Massachusetts Legislators Take $100 Million From Hospitals

Watching the Massachusetts health care reform unfold is like watching a tragic game of whack-a-mole.  As I noted before, the expected cost-savings have largely not materialized, pushing the thing way over budget, and despite the fact that it already had the highest rates in the country, the cost of insurance is rising at a brisk rate of roughly 10% a year.  The best you can say about this cost problem is the wan defense that I've now heard several times:  that by provoking a crisis, the system may now finally do real delivery service reform that will control costs.

Maybe.  That's not actually what they've done so far; what they've done is appoint a commission, and attempt to control insurance prices.  Now that the providers are, predictably, losing money, the legislators are taking the mallet to the providers.  Hospitals that make too much money are going to have to make a "one time contribution" of $100 million to a fund to help small businesses buy insurance.

Even if you're in favor of the healthy reform, this is a lousy, desperate way to go about it.  This kinds of mandatory "contributions" are essentially a punishment for past, legal behavior.  Practically, they tend to be vulnerable to regulatory takings challenges.  Economically, they dramatically ratchet up the risks of doing business in Massachusetts, which tends to do less than delightful things to your market as companies scale back their operations, transfer as much business as possible out of state, or decide to focus their efforts on things the government doesn't care about so much, like plastic surgery.  And financially, the costs almost always come back at your consumers, as companies ratchet up their rates to make up the losses.

The quality of legislation coming out of Massachusetts on this stuff right now is really frighteningly bad.  There's none of the technocratic fine tuning that we were assured was the greatest reward of this sort of program, just crude, blanket rules that do much reflect the realities of the market.  Rather, they're a cathartic outlet for legislators frustration that any reality exists outside of the power of their pens.

Maybe the federal program will be different.  But I'm really not seeing how.  Ironically, the cash infusion from the Feds may save the Massachusetts program from bankruptcy.  But I don't know who's going to take care of the rest of us.