mentioned in this thread. I personally think that Brett B is an optimist that technology will catch up with the aging population and the costs will start to come down, in proportion. There are certainly technical and technological advances that can help on a large scale – some system of e-health records, for example – but the drivers of costs are diverse and stubborn.

    1. This is a very good point John G — in recent years the UK NHS and some of the other socialized systems have had more inflation that the US, so inflation it’s not as simple as public vs. private. And I agree with you that technology will not save us, in fact it could make the cost problem worse by leading to new, expensive procedures which people expect their insurance to cover.

  11. Betsy, medical care exspenses ARE deductible, after you surmount the 10% of income threshold, one of the many deduction limitations progrssives like you insist on so that higher income folks can’t deduct much of anything.

    Of course, if you don’t pay any taxes in the first place, the deductibility of such expenses won’t help you much.

    As to the greater point raised by Keith (and strengthened by Brett), I am glad to see that at least one of your tribe understands that ultimately the Mass. plan (and PPACA) is unsustainable. In fact, I expect Gov. Romney to ultimately disavow the Mass. plan during the campaign (which he should have done much earlier) and point out how the legislature there distorted what started out as a workable plan.

    Brett is right, of course, that we all don’t have the right to any old medical procedure or drug that we want, somebody eventually has got to pay. Progressives have a hard time with this because they believe everyone has that right, but it’s a pipe dream. And when you force insurers to give up underwriting, the risk becomes uninsurable.

    As for Brett’s optimism about future drugs and procedures bringing costs down through prevention, I agree but over a much longer time frame. Of course, we might shorten up that time frame with a more rational regulatory approach at the FDA.

    1. Let’s talk about the perceived unsustainability of the Massachusetts plan.

      Apparently, the $61 billion in healthcare costs are not state spending (the state’s budge is about $34-$35 billion only), but is the total healthcare spending within the state. Massachusetts had a Gross State Product of $365 billion in 2009 and 17.2% of its GSP went to healthcare spending (based on the state of the provider). That would amount to about $62.8 billion in 2009. If you calculate things differently (state of resident rather than state of provider) you’ll probably end up with slightly different values which is where the $61 billion come from. The article isn’t entirely clear where it got its numbers from, the referred website has far too many tables to pinpoint one.

      Spending 17.2% of GSP on healthcare is fairly middle of the road for an American State.

      Actual state spending on healthcare has increased since the introduction of the new system. This is not really surprising, given that the legislation was successful in insuring a lot of new people and healthcare costs are rising. There have also been offsetting savings. Overall, the growth of healthcare costs still exceeds GDP growth, but not dramatically, and that’s the case everywhere.

      As to premiums, Healthcare Connector (the MA insurance exchange) premiums fell last year and are expected to fall by another 5%. In general, premiums seem to have been pretty stable; that the price of the bronze plan has risen is likely because it was underpriced initially.

      I’m not sure how the authors arrive at healthcare consuming 54% of the state’s budget in FY 2012. As you can see above, the numbers do not seem to even come close.

      Yes, healthcare is expensive and cost control is a problem. I’m just not sure how the out-of-control growth elsewhere in the US is any better.

        1. Isn’t the reason for that simply Massachusetts’s more expansive eligibility criteria for Medicaid (MassHealth)?

          1. No doubt, but my point is that Medicaid is growing very rapidly as a share of the state budget (it’s about a third), and those funds do not count the Commonwealth Care fund that subsidizes insurance with public money — that’s how you get to majority of the state budget being spent on health care.

            Note what Austin says, Massachusetts is number one in the country just counting Medicaid, and then they have another large fund which no other state has.

            That’s why I think you are likely understating the fiscal challenges they face.

          2. Well, MA healthcare spending compared to FY 11 is actually projected to go down.

            And over seven years, since the introduction of the new system, (FY 06-FY 12 inclusive), it’s a bit more than an amortized 2% p.a. increase ($12,7 billion*1.02^7 = ~$14.6 billion).

            I wouldn’t get complacent, but I don’t see grounds for panic, either.


    2. No they’re not. I spent $2900 out of pocket last year (as a HEALTHY person, on a GOOD insurance plan) and none of it was deductible because it didn’t get up beyond the 7.5% of AGI threshold.

      Needless to say, *I* didn’t ask for that cap. Straw man attempt on your part.

      I do pay taxes … plenty. More than any of your banksters.

    1. There is no doubt this is important, particularly as one starts getting into specialities and subspecialties. That’s a big reason why many doctors move to the US from other countries.

      1. When attacking bloat, I suggest we start with the parasites rather than the host or the useful symbiotic partners.

        There’s many problems with the doctor-centered system we’ve developed but, on the.whole, let’s first target the parasites whose only role is financial and who add only pain and suffering to the system, aka the insurance mafia.

        When we get the insurance gangsters out of the picture and doctors can practice the without full time billing specialists and dealing with insurance companies whose operational DNA is to deny, lie, and delay, we can reevaluate the doctoring pay scales. My neighbor is a physician retired too early. She liked medicine, but grew to loathe insurance parasites, most of whom should be jailed for practicing medicine without a license, and the way that they grew in power and control in direct proportion to the degree to which they were able to not care about the effect of their decisions on sick people.

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