Massachusetts Governor Hiking Taxes To Rescue Failed Health Reform

(A version of this Health Alert was published by Forbes.)

Governor Charlie Baker of Massachusetts has proposed a tax of $2,000 per worker on businesses which do not offer health coverage to employees who become dependent on Medicaid. This makes him the second Republican governor of Massachusetts to buy into the notion that imposing taxes (or fines or penalties or fees) on individuals and businesses can force them to accept responsibility for government failure at getting health spending under control.

image017bEvidence from Massachusetts and the nation shows the opposite is true. Yesterday, I testified on the effect of Obamacare’s individual mandate before the Oversight Subcommittee of the U.S. House of Representatives’ Ways and Means Committee. (The video is at this link, and my written testimony is at this link.)

I was joined on the panel of witnesses by Dr. John E. McDonough of Harvard University’s T.H. Chan School of Public Health. Professor McDonough was a central figure in Governor Mitt Romney’s 2006 Massachusetts health reform, where the individual mandate was first implemented. Governor Romney tried to label it a “conservative” or “Republican” idea. The spin was that the mandate characterized individual responsibility.

The reality is the mandate merely camouflages significant growth of government spending and control over health insurance. This has been the case in Massachusetts since day one: Spending has grown out of control despite many failed efforts to bend the cost curve.

In its 2007-2008 Progress Report, the state noted 97,000 uninsured residents (58 percent of the uninsured) were assessed a (very small) penalty in 2007. However, of the 434,000 who became newly insured through March 2008, 72,000 were enrolled in the fully subsidized MassHealth program and 176,000 in the partially subsidized Commonwealth Care. Although, a majority of enrollees in Commonwealth Care did not actually pay any premium.

The proportion paying premium was just 42 percent in 2013 (the last year before Obamacare threw federal subsidies into the mix). For most beneficiaries, Commonwealth Care was wholly welfare, not “individual responsibility”.State and federal spending attributable to Massachusetts health reform almost doubled from $1.0 billion in 2006 to $1.9 billion in 2011.

Hospitals’ emergency department use increased by 17 percent in the two years after the reform was implemented. (Plenty of evidence, reaching as far back as the Canadian province of Quebec’s guaranteeing universal coverage in 1971 shows emergency departments see more patients, not fewer, after such a reform.)

Insurers were crushed by skyrocketing claims. The state insurance commissioner refused 235 of 276 rate hikes for April 2010 and demanded that plans rebate premiums that had already been paid. Massachusetts’ health plans hemorrhaged cash, and a senior regulator described the situation as a “train wreck” (Robert Weisman, “State Acts to Oversee 3 Insurers, Boston Globe, June 11, 2010).

What these taxes and fines and penalties and growth in welfare really accomplish is feeding more unaccountable money into hospitals and other health services facilities. From January 2008 (the national high-water mark of employment before the Great Recession) through December 2016, Massachusetts added 302,000 nonfarm civilian jobs. However, 164,000 – more than half – are in education or health services, which grew 26 percent. Non-health jobs grew only five percent. This is surely way out of whack.

I respect Governor Baker is responding to ballooning health costs that are partially the result of Obamacare. Nevertheless, hiking taxes on businesses to pay for a failed decade old state health reform that paved the way for Obamacare is not a good sign for Massachusetts’ ability to respond to Congress’ imminent repeal of Obamacare in favor of state-regulated insurance markets.

Comments (27)

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  1. Ron Greiner says:

    Real markets would work best. Senator Rand Paul is not one of these Socialist Republicans like Mitt.

    Paul’s plan would provide a two-year “open enrollment” period during which people with pre-existing conditions could not be denied coverage. After that window, the laws would revert to as they were before the ACA.

    That’s called repealing Obamacare.

  2. Paul Nelson says:

    It is my understanding that some of the details for ACA 2010 were modeled after the Massachusetts universal healthcare insurance plan. I would hope that dismantling ACA 2010 doesn’t just reappear as a reformatted variant. I continue to hold that universal health insurance will eventually bankrupt our Federal government and Massachusetts without 1) a community by community effort to enhance its ‘social capital’ as a means to manage its own ‘common good’ for minimizing the adversities that seriously influence the Stable HEALTH of their citizens, 2) assuring that the community’s Primary Healthcare is equitably available to and ecologically accessible by each citizen and 3) an annually revised community disaster preparedness plan for mitigating its knowable disasters as a basis to mitigate the occurrence of any unanticipated disaster. Along with the a decentralized, locally supported commitment, the economic mandate and social mandate for universal health insurance must distribute the risk management for its stability among all the vested interests: Primary Healthcare, Complex healthcare, State by State health insurance, each citizen, Medical Schools, Health systems/enterprises, community by community level of social capital investment for improving its ‘common good,’ Federal catastrophic risk, and Public Health governance. We have no nationally sanctioned institution to modulate these vested interests in a manner to justly and reliably achieve “Stable HEALTH” for each citizen. As a result, the excess cost of our nation’s healthcare will continue drive our nation into international bankruptcy.
    Over-all our inability to offer equitably available, ecologically accessible, justly efficient and reliably effective healthcare to each citizen will jeopardize our nation’s autonomy within the world-wide market places for its Resources, Knowledge AND Human Dignity. This month we have a very unique opportunity to change direction.
    How about a new “Big/Hairy/Audacious/Goal,” aka BHAG? Reduce the cost of our nation’s healthcare to 17% of the GDP in 5 years, 14% of the GDP in 10 years, and 11% of GDP in 15 years. And, all of this, along with a reduction of our nation’s maternal mortality ratio by 40% in 5 years, 60% in 10 years and 80% in 15 years. Its likely that 500 women died with a pregnancy in 2013 just because they lived in the USA rather than Ireland or…

    • Ron Greiner says:

      We get some crazy central planners here at the NCPA blog but you Paul take the cake.

      YOU write, “Its likely that 500 women died with a pregnancy in 2013 just because they lived in the USA rather than Ireland or…”

      Maybe we should send all American women to Ireland to have their babies so they can get your so-called “Stable HEALTH”.

      • Paul Nelson says:

        In 2013, 3.9 million live children were born in the USA. Our maternal mortality ratio was “17” yielding 663 deaths. The top 5 developed nations with the best maternal mortality ratio averaged “4”. [ 4 x 39 = 156 and 663 – 156 = 507 ] Agreed their are many HEALTH ecologic factors involved. But, the fundamental observation is that the difference is a really big problem. Remember that the USA MMR has a worsening trend for the last 40-50 years. NO other developed nation has worsened over that time interval. There are many, highly significant issues with our nation’s data. See MacDorman et al, OBSTETRICS & GYNECOLOGY, Sept 2016, 128:3:447-455 Of special note: the lack of an accurate set of State by State MMR data is probably THE determining factor for any rational discussion of maternal health care, community by community.

        How about a BHAG for healthcare reform of NO maternal deaths, community by community. Just think of the ‘social capital’ required for this and its related effect on the HEALTH of every citizen, not to mention its related decrease in cost.

        • Ron Greiner says:

          Paul, you want – “How about a BHAG for healthcare reform of NO maternal deaths, community by community.”

          “Big/Hairy/Audacious/Goal,” lol

        • John Fembup says:

          Paul, as I read your comment, it seems to me that you are describing a public health problem – coupled with the inability to access proper maternal medical care.

          It also seems to me that the inablilty to access proper maternal medical care stems from the high cost of delivering that care. Insurance may be necessary to help people pay for the care – but insurance cannot solve the problem of high medical delivery cost.

          I’ve though for years that the fundamental problem – not just for maternal care, but for all medical care – is the high and rising cost of delivering that care. That is the “upstream” factor that drives so many of the “downstream” problems. I think we waste time and resources trying to solve the problem by alleviating symptoms, rather than curing the disease.


          • Paul Nelson says:

            Do we have any population based evidence that the insurance by ACA 2010 for the coverage of 20 million citizens has improved their health? NO
            Remember that our nation’s maternal mortality ratio (MMR) continues to go up, as in worsening, annually for a long time. We rank near the worst MMR levels of ALL the developed nation’s of the world. It is likely that the social determinants for HEALTH are much more significant than we realize. Until we recognize this issue, no configuration of health insurance will improve its cost or quality, even with a single payer and rationing. The use of high deductibles has merely diminished the accessibility to healthcare.

        • Allan says:

          Paul, I have asked before. Don’t you think drug and alcohol abuse contribute substantially to our high maternal death rates? We have a big problem in this area and it spills off tremendously onto infant mortality. Data registry and reporting criteria are involved as well along with the definition of maternal mortality.

          For the same reasons you state that maternal mortality is high in previous years our healthcare system was blamed for high infant mortality. However, when the weight at birth was taken into account it was found that we were the best in treating those low weight deliveries that are most likely not to survive and in the top tier with normal birthweights.

          Unless you have the actual data I think the way you are presenting this problem is wrong. I think that if our infant mortaliity is in top tier when socio economic problems are separated from healthcare then I think our maternal death rate should occupy a similar place.

          • John Fembup says:

            Allan, I think denial rules when anyone brings up the notion that our behaviors affect our health. Because that necessarily leads to “responsibility” and that is forbidden.

            Understand? Forbidden!! 😎

            But in fairness i think personal responsibility for one’s health behavior is actually what Paul is getting at when he says “it is likely that the social determinants for HEALTH are much more significant than we realize”.

            • Allan says:

              John, I hope personal responsibility of one’s health behavior is what Paul is getting at now. Remember my understanding of what one says is based upon what has been said previously. Take note that the lead in sentence of my above response was “Paul, I have asked before.”. I will leave it up to Paul to state what he believes, but I want to make sure that no one uses bogus statistics to promote an ideology or unfairly denegrate American healthcare.

              • Barry Carol says:

                So if someone develops heart disease or lung cancer because they didn’t take good care of themselves and then need expensive healthcare to help them live with the consequences of their poor personal behavior for as long as possible, what are you suggesting exactly? Are you suggesting that they don’t deserve healthcare or shouldn’t get it unless they can pay for it out of pocket or that they shouldn’t get a subsidy to help them buy health insurance coverage? Are they less deserving of healthcare than someone who got sick because of bad genes or no fault of their own? What exactly is the message here? Everyone already knows that personal behavior and socioeconomic status are important determinants of health status.

                • Lee Benham says:

                  Nearly 1/2 of the world’s population live on less than 2.50 a day thats more than 3 billion people. If your family income is $10,000 a year, you are wealthier than 84 percent of the world. If it’s $50,000 or more a year, you make more than 99 percent of the world.

                  Why are we subsidizing the wealthy?

                • Allan says:

                  Barry, the comment that regarded personal responsibility had to do with the causes of our poor statistics regarding maternal mortality and nothing to do with how to finance those with significant illness.

  3. Paul Nelson says:

    One last comment. The best research study reported recently regarding ‘social capital’ appeared in April 2016. See Chetty et al. The association Between Income and Life Expectancy in the United States, 2001-2014. JAMA 315:1750-66,2016.
    SOCIAL CAPITAL may be defined as: a community’s level of altruism that is shared among its citizens and its local institutions as a basis to promote the networks of ‘caring relationships for improving the outcome of any ‘collective action’ strategy intended to augment the resiliency of the community’s ‘common good.’ The best reference for social capital is: Ostrom and Ahn, FOUNDATIONS OF SOCIAL CAPITAL, Edward Elgar Publishing Limited, 2003.

  4. Ron Greiner says:

    John, MDs don’t like your idea of block grants to the states for Medicaid. MDs think like me in recent polling:

    More than half (59 percent) of the physicians surveyed supported tax credits that would allow the purchase of private insurance by people eligible for Medicaid, the federally-financed but state-run health insurance program for the poor.

  5. Hunter Business School says:

    How many times do we have to reform healthcare before we get it right. Even if we keep making it better.