Could Massachusetts take the lead on the path to health care reform?
"We've got a whole new dialog about how health care should be delivered and financed," says Kaiser Commission on Medicaid and the Uninsured executive director Diane Rowland. And nowhere is that more true than in Massachusetts. While West Virginia has changed its Medicaid plan to try to encourage people to take better care of themselves and Utah has tried to cover more people by reducing benefits for others, Massachusetts has undertaken a radical attempt to reform the health care system to cover everyone, leading to the natural question of whether they have found a system that could work in many other states.
Academy Health says the Massachusetts legislation aims to cover 95% of the state's uninsured within the next three years. The bill signed by Republican governor Mitt Romney April 12 ended more than a year of negotiations and compromise between the governor and legislature and includes provisions to increase access to health insurance, contain health care costs and improve quality.
Key elements of the plan include:
- Health Insurance Connector. To improve the availability and affordability of coverage, the Health Insurance Connector will help individuals and small businesses find affordable health coverage. It allows individuals to purchase health insurance using pre-tax dollars, which is estimated to reduce premium cost by up to 25%. A unique feature is that individuals can keep their policy even if they change jobs.
- Insurance Market Reforms. Starting in July 2007, the non- and small-group markets will be merged, although a study of the merger must be completed before then to assist insurers in planning for the transition. Policy-makers estimated the change will reduce premiums for people currently purchasing in the individual market by nearly a quarter of their current cost.
- Individual Mandate. All individuals are required to obtain health insurance by July 1, 2007. Those who cannot afford insurance, as determined by the Connector, are not penalized. For tax year 2007, penalties for not having health insurance will include loss of the personal exemption for income tax purposes. In subsequent tax years, the penalty will be a fine equal to 50% of the monthly cost of health insurance for each month without insurance.
- Employer Requirements. State employers with 11 or more employees that don't make a "fair and reasonable" contribution toward their employees' health insurance coverage would be required to make a per-worker contribution estimated at $295 per full-time employee. (The governor line-item vetoed the $295 per employee fee.) Also, employers with 11 or more employees must adopt by Jan. 1, 2007, a Section 125 cafeteria plan permitting workers to purchase health care with pre-tax dollars. And employers with 11 or more employees who don't offer to contribute toward, or arrange for the purchase of health insurance, may be assessed a surcharge if their employees access free care a total of five times per year in the aggregate or one employees accesses free care more than three times.
- Subsidies. The reform addresses uninsured low-income populations by establishing the Commonwealth Care Health Insurance Program to provide sliding-scale subsidies to individuals with incomes below 300% of the federal poverty level. No premiums are to be imposed on individuals with incomes below 100% of poverty. The existing Insurance Partnership premium assistance program will raise eligibility for employee participation from 200% of poverty to 300%.
- Uncompensated Care Pool. By Oct. 1, 2007, the current Uncompensated Care Pool is to be replaced by a new Safety Net Care Fund that will develop a new standard fee schedule for hospital reimbursements for uncompensated care. The intent is that as free care declines with implementation of the new coverage programs, the fund will be able to transfer money to subsidize the Commonwealth Care program.
- Medicaid. The state's MassHealth Medicaid program will be expanded, with eligibility for children increased from 200% of poverty to 300% and enrollment caps on several programs raised in hopes of enrolling more adults who are eligible for the programs.
- Funding. The new plan is to be funded through several revenue sources, including currently available surplus state general funds, federal matching dollars, required individual premiums, employer assessments, and pre-existing Uncompensated Care Pool funds.
The national advocacy group Community Catalyst says while the legislation represents a major coverage expansion, many questions remain unanswered. Uncertainty surrounding the individual mandate is perhaps the biggest, but not the only issue to be resolved. Key questions also remain about the plan's financial viability, the group says, since the ongoing commitment of state and federal funds is critical, as is the projected $200 million to come in over three years from employer contributions.
In assessing the plan's policy lessons, Community Catalyst says some features of the Massachusetts plan are not easily replicable elsewhere. Foremost among them is the availability of federal matching money, because special circumstances arising from the Massachusetts waiver made money available and led the Centers for Medicare & Medicaid Services to insist it be used for coverage.
What could be exported, according to the group, is the provision to allow purchase of health insurance with pre-tax dollars. Also, the principle of an employer contribution has been established, even though the contribution level is low, and it is clear that is growing political interest across the country in addressing the role of employers in solving the problem of the uninsured.
"Even where support for coverage is broad, it is all too easy for reform efforts to get bottled up in the legislative process," Community Catalyst said. "The necessity of passing legislation to address the waiver coupled with the ballot proposal created the political environment where something had to happen. Creating similar 'must-do' scenarios will be important in other states pursuing reform."
Commonwealth Fund president Karen Davis said that since it doesn't appear there will be any federal solution to the problem of the uninsured any time soon, what Massachusetts has done potentially holds lessons for every state. "One particularly cogent lesson," she said, "is the manner in which the measure was crafted — via a civil process that successfully brought together numerous players from across the political, business, health care delivery, and policy sectors."
She expressed the hope that other states would follow Massachusetts' lead, "particularly if some of the other states that have traditionally served as economic and social policy models for the nation, New York, California, and Maryland among them, can work toward similar solutions. It won't be easy, and it likely will take time. But never before have there been so many good reasons to take such action."
Not everyone is as optimistic that the Massachusetts plan can be a national model. Even Mr. Romney told members of the U.S. Chamber of Commerce that the plan was custom-made for his state's situation and unique circumstances, although other states could borrow some ideas. Because of high private insurance rates and an expansive Medicaid program, Massachusetts estimates only 7% of residents are uninsured, compared to a national average of 15%. Also, Massachusetts can subsidize premiums with funds other states don't have. It already spends $680 million in state and federal money to support hospitals serving the poor and that money will be redirected to buy insurance for lower-income residents.
"It's obvious in some respects that, if we could do it there, we could do it in other states," Mr. Romney said. "I believe that's true. I'm not sure it would be done in exactly the same way. Some of the principles we found to work in Massachusetts may well be applied in other states, others perhaps not."
He said the Commonwealth Connector is one element that other states could adopt, and State Coverage Initiatives director Alice Burton agreed, although she noted the concept depends on merging the individual and small group health markets, which would be a giant leap for most states.
Destined to fail
A note of caution was sounded by Harvard Medical School professors Steffie Woolhandler and David Himmelstein, co-founders of Physicians for a National Health Program. They said the plan is likely to fail because politicians underestimated the true number of uninsured in the state, because it's not true that uninsured people will be able to find affordable health plans, and because the legislation does nothing to contain the skyrocketing costs of care in the state, already the highest in the world. "Predictably, rising costs will force more and more employers to drop coverage," the two said, "while state coffers will be drained by the continuing cost increases in Medicaid. Moreover, when the next recession hits, tax revenues will fall just as a flood of newly unemployed people join the Medicaid program or apply for the insurance subsidies promised in the reform legislation. The program is simply not sustainable over the long, or even medium, term."
Ms. Woolhandler and Mr. Himmelstein said a better solution would be a single-payer, universal coverage plan that cuts costs by streamlining health care paperwork, making health care affordable.
A study by the California HealthCare Foundation found that providing health insurance coverage for nearly all Californians would cost significantly more than the Massachusetts price tag. That analysis found that a Massachusetts-style program would require as much as $9.4 billion in additional funding ($1,450 per uninsured Californian) because of socioeconomic and insurance coverage differences between the two states.
California is not Massachusetts
The foundation report said some experts have criticized the Massachusetts plan as based on unrealistic cost estimates. The study noted several key differences between California and Massachusetts that could contribute to the higher California cost estimates, including:
- The percentage of the population without health insurance is much higher in California (20.7%) than in Massachusetts (13.1%).
- The nonelderly population with employer health coverage in California is 13.8% lower than Massachusetts, in part because more Californians are employed in firms with a majority of low-wage workers. Coverage rates among such firms are much lower than in other firms.
- In California, 42.8% of the population has low or modest incomes, compared to 28.7% in Massachusetts.
- Massachusetts already spends considerably more public money than California does on uncompensated care for the uninsured, between four and six times more per uninsured person. Massachusetts expects that redirecting these funds will pay for most of the coverage subsidies.
At a Cato Institute forum on the replicability of the Massachusetts plan, Families USA executive director Ron Pollack said he was "cautiously enthusiastic." He said he's enthusiastic because the proposal has the potential for significantly expanding health coverage to people who are now uninsured and because the process that led to adoption of the program represents a political breakthrough. His caution comes because of the outstanding issues remaining to be resolved, including the level of subsidies for people between 100% and 300% of poverty, the standard for coverage affordability under the individual mandate, and whether the Commonwealth Connector can come up with insurance policies that are both adequate and affordable.
"I am left with a sense of optimism about this," Pollack declared. "And that is because I believe that the policy-makers in the state of Massachusetts are truly committed to expanding coverage for everyone. And as these problems crop up, as they undoubtedly will, I believe that there are key members who are leading the drive in the legislature who are prepared to make modifications in this proposal, to make sure that it truly works."
Wrong on all counts
Taking a totally different perspective, Cato Institute director of health and welfare studies Mike Tanner said that while the plan may be well intentioned, "in almost every case the state's gotten it wrong." He described the individual mandate as an unprecedented level of interference with individual decision making in the health care marketplace. "Never has any state or the federal government mandated that simply because you live in a particular place, a particular state, you must therefore buy a particular government-prescribed product," he declared. Beyond that, he said, the mandate is an enormous infringement on individual liberty that sets in place a series of dominoes that he said will cascade down to ever more government control over the health care system, because once you set up a situation in which individual consumers can't discipline the marketplace by refusing to buy a product, when you create a captive audience or a captive buying populace, it will lead to every special interest group, every provider group, every disease constituency demanding that they be included in the product that now has to be bought, driving up the product's cost.
He also criticized the plan's increase in government imposition on businesses through the business mandate, no matter how modest it is, and the creation of 10 new government entities, vastly expanding the health care bureaucracy.
"Essentially, health care reform in this country needs to move in the direction of greater consumer control and more freedom," Mr. Tanner declared. "The Massachusetts plan moves in exactly the opposite direction. It moves in favor of greater government control, less consumer choice, more subsidies, and more regulation."
Bipartisan agreement best feature
New American Foundation health policy program director Len Nichols told the forum the best thing about the Massachusetts experiment is that it is a bipartisan agreement. "You've got a Republican governor, expressly declared to be running for president, shaking hands with a legislature that I think we would agree is among the bluest of the blue in the country as we know it," he said. "So the fact that you had a Republican presidential candidate willing to use the word 'all' and a Democratic liberal legislature willing to accept the word 'limits' is news. This is progress. This is indeed advancing the ball down the court and why I think it can be a model for all of us."
He also stressed the importance of the combination of individual responsibility and shared community responsibility.
Economist Arnold Kling said the Massachusetts plan doesn't address any of the three major problems he sees in health care policy today — Medicare's unfunded liability; the cost-effectiveness gap in American health care, marked by spending more than any other country but not having the best health outcomes; and the issue of affordable health care for all. What it has the potential to solve, he said, is the problem of affordable health insurance for people who need health care least.
"Actually, I do like the idea of state-level experiments," he said. "But I would like to see interesting experiments. I would like to see some states experiment with radical deregulation and more consumer-oriented health care. And I would like to see some states experiment with a single-payer system because I believe that in the context of premium medicine, Americans are making extravagant use of procedures that have high cost and low benefit. But in that context, a single payer system would be a disaster. I would much rather see that disaster unfold in one or two states before we try it out at a national level."
Contact Ms. Rowland at (202) 347-5270; Ms. Davis at (212) 606-3800; Ms. Burton at (202) 292-6700; Ms. Woolhandler and Mr. Himmelstein at (617) 665-1032; Mr. Pollack at (202) 628-3030; Mr. Tanner at (202) 842-0200; Mr. Nichols at (202) 986-2700; and Mr. Kling through www.econlib.org. The Cato Institute forum is available through www.kaisernetwork.org.
"We've got a whole new dialog about how health care should be delivered and financed," says Kaiser Commission on Medicaid and the Uninsured executive director Diane Rowland.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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