The High Costs Of Universal Health Coverage

by Pejman Yousefzadeh on July 16, 2009

If health care reform gets passed, and signed into law, its proponents may well have Mitt Romney to thank. The former Governor of Massachusetts helped push through a universal coverage law that has pushed the percentage of uninsured in the state down to 2.6%.

Unfortunately, the costs of the law may well outweigh the benefits:

A hospital that serves thousands of indigent Massachusetts residents sued the state on Wednesday, charging that its costly universal health care law is forcing the hospital to cover too much of the expense of caring for the poor.

The hospital, Boston Medical Center, faces a $38 million deficit for the fiscal year ending in September, its first loss in five years. The suit says the hospital will lose more than $100 million next year because the state has lowered Medicaid reimbursement rates and stopped paying Boston Medical “reasonable costs” for treating other poor patients.

“We filed this suit more in sorrow than in anger,” said Elaine Ullian, the hospital’s chief executive. “We believe in health care reform to the bottom of our toes, but it was never, ever supposed to be financed on the backs of the poor, and that’s what has happened in Massachusetts.”

The central charge in the suit is that the state has siphoned money away from Boston Medical to help pay the considerable cost of insuring all but a small percentage of residents. Three years after the law’s passage, Massachusetts has the country’s lowest percentage of uninsured residents: 2.6 percent, compared with a national average of 15 percent.

Low-income residents, who have benefited most from expanded access to health care, receive state-subsidized insurance, one of the most expensive aspects of the state plan. But rapidly rising costs and the battered economy have caused more problems than the state and supporters of the 2006 law — including Boston Medical — anticipated.

According to the suit, Massachusetts is now reimbursing Boston Medical only 64 cents for every dollar it spends treating the poor. About 10 percent of the hospital’s patients are uninsured — down from about 20 percent before the law’s passage in 2006. But many more are on Medicaid or Commonwealth Care, the state-subsidized insurance program for low-income residents.

One of the state’s reimbursement rates to Boston Medical, dropped from $12, 476 in 2008 to $9,323 by 2009, the suit says.

The story mentions that Boston Medical is not likely to prevail in its suit. But that is really not the point. Rather, the point is that Massachusetts’s universal coverage law has managed to throw hospitals like Boston Medical into financial crisis, meaning that the ability of those hospitals to stay in business and provide health coverage is now seriously in doubt.

There is no point in having universal health coverage if the end result is to cause health care providers to go out of business. Such a policy approach helps no one in the end. I don’t know if anyone in the Obama Administration is paying attention to this particular lesson, but it would be crazy not to.

And by the way, if Mitt Romney does decide to run for President again in 2012, he ought to answer for the deleterious policy consequences of his health care reform plan. There is just no way that these policy outcomes are defensible.

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