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Massachusetts Miracle or Massachusetts Miserable: What the Failure of the "Massachusetts Model"Tells Us about Health Care Reform

June 9, 2009

When Massachusetts passed its pioneering health care reforms in 2006, critics warned that they would result in a slow but steady spiral downward toward a government-run health care system. Three years later, those predictions appear to be coming true: Although the state has reduced the number of residents without health insurance, 200,000 people remain uninsured. Moreover, the increase in the number of insured is primarily due to the state's generous subsidies, not the celebrated individual mandate. Health care costs continue to rise much faster than the national average. Since 2006, total state health care spending has increased by 28 percent. Insurance premiums have increased by 8-10 percent per year, nearly double the national average. New regulations and bureaucracy are limiting consumer choice and adding to health care costs. Program costs have skyrocketed. Despite tax increases, the program faces huge deficits. The state is considering caps on insurance premiums, cuts in reimbursements to providers, and even the possibility of a "global budget" on health care spending -- with its attendant rationing. A shortage of providers, combined with increased demand, is increasing waiting times to see a physician. With the "Massachusetts model" frequently cited as a blueprint for health care reform, it is important to recognize that giving the government greater control over our health care system will have grave consequences for taxpayers, providers, and health care consumers. That is the lesson of the Massachusetts model.

Obamacare to Come: Seven Bad Ideas for Health Care Reform

May 21, 2009

President Obama has made it clear that reforming the American health care system will be one of his top priorities. In response, congressional leaders have promised to introduce legislation by this summer, and they hope for an initial vote in the Senate before the Labor Day recess. While the Obama administration has not, and does not seem likely to, put forward a specific reform plan, it is possible to discern the key components of any plan likely to emerge from Congress: At a time of rising unemployment, the government would raise the cost of hiring workers by requiring employers to provide health insurance to their workers or pay a fee (tax) to subsidize government coverage. Every American would be required to buy an insurance policy that meets certain government requirements. Even individuals who are currently insured -- and happy with their insurance -- will have to switch to insurance that meets the government's definition of "acceptable insurance." A government-run plan similar to Medicare would be set up in competition with private insurance, with people able to choose either private insurance or the taxpayer-subsidized public plan. Subsidies and cost-shifting would encourage Americans to shift to the government plan. The government would undertake comparative-effectiveness research and cost-effectiveness research, and use the results of that research to impose practice guidelines on providers -- initially, in government programs such as Medicare and Medicaid, but possibly eventually extending such rationing to private insurance plans. Private insurance would face a host of new regulations, including a requirement to insure all applicants and a prohibition on pricing premiums on the basis of risk. Subsidies would be available to help middle-income people purchase insurance, while government programs such as Medicare and Medicaid would be expanded. Finally, the government would subsidize and manage the development of a national system of electronic medical records.Taken individually, each of these proposals would be a bad idea. Taken collectively, they would dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and -- most importantly -- the quality and range of care given to patients.

The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World

March 18, 2009

Critics of the U.S. health care system frequently point to other countries as models for reform. They point out that many countries spend far less on health care than the United States yet seem to enjoy better health outcomes. The United States should follow the lead of those countries, the critics say, and adopt a government- run, national health care system. However, a closer look shows that nearly all health care systems worldwide are wrestling with problems of rising costs and lack of access to care. There is no single international model for national health care, of course. Countries vary dramatically in the degree of central control, regulation, and cost sharing they impose, and in the role of private insurance. Still, overall trends from national health care systems around the world suggest the following: Health insurance does not mean universal access to health care. In practice, many countries promise universal coverage but ration care or have long waiting lists for treatment. Rising health care costs are not a uniquely American phenomenon. Although other countries spend considerably less than the United States on health care, both as a percentage of GDP and per capita, costs are rising almost everywhere, leading to budget deficits, tax increases, and benefit reductions. In countries weighted heavily toward government control, people are most likely to face waiting lists, rationing, restrictions on physician choice, and other obstacles to care. Countries with more effective national health care systems are successful to the degree that they incorporate market mechanisms such as competition, cost sharing, market prices, and consumer choice, and eschew centralized government control. Although no country with a national health care system is contemplating abandoning universal coverage, the broad and growing trend is to move away from centralized government control and to introduce more market-oriented features. The answer then to America's health care problems lies not in heading down the road to national health care but in learning from the experiences of other countries, which demonstrate the failure of centralized command and control and the benefits of increasing consumer incentives and choice.

A Fork in the Road: Obama, McCain, and Health Care

July 29, 2008

Healthcare reform will be one of the top issues of the 2008 presidential election. In the face of widespread public demand for changes in the U.S. health care system, both Barack Obama and John McCain have offered detailed proposals for reform. Senator Obama's approach relies heavily on government mandates, regulations, and subsidies. He would mandate that employers provide health care coverage for their workers and that parents purchase health insurance for their children. He would significantly increase regulation of the insurance industry, establishing a standard minimum benefits package, and requiring insurers to accept all applicants regardless of their health. He would offer a variety of new and expanded subsidies to middle- and low-income Americans. In contrast, John McCain emphasizes consumer choice and greater competition in the health care industry. He would move away from our current employment-based insurance system by replacing the current tax exclusion for employer-provided insurance with a refundable tax credit for individuals. At the same time he would sharply deregulate the insurance industry to increase competition. Senator McCain's proposal is far from perfect, but from a free-market perspective, it appears superior to Senator Obama's plan. Obama's plan, with its heavy reliance on government, leads to the same problems that bedevil universal health care systems all over the world: limited patient choices and rationed care. McCain's proposal is much more consumer centered and taps into the best aspects of the free market.

No Miracle in Massachusetts: Why Governor Romney's Health Care Reform Won't Work

June 6, 2006

Massachusetts has enacted one of the most far-reaching state health insurance reform packages in recent decades. Much attention has been focused on the act's unprecedented mandate that every resident obtain health insurance coverage. However, the act goes far beyond an individual mandate to radically change the way health insurance is bought and sold in the state. Many observers see Massachusetts's reforms as a model for the nation, but a closer look provides ample reasons to be skeptical. Among them: The individual mandate opens the door to widespread regulation of the health care industry and political interference in personal health care decisions. The act's subsidies are poorly targeted and overly generous. The Massachusetts Health Care Connector, which restructures the individual and small business insurance markets, is a form of managed competition that has the potential to severely limit consumer choice. The act imposes new burdens on business and creates a host of new government bureaucracies to manage the health care system. Health care needs more consumer control and freer markets, not more government regulation, controls, and subsidies. The Massachusetts reform takes us in the wrong direction.

Keep the Cap: Why a Tax Increase Will Not Save Social Security

June 8, 2005

Some opponents of allowing younger workers to privately invest a portion of their Social Security taxes through individual accounts have suggested that most or all of Social Security's financial problems can be solved if the current cap on income subject to the Social Security payroll tax is raised or removed altogether. Indeed, public opinion polls show widespread public support for the idea. Even President Bush appears open to the idea, although only in the context of larger reforms that would also include the creation of personal accounts. However, removing the cap would create the largest tax increase in U.S. history: $ 1.3 trillion over the first 10 years. Even increasing the cap to cover the first $150,000 of wages would amount to $384 billion in new taxes. It would give the United States one of the highest marginal tax rates in the industrialized world, with the potential for severely disrupting economic growth. Yet in exchange for this massive tax increase, Social Security would gain only an additional seven years of cash-flow solvency. In the end, proposals for changing the taxable wage cap are all pain and no gain. With a viable alternative -- creating personal accounts -- Congress should not go down this road.

A Better Deal at Half the Cost: SSA Scoring of the Cato Social Security Reform Plan

April 26, 2005

The Social Security Administration's Office of the Actuary has officially "scored" the Individual Social Security Investment Program Act (HR 530), introduced by Reps. Sam Johnson (R-TX) and Jeff Flake (R-AZ). That legislation is based on the Cato Institute's 6.2 Percent Solution. (There are slight differences between the Cato plan and the final draft of the legislation, but these would not significantly change the scoring.) According to SSA's actuaries, the 6.2 Percent Solution would eliminate Social Security's long-range actuarial deficit and restore the system to permanent "sustainable solvency." The legislation compares very favorably to other Social Security reform plans. In terms of giving workers more control and ownership of their retirement funds, the 6.2 Percent Solution clearly provides the most "bang for the buck." By 2046, the system would begin running surpluses, allowing any short-term debt to be repaid. Indeed, by the end of the 75-year actuarial window, the system would be running surpluses in excess of $1.8 trillion (in constant $2005). The SSA analysis shows that the 6.2 Percent Solution can provide large individual accounts while restoring Social Security to permanent sustainable solvency, and can do so in a fiscally responsible manner.

Corrupting Charity: Why Government Should Not Fund Faith-Based Charities

March 22, 2001

President George W. Bush has proposed that faith-based charities be made eligible to receive billions of dollars in federal grants to provide social services. But doing so risks mixing government and charity in a way that could undermine the very things that have made private charity so effective. Government dollars come with strings attached and raise serious questions about the separation of church and state. Charities that accept government funds could find themselves overwhelmed with paperwork and subject to a host of federal regulations. The potential for government meddling is tremendous, and, even if regulatory authority is not abused, regulation will require a redirection of scarce resources from charitable activities to administrative functions. Officials of faith-based charities may end up spending more time reading the Federal Register than the Bible. As they became increasingly dependent on government money, faith-based charities could find their missions shifting, their religious character lost, the very things that made them so successful destroyed. In the end, Bush's proposal may transform private charities from institutions that change people's lives to mere providers of services, little more than a government program in a clerical collar. Most important, the whole idea of charity could become subtly corrupted; the difference between the welfare state and true charity could be blurred. Charitable giving is at a record high; there is no need to risk deepening the involvement of government and religious charity. President Bush should abandon his proposal and leave charities to do what they do best.

Disparate Impact: Social Security and African Americans

February 5, 2001

Perhaps no group has as much at stake in the debate over Social Security reform as do African Americans. Elderly African Americans are much more likely than their white counterparts to be dependent on Social Security benefits for most or all of their retirement income, yet the current system often works to their disadvantage. Despite a progressive benefit structure, Social Security benefits are inadequate to provide for the retirement needs of the elderly poor, leaving nearly 30 percent of African-American seniors in poverty. Moreover, because African Americans generally have shorter life expectancies than do whites, they receive less total Social Security payments over the course of their lifetimes. Social Security also contributes to the growing wealth gap between blacks and whites. Because Social Security taxes squeeze out other forms of saving and investment, especially for low-income workers, many African Americans are unable to accumulate real wealth. And, since Social Security benefits are not inheritable, that wealth inequity is compounded from generation to generation. Traditional Social Security reforms such as raising the retirement age, cutting benefits, or increasing taxes would only make the problem worse. On the other hand, African Americans would be among those with the most to gain from the privatization of Social Security--transforming the program into a system of individually owned, privately invested accounts.

Union Workers Should Support Social Security Privatization

September 7, 1998

Union leaders have been among the most vocal opponents of privatizing Social Security. Their opposition is something of a mystery, because union workers would be among those who would gain the most if Social Security were transformed to a system of individually owned, privately invested accounts. Because a privatized Social Security system would provide a higher rate of return, union workers would receive far greater benefits than they would under the current Social Security system. In contrast, traditional Social Security fixes, such as raising payroll taxes, would severely harm union workers. Perhaps more important, privatizing Social Security would break down traditional barriers between labor and capital by giving workers a greater opportunity to own wealth-producing investments. In effect, every laborer would become a capitalist.