Thursday, January 19, 2006

More Income for Massachusetts Hospitals?

Massachusetts is considering legislation to reduce the portion of the population without health insurance. Mitt Romney, the Republican governor, proposes a “carrot” approach involving savings and tax incentives. The Democratic legislature is more inclined to the “stick,” with one proposal requiring any company with 11 or more employees to either offer coverage or pay a special payroll tax in the range of 5%-7%.

In the January 18 issue of the Boston Globe, reporter Christopher Rowland summarized a study by Families USA claiming that one version of the plan would “reduce pressure on health insurance premiums by at least $500 million a year.”

There being no such thing as a free lunch, it is recognized that patients who don’t pay are paid for by patients who do. If more people have health insurance, hospitals will have fewer patients who can’t pay. The question is whether hospitals will then reduce their charges accordingly or whether they will just enjoy some additional income.

I have long believed that some kind of mandatory coverage would have to be a part of health care reform. I have also believed that unless it was done as part of an overall reform strategy, the main financial effect would be increased income for hospitals, thus further fueling the health care cost inflation that is already out of control.

I’m not familiar with the details, but from what I read, I’m betting that is exactly what will happen in Massachusetts.

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