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A Tale Of Two States


Stanley Feld M.D., FACP,MACE

The tale of two States demonstrates the difference between doing healthcare reform incorrectly and correctly.

Obamacare is fashioned after the Massachusetts healthcare reform plan. It leaves the administrative services in the hands of the healthcare insurance industry.

Indiana empowers consumers to control their healthcare dollars.

Therein lies the difference between ineffective and effective healthcare reform.


President Obama has even given the State of Massachusetts $8 billion dollars in bailout money to support the failed healthcare reform plan.

“MASSACHUSETTS HAS been lauded for its healthcare reform, but the program is a failure. Created solely to achieve universal insurance coverage, the plan does not even begin to address the other essential components of a successful healthcare system.”

President Obama’s healthcare reform plans goals mimic the goals of the Institute of Medicine. His goals are coverage should be universal, not tied to a job, affordable for individuals and families, affordable for society, and it should provide access to high-quality care for everyone.

No one would disagree with these goals. Massachusetts’ healthcare reform plan had these goals

“The state’s plan flunks on all counts.”

“First, it has not achieved universal healthcare, although the reform has been a boon to the private insurance industry. The state has more than 200,000 without coverage, and the count can only go up with rising unemployment.

Second, the reform does not address the problem of insurance being connected to jobs. For individuals, this means their insurance is not continuous if they change or lose jobs. For employers, especially small businesses, health insurance is an expense they can ill afford.

Third, the program is not affordable for many individuals and families. For middle-income people not qualifying for state-subsidized health insurance, costs are too high for even skimpy coverage. For an individual earning $31,213, the cheapest plan can cost $9,872 in premiums and out-of-pocket payments. Low-income residents, previously eligible for free care, have insurance policies requiring unaffordable copayments for office visits and medications.

Fourth, the costs of the reform for the state have been formidable. Spending for the Commonwealth Care subsidized program has doubled, from $630 million in 2007 to an estimated $1.3 billion for 2009, which is not sustainable.

Fifth, reform does not assure access to care.”

The Governor of Massachusetts in now threatening to institute price controls. Price controls never work.

There is little hope it will work now. Former Governor Mitt Romney sold this plan as a way to control spending. The new entitlement has failed to control costs. For fiscal 2010 the cost over budget is $47 million and in fiscal 2011 the cost is estimated at $913 million. The original estimated cost was two thirds less.

The plan could never work because the health insurance industry had control over the healthcare dollars and kept raising premium prices.

Last month, Democratic Governor Deval Patrick landed a neutron bomb, proposing hard price controls across almost all Massachusetts health care. State regulators already have the power to cap insurance premiums, which Mr. Patrick is activating. He also filed a bill that would give state regulators the power to review the rates of hospitals, physician groups and some specialty providers. Those that are deemed too high "shall be presumptively disapproved."

The Massachusetts healthcare reform plan is not beyond price controls.

On the other hand the State of Indiana has conducted a different experiment. They have instituted a system using Healthcare Savings Accounts (HSA). It has been very successful.

The healthcare reform was set up as a healthcare insurance option for State s. In the first year only 4 percent of State employees signed up for the HSA option.

In the second year over 70 percent of Indiana’s 30,000 state workers chose the HSA option.

The HSA option has proven highly popular, says Mitch Daniels, Indiana’s governor, by far the highest in public-sector America.”

This is how it works;

  • In Indiana’s HSA, the state deposits $2,750 per year into an account controlled by the employee. The employee pays all his health bills controlling his first healthcare dollars. The State of Indiana pays the premium for the plan.
  • The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.
  • It turned out that a very small number of employees (about 6 percent last year) used their entire $2,750 account balance.
  • The unused funds in the account (to date some $30 million or about $2,000 per employee) are the State employee’s permanent property.
  • The State shares further health costs up to an out-of-pocket maximum of $8,000, after which the employee is completely protected.

The State found that individually owned and directed health-care coverage has a startlingly positive effect on costs for both employees and the state.” State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative.

Mitch Daniels says the state is saving, too.

In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of high HSA enrollment.”

“Mercer, a healthcare consultant calculates the state’s total costs are being reduced by 11 percent due solely to the HSA option.” 

The contrasts between the financial results of the two states are obvious. Obamacare is similar to the Massachusetts plan with added infringements on freedom to choose. It will fail.

The Indiana healthcare reform plan can be improved upon using the ideal Medical Savings Account.

There is no reason not to try a plan similar to the Indiana plan in most States. States are required to have a balanced budget. The Senate bill has marginalized health savings accounts. President Obama has refused to understand the merits of giving consumers the freedom to be responsible for their healthcare dollars.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

  • Dave Wilson

    HSA’s are the obvious solution. To add insult to injury, it looks like the new health care reform is changing HSA benefits rather than expanding them! It’s going in the wrong direction

  • Stanley Feld M.D.,FACP,MACE

    You got it Dave.
    President Obama’s goal is to limit choice and force everyone into the public option and socialize medicine.
    corporations will pay the penalty rather than provide healthcare insurance.
    Stanley Feld M.D.,FACP,MACE

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