Massachusetts's 2006 healthcare reform plan, often cited as a model for the nation, is sailing through choppy waters. Governor Deval Patrick is keeping it afloat by throwing away the lifeboats: public hospitals and clinics. Freighted with tax-funded windfalls that brought private insurers and hospitals on board, the reform has proved far more expensive than politicians forecast--costing the state $1.3 billion this fiscal year, according to the state's report to its bondholders.
Yet despite the threat of a $1,068 fine for being uninsured, hundreds of thousands remain uncovered in Massachusetts, and the number of uninsured patients showing up at hospitals and clinics has fallen by only one-third. Moreover, according to surveys one in five state residents (including many with insurance) cannot afford care, and those directly affected by the reform are more likely to say it has hurt than helped them.
High costs and skimpy coverage are in the reform's DNA; private insurers drafted its blueprint, cementing their dominant role. As a result, the plan forfeited the savings on bureaucracy that a single-payer plan could realize--an estimated $7.8 billion annually in Massachusetts alone. The public-plan option that Massachusetts's reform offers to the near-poor hasn't trimmed bureaucracy--a warning that this option, pushed as a compromise at the federal level by erstwhile single-payer supporters, would yield scant savings. Indeed, Massachusetts's reform has actually increased bureaucratic costs; the new insurance exchange (similar to that touted by President Obama and Senate Finance Committee chair Max Baucus) has added 4 percent to insurers' already high overhead. Promised savings through prevention, care management and computerization (also mainstays of Obama's plan) haven't materialized. Consequently, much of the new coverage has come with unaffordable out-of-pocket costs. And cost overruns have drained state funding for care of those who remain uninsured.
Now comes a recession, drying up jobs and private coverage, along with the tax revenues needed to subsidize coverage for the newly uninsured. Facing a yawning budget deficit and desperate to stay the course on the 2006 reform plan, Patrick has slashed funding to safety-net providers such as Cambridge Health Alliance (CHA) and Boston Medical Center (BMC) (né Cambridge City and Boston City Hospitals). (Disclosure: we practice at CHA and teach at Massachusetts General Hospital.)
At CHA--a Harvard affiliate that operates three public hospitals, twenty-one community clinics and more psychiatric beds than all of Boston's big teaching hospitals combined--the cuts will shutter one hospital, six clinics, the area's only inpatient detox unit and nearly half of the psychiatric wards. Even before these closures, suicidal patients often spent days in ERs awaiting a bed.
These cuts follow a national pattern of responding to fiscal crises by defunding hospitals that care for the poor. Chicago's Cook County healthcare system recently suffered massive cuts, including half of its outpatient clinic doctors. Now women with abnormal Pap smears can't get follow-up appointments, and mammograms aren't available. In Los Angeles, the only hospital serving a huge area of the central city shut its doors; LA's surviving public hospitals and clinics face a $750 million shortfall.
In Detroit (which, like Philadelphia, has already lost its only public hospital), private hospitals are fleeing the inner city for greener (as in money) suburban pastures. That city once had forty-two hospitals; now it's down to four. Atlanta's public hospital came within a hair's-breadth of closing and still faces huge deficits. New Orleans's Charity Hospital--for 250 years the sole provider for a wide swath of Louisiana's poor--hasn't reopened since Hurricane Katrina. And the public hospital in Galveston, Texas (which provided specialized care to indigent patients from all over the state) stopped accepting the uninsured in the wake of Hurricane Ike. New York's public hospital system has been whittled away for years, and a new round of budget cuts is on the horizon.
While safety-net hospitals are withering, private ones have thrived. Hospitals nationwide showed record profits in 2007--the most recent year for which data are available. Governor Patrick's deficit reduction plan will barely touch Massachusetts General, which ran a surplus of $354 million that year.
Safety-net providers aren't in trouble because they're inefficient. In fact, CHA is about 20 percent cheaper than Boston's big teaching hospitals, and it scores as high on quality measures. The same is true in other cities, where endangered public hospitals consistently cost less than their prosperous private counterparts.
Public hospitals are in the red because they provide vital care that others won't. CHA cares for one-third of the uninsured chronically mentally ill in Massachusetts--a group whose complex care brings low payments. While CHA does relatively little elective (read "profitable") surgery, it delivers more emergency and primary (read "money-losing") care than famous Boston hospitals like Massachusetts General, Brigham and Women's, and Beth Israel Deaconess.
The pernicious market signals in medical care don't reflect consumer preferences or invisible hands; they arise largely from government policy. Taxpayers foot the bill for at least 60 percent of hospital expenses--at both public and private institutions. Indeed, the average American with private insurance draws a government subsidy twice that given to the uninsured. In Massachusetts, little-known provisions of the reform bill cut payments for primary and mental healthcare while boosting fees for already lucrative specialty care and already overbuilt high-tech facilities. Today, Blue Cross pays Massachusetts General $838 for a chest CT scan but offers safety-net BMC only $418. Like an auto industry hooked on high-margin SUVs, a medical system with a surplus of high-tech gadgetry and a deficit of appropriate technology (e.g., primary care) is unsustainable.
A sustainable alternative requires healthcare planning based on needs rather than profitability, as well as the jettisoning of private insurers and their bloated bureaucracy. Unfortunately, Governor Patrick seems disinclined to face down powerful and prosperous insurers and hospitals. With healthcare costs threatening to swamp reform, his only other option is to throw overboard the institutions that care for the poor.
Massachusetts offered the optimal conditions for reform: abundant medical resources, low rates of uninsurance and liberal state funding for free care. The governor's dilemma should serve as a warning to the rest of the nation. The Massachusetts model may rest on impeccable political logic, but it's economic and medical nonsense.