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University of Massachusetts Amherst

Family Business Center

Update on Health Care Reform

by Shel Horowitz

Renée Wroth, Director of Service Operations of the Family Business Center's newest sponsor Health New England, updated the March gathering on Massachusetts' new  health care reform law, now that there's been some time to see it in action.

Describing the issue as "huge and complex," she noted that two goals of reform are: to reduce the number of uninsured Massachusetts residents (estimated at between 370,000 and 600,000), and to lower costs.

The first goal is seeing good progress:

    • Over 320,000 state residents are newly insured
    • Free care pool usage (for uninsured) is declining
    • Privately funded plans have not lost customers to publicly funded ones
    • There's more choice in the market

Uninsured people, Wroth pointed out, actually cost the system more—because instead of getting preventive and mild-sickness care, they often wait until they're desperate, and then seek extremely expensive treatment in the Emergency Room. She illustrated this by stating that while, for instance, it might cost a around a hundred dollars to visit a doctor in a doctor's office, going to the ER for something like a broken wrist can cost approximately $7500.

As to the second goal, she noted that controlling the cost of care is a much more difficult problem. Drug companies have been an obstacle to reform, and their influence is growing. "10 years ago, we didn't have drug companies telling us to tell our doctors what we needed." And drug company advertising inflates the cost of medicines. Heavily-advertised Nexium costs $5 for each pill, versus just 75 cents for an over the counter or generic equivalent.

Other barriers to low cost include state mandates, high cost of new technology, medical errors, and lack of transparency. Yet the reform initiative has created shared responsibilities among the consumer, employer, government, and health provider. Employers have certain specific responsibilities, from offering a "fair and reasonable" contribution to the plan to making sure employee HIRD forms are signed.

Many people have the idea that HMOs are a cash cow, but Wroth disagrees. She breaks down the health care premium, using a study by Mark Farrah associates done in 2000, as:

87.3% patient care

11.1% administrative

1.6% "surplus" (i.e., profit)

In other words, according to Wroth, HMOs, like many other businesses, have to struggle not only to make ends meet but with that public perception of wealth at others' expense.

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