Maryland outdoes ObamaCare in Rationing

By Burke Balch, JD, and Jennifer Popik, JD
Robert Powell Center for Medical Ethics

Maryland Health Secretary Joshua M. Sharfstein

Maryland Health Secretary Joshua M. Sharfstein

The federal health care law enacted in 2010 imposes unprecedented limits on what Americans are allowed to spend to save their lives and the lives of their family members.  Now, Maryland officials have unveiled a proposal that would impose even lower limits in that state.

While the plan still awaits action from the Federal government, Maryland Health Secretary Joshua M. Sharfstein said there will be continuing discussions with hospitals and insurance companies about the plan. However, he has said that he believes that spending needs to be curbed to prevent health care from becoming unaffordable.  This is the same fatal reasoning at the heart of the Obama health care law, popularly known as ObamaCare.

Under Federal law, in 2018 and later, the government would limit Americans to health care spending that rises only at the increase in per capita Gross Domestic Product plus 1%.

In Maryland, state officials have applied for a special Medicare waiver that would further limit Marylanders to health care spending that rises only at the rate of per capita State Domestic Product. This proposal, currently awaiting Federal approval, targets the rates that hospitals may charge patients – placing growth limits on the rates.

In practice, forbidding prices from growing faster than the overall economy will mean a reduction of about half in the annual increase in what Marylanders would otherwise be likely to spend in hospitals.

While it might seem reasonable to some that the resources devoted to saving lives grow only at the rate of the general economy, in fact productivity increases in other areas of the economy have consistently freed up resources that can be used to reduce the death rate and increase health.

A government-imposed straightjacket forcing any one sector of the economy to grow no more than the average rate of economic growth is as foolish as would be a rule allowing no student to receive a grade higher (or lower) than the average grade in the class.  In a free market economy, the share of resources devoted to each sector constantly shifts based both on increases in the efficiency of production and on changes in demand for products and services.

Imagine the impact on our overall well-being if, in 1960, a law had been enacted preventing spending on computers from rising any more than the average growth in the economy. Probably personal computers – desktop or laptop—could never have been developed.  And we certainly would not have smartphones.  The Internet could never have been developed.

The consequence would have been clear. Without the dramatic developments in computer technology over the past half-century, our standard of living, and overall economy, would have been far lower than it is today – frozen at a level not much different from that available in the 1960s.

Americans have to date enjoyed dramatic drops in mortality from cancer, heart disease, and a host of other illnesses and injuries precisely because our increasingly productive economy has allowed us to devote more resources to saving our lives. Now, however, the government is slamming on the brakes, with the consequence that medical progress will – at best – slow to a crawl.

The Maryland plan aggressively takes aim at what its citizens are permitted to spend to obtain medical treatment in hospitals

When the state, as Maryland is proposing to do, limits by law what can be charged for hospital prices, it limits what people are allowed to pay for medical treatment at those hospitals. While everyone would prefer to pay less – or nothing – for health care (as for anything else), government price controls in fact prevent access to lifesaving medical treatment that costs more to supply than the price set by the government.

What will happen under a scheme of hospital price controls? Hospitals will be forced to reduce lifesaving medical treatment as they are squeezed more and more tightly each year by the declining “real” (that is, adjusted for health care inflation ) value of the payments they take in. These day-to-day rationing decisions will have the most direct and visible impact on the lives – and deaths – of people with a poor “quality of life.”

The similar measure in the Obama health care law is an 18 member cost cutting board known as the Independent Payment Advisory Board or IPAB.  In addition to having authority to limit Medicare reimbursement rates, IPAB also has a key role in suppressing nongovernmental health care spending. IPAB is instructed by the health care law to make recommendations to limit what all Americans are legally allowed to spend for their health care so as to hold it below the rate of medical inflation through 2017, and thereafter to the per-person growth in the Gross Domestic Product plus one percent.

The health care law authorizes the Department of Health and Human Services (HHS) to implement these recommendations by imposing so-called “quality” and “efficiency” measures on health care providers, limiting what treatment doctors are allowed to give their patients.

The documentation can be found here.

What happens to doctors who violate a “quality” standard by prescribing more lifesaving medical treatment than it permits? They will be disqualified from contracting with any of the health insurance plans that individual Americans, under Obamacare, will be mandated to purchase. Few doctors would be able to remain in practice if subjected to that penalty.

This means that treatment a doctor and patient deem advisable to save that patient’s life or preserve or improve the patient’s health — but which exceeds the standard imposed by the government — will be denied even if the patient is willing and able to pay for it.

This may soon be the case in Maryland.  The plan that the Maryland Department of Health and Mental Hygiene submitted to Kathleen Sebelius and the Department of Health and Human Services (HHS) is an effort to update its current Medicare waiver. Maryland is one of many states who take a unique approach in order to have more direct control on its Medicare spending. But such proposals require special waivers.  Crafted by Maryland’s Health Services Cost Review Commission, the plan, once approved by HHS could be implemented as early as next year.

While state officials claim to have worked with hospitals and insurers on the Maryland plan, hospitals and insurers have expressed deep reservations.  According to Chet Burrell, president and CEO of CareFirst BlueCross BlueShield, “You have the makings of a potential disaster.”  And the executive Director of the Maryland Hospital Association (representing 46 state hospitals) said, “If we are going to look at having targeted spending levels we need to make sure those levels are reasonable.”

The state’s Health Services Cost Review Commission, which sets hospital rates, would be responsible for finalizing a lot of the details under the state’s plan. Sharfstein said state officials wanted to leave some amount of flexibility in the process – although the legislature will not need to be involved.

Though we will all be subject to cuts under the Federal Health Care Law, the situation in Maryland could be even more dire. If the Maryland waiver is granted, it will mean even more severe limits on health care services for Maryland citizens.

While input from state legislators and stakeholders will be taken under advisement, the proposal has already been sent to the Federal government – and merely awaits approval.  Concerned citizens of Maryland could contact Gov. Martin O’Malley‘s office ((410) 974-3901 ) to urge them to withdraw the proposal, and reconsider the hospital price caps.  Also, Maryland citizens might contact Marilyn Tavenner (1-877-4MD-DHMH) at the Center for Medicare and Medicaid Services, to whom the proposal was submitted.