Massachusetts take-away messages for national health care reform

By: Regina S. Rockefeller

Ongoing health care reform discussions in Washington focus on subsidies to help low- and moderate-income Americans buy insurance on new health insurance exchanges, an expansion of Medicaid to cover the poor, incentives to encourage small businesses to offer health insurance to their workers, and an individual mandate that requires everyone to have health insurance, just as we do car insurance. Congressional leaders struggle with ways to pay for health reform without increasing the national deficit. Many of these concepts have a familiar ring to Massachusetts health care consumers and bring back memories of the 2006 health-reform debate for Baystaters. The challenges now facing the Congress closely align with those that confronted the Massachusetts Legislature just before adoption of the Massachusetts health care reform law (Chapter 58 of the Acts of 2006) enacted April 12, 2006.

After three years, health reform in Massachusetts remains a so-far-successful work-in- progress. Massachusetts enjoys a head start on the nation toward health coverage for nearly all. But, like the nation, Massachusetts has a long way to go to "bend the health care cost curve" and faces significant opportunities for continuing to improve health care quality. On July 16, the Massachusetts Special Commission on the Health Care Payment System acknowledged that Massachusetts has among the highest health care costs in the U.S. Those costs are projected to grow faster in Massachusetts than for the U.S. as a whole. (DHCFP, MA. Health Care Cost Trends 2008.) Massachusetts wages were also 23.4 percent higher than the U.S. average. (Bureau of Economic Analysis, U.S. Department of Commerce.)

As a matter of political reality, Massachusetts chose to solve the coverage problem first. Jamie Katz, General Counsel to the Massachusetts Connector Authority, notes, "If Massachusetts in 2006 had tried to solve both coverage and cost, the effort would have gone nowhere. What Massachusetts did is to demonstrate that something can be done to achieve health care coverage for nearly all. As a result of Massachusetts’ experience of the past three years, the argument that you can’t do it is off the table."

Near-universal coverage has been achieved in Massachusetts

Approximately three years after passage of Massachusetts health care reform, 97.4 percent of Massachusetts legal residents, as of June 2009, are protected by health insurance. The state’s 2.6-percent rate of uninsured compares favorably to the national average of 15 percent of uninsured residents. The costs do exceed 2006 predictions, in part, not so much because of the unit costs, but because so many have signed on for health insurance coverage and because the minimum required coverage is substantial. These newly insured include people with cancer, diabetes, cardiovascular disease, and other illnesses previously went untreated, except in the expensive setting of hospital emergency departments. From June of 2006 until March of 2008, 439,000 Massachusetts residents became newly insured. Massachusetts now faces hard economic choices. Most recently, a substantial portion of legal immigrants are at risk of losing their coverage, despite Governor Deval Patrick’s advocacy efforts on their behalf.

The Massachusetts Connector

In its first year, the Massachusetts Health Insurance Connector Authority—the Massachusetts health exchange—launched two coverage programs, the subsidized Commonwealth Care, with income-eligibility criteria, and the unsubsidized Commonwealth Choice, which connects consumers with private health insurers. Thanks to health reform, Massachusetts had the lowest rate of uninsured residents in the U.S. for the 2006 and 2007 period. Half of the 439,000 newly insured Massachusetts residents are enrolled in private plans with no government subsidies. In short, health care reform has substantially expanded the Massachusetts market for private health insurers.. The Connector, according to Jamie Katz, has made it far easier for individuals to purchase health insurance and has made it possible for some smaller insurers to put their products "on the shelf" to be purchased by Massachusetts consumers.

The Connector also introduced a high level of transparency to the Massachusetts health insurance marketplace. The Connector website allows health insurance consumers quickly and easily to compare policies and coverage premiums in a way that was previously nearly impossible as a practical matter. This transparency of insurance premium costs and coverage benefits has increased competition among health insurers. No longer does a consumer leave a health fair with a handful of hard-to-compare brochures. Instead, a few clicks on the Connector website facilitates quick, apples-to-apples comparisons of the price and coverage benefits of competing insurance options.

The sausage-making of national health reform

Sure, there will be fights during the sausage-making process of national health reform as there were in Massachusetts when then Republican Governor Mitt Romney was highly motivated to make health reform happen before he hit the presidential campaign trail. Congress will squabble about political issues related and divorced from true health care.

Abortion is one of those hot-button squabble points. With leadership from Senator Barbara Mikulski (D-MD), women’s health advocates won a key vote in the Senate health committee last week to ensure that women’s health clinics and HIV/AIDS clinics will be considered "essential providers" in any national health reform legislation. However, 20 conservative House Democrats have informed House Speaker Nancy Pelosi (D-CA) that they will refuse to sign onto any legislation that does not explicitly prohibit the use of tax dollars for abortion. In Massachusetts, private health insurance plans purchased with government funds through the Connector pay for abortion services.

Abortion is not alone as a hot-button issue. Contraception, fertility treatments, male impotency treatments, acupuncture, therapeutic massage and other alternative health care services will be much debated as congressional leaders define what is and is not a covered service.

How to pay for health reform

House Ways and Means Committee Chair Charles Rangel (D-NY) wants a tax on the wealthiest Americans to pay for expanded health coverage nationwide, an effort that former Secretary of Labor Robert Reich recently dubbed on National Public Radio as "taxing the wealthy to keep everyone healthy." Now, there’s a bumper sticker slogan.

Four Democrats on the Senate Finance Committee want new fees on the insurance industry, with its soaring profits, to raise $100 billion in 10 years to pay for universal coverage. If my pocket calculator could perform the long division for such large numbers (it can’t), that might not be a bad trade for the delivery of 50 million new customers to health insurers. These customers will pay for health insurance until they become eligible for Medicare at age 65. That’s an impressive stream of future revenue for insurers.

Employer resistance

The National Chamber of Commerce and the National Retail Federation are resisting new requirements for employers to contribute to employee health coverage by purchasing insurance or paying into a fund. Massachusetts employers of 11 or more full-time equivalent employees have already bitten that bullet.

Addressing long-term costs

On July 15, 2009, the Obama administration sent a proposal to Capitol Hill that would empower the Medicare Payment Advisory Commission (MedPAC) to determine cuts and changes to Medicare payments. As a non-partisan body of health care experts, so the thinking goes, MedPAC might be better equipped to make these difficult choices than elected representatives who feel pressured to bring home the bacon to local health care providers and their communities.

A second administration proposal sent to Congress the same day would create a similar arbiter, the Independent Medicare Advisory Council, to make Medicare recommendations to the president that lawmakers could vote to overturn. This up-or-down approach would curtail congressional tinkering with Medicare spending to satisfy local concerns.

Public option

Commonwealth Care is a publicly administered and publicly funded program that helps low-income Massachusetts residents enroll in private health insurance. Commonwealth Care is not a "public option," as is now being debated in Washington. Instead, Commonwealth Care pays one of four private managed-care organizations a monthly capitation payment for each insured person. That payment is negotiated annually through a bidding process, explains the Connector’s General Counsel, Jamie Katz. At the end of the day, that insured person has a contractual relationship with a private insurer, not with a government health plan. Unlike a true public option, Commonwealth Care processes no claims for patient care services. It is not an expanded Medicaid program, says Katz. For those who are reluctant to accept a true public option for federal health reform, the Massachusetts approach might offer a viable compromise.

The American Medical Association (AMA) told the Senate Finance Committee that it opposes the public option and prefers that expanded coverage be provided through "private markets as health care currently is provided." The president of the Association of Public Health Hospitals and Health Systems labeled the AMA "preposterous" in the face of Medicare, Medicaid, CHIP, the Veterans Administration, and the government’s tax expenditures for what we call "private health insurance."

At some point soon, the national political wrangling among interest-holders will stop and the democratically controlled Congress, like the Massachusetts Legislature three years ago, will very likely adopt its own model of health reform.

Four key elements to the Massachusetts model

The Massachusetts model of health reform includes four key elements.

1. Commonwealth Care—Legal residents (though legal immigrants may now be in jeopardy) who are not eligible for other public or employer-sponsored health insurance can receive:
   1. Completely subsidized comprehensive health insurance for adults earning up to 150 percent of the federal poverty level;
   2. Substantial premium subsidies to those earning above 150 percent and up to 300 percent of the federal poverty level; or
   3. Completely subsidized comprehensive coverage for children whose parents earn up to 300 percent of the federal poverty level.
2. Insurance Market Reform—The non-group and small-group health insurance markets were reformed to effectively lower the price and offer more choices for individuals purchasing unsubsidized products on their own.
3. Individual Mandate—Adults in Massachusetts who can obtain affordable health insurance are mandated to do so. In Massachusetts, individuals are required to have health insurance unless they don’t have a health plan option that is deemed affordable for them. Tax penalties of up to $912 per taxpayer can be imposed on a person who is not enrolled in an affordable health insurance plan. Lower-income people and young adults (ages 18–26) face lower penalties.
4. Employer Mandate—Employers with 11 or more full-time equivalent employees in Massachusetts must make a fair and reasonable contribution toward coverage of full-time employees, or pay a Fair Share Assessments of up to $295 per employee per year, and offer both full-time and part-time employees a pre-tax payroll deduction plan (known as an Internal Revenue Code Section 125 plan) for their own health insurance premium payments.

A floor of mandated benefits in Massachusetts

In 2009, new Minimum Creditable Coverage (MCC) standards for health insurance in Massachusetts set the "floor" of benefits that an adult tax-filer needs to have to be considered insured and to avoid tax penalties in Massachusetts. The 2009 standards include:

- Prescription drug coverage, visits to the doctor for preventive care before a deductible;

- Annual deductibles that are capped at $2,000 for an individual and $4,000 for a family;

- An annual cap on out-of-pocket spending at $5,000 for an individual and $10,000 for a family, for plans with upfront deductibles or co-insurance on core services;

- No cap on total benefits for a particular sickness or for a single year; and

- No policy that covers only a fixed dollar amount per day or stay in the hospital with the patient being responsible for all other charges.

In other words, in Massachusetts, real health insurance coverage is required.

Another way for a Massachusetts resident to meet the MCC standards is to enroll in one of a variety of health plans, including Medicare Part A or B, Commonwealth Care, Commonwealth Choice, and other specified plans.

For policies with a separate prescription drug deductible, that deductible cannot exceed $250 for an individual or $500 for a family per year. Despite these clear MCC standards, though, the Commonwealth Connector cautions consumers at its website that, "Some insurance companies may still try to sell you a plan that does not comply with the Minimum Creditable Coverage standards."

Exemptions from the mandatory health insurance requirements in Massachusetts exist so that not everyone who fails to get health insurance is penalized. Individuals such as Christian Scientists with firmly held religious beliefs that prevent them from enrolling in a health insurance plan are exempt.

Economic downturn threatens the Commonwealth’s goal of maintaining health insurance for nearly all

Enrollment in the subsidized Commonwealth Care has risen sharply to 181,000 as residents have lost their jobs. Plummeting state tax revenues and climbing Commonwealth Care enrollment threaten to undermine the goal of maintaining the 2008 level of coverage and service.

Philip W. Johnston, chair of the Blue Cross Blue Shield of Massachusetts Foundation and a former state secretary of Health and Human Services, recently recommended that the revenue to fund health reform in Massachusetts should come from an income tax surcharge on the wealthiest—just what House leaders in Washington, D.C., are now proposing for the federal health reform plan.

Enrollment reductions are being proposed in Massachusetts to contain costs. The recently adopted 2009–2010 state budget for Massachusetts eliminated coverage effective August 1st for 30,000 legal immigrants who enjoyed coverage under Commonwealth Care, the subsidized insurance program for low-income residents. This cut was estimated to save the state $130 million, but would have had an adverse impact on health care providers and the needy legal immigrants they serve. Massachusetts Governor Deval Patrick proposed restoring $70 million to the legal immigrants’ coverage, at least for some preventive and emergency care. Some Massachusetts legislative leaders resisted the governor’s proposal. On July 29, 2009, the Massachusetts Legislature approved $40 million, instead of the Governor’s recommended $70 million.

The Massachusetts Hospital Association predicted that, if the full $130-million cut proposed by the legislature had become effective, hospitals that provide free care to the poor would need to spend an additional $87 million this year on treating immigrants who were formerly covered under Commonwealth Care. That would further penalize hospitals that serve the poor.

In another effort to control costs, the subsidized Commonwealth Care plans to save $63 million by no longer automatically enrolling low-income residents who fail to select a primary-care physician. This action is likely to expand the number of uninsured in Massachusetts.

Adverse consequences for a safety net hospital

Some adverse consequences have resulted from the Massachusetts Health Care Reform Law of 2006. Before Massachusetts health reform passed in 2006, Boston Medical Center, the largest safety net hospital in Massachusetts, received large grants to care for the uninsured as well as special payments to supplement regular Medicaid fees. These payments are being phased out as the number of uninsured adults in Massachusetts has fallen dramatically, thanks to Massachusetts health reform.

After operating in the black for five years, Boston Medical Center (BMC) is now predicting operating losses of $38 million in the 2009 fiscal year that ends in September and, even more troubling, a $175-million operating loss for fiscal year 2010. That’s an 18-percent operating loss for a hospital that reportedly treats 15 percent of all poor residents in Massachusetts. Just to put this shortfall in perspective, in fiscal year 2008, teaching hospitals (BMC is a teaching hospital of Boston University) reported a medical operating margin of 4.1 percent, compared with a median operating margin of 0.4 among community hospitals.

BMC CEO Elaine Ullian, who announced on July 27, 2009, her plan to retire in January of 2010, noted in a recent interview that BMC admissions have grown 7 percent and outpatient visits have increased 11 percent since 2006, when Massachusetts first required that nearly all Massachusetts residents have health insurance coverage. Ms. Ullian criticized state payments to her hospital of 64 cents for every dollar it costs to care for poor patients as unsustainable. Half of the hospital’s 400,000 patients live below or near the poverty line; half of its patients earn $20,000 or less a year; one-third are on Medicaid; and, for 30 percent, English is not their first language, making seeking jobs with benefits more difficult. Many of these non-native speakers may be the same currently insured legal immigrants who are at risk of being cut from Commonwealth Care in August 2009, if Governor Patrick’s proposal is not adopted.

BMC filed suit July 15, 2009, against Massachusetts, accusing state officials of illegally cutting payments to the hospital and financing Massachusetts health reform and its expanded coverage on the backs of poor residents served by BMC. State officials deny that accusation, claiming that BMC is being treated no differently than others in the tight fiscal environment. Former U.S. Attorney Donald Stern is representing BMC in this just commenced litigation.

BMC executives attribute the hospital’s projected operating losses to the state’s slashing Medicaid payments from $12,474 per admission to $9,323 this year and paying inadequate rates for uninsured and newly insured patients. As plaintiff, BMC alleges that the state calculated the new Medicaid rate by paying 75% of the average cost of caring for Medicaid patients at Massachusetts hospitals. Among BMC’s exceptional costs are employing 75 translators and treating 70 percent of Boston’s trauma volume in its world-class Emergency Department. Dr. JudyAnn Bigby, the state’s health and human services secretary, cited BMC’s $190 million in cash reserves as a counterweight to the hospital’s receiving significantly less in 2010 for treating Medicaid, uninsured and new insured patients.

The president of the National Association of Public Hospitals and Health Systems’ Larry Gage asserts that Massachusetts phased out special payments too quickly to BMC and another safety net hospital, Cambridge Health Alliance, for treating the poor. His organization is now advising Congress to diminish payments to safety net hospitals more slowly. Gage’s recommendation is but one of the many lessons that the those tasked with reforming our national health system can take away from the Massachusetts experience with health coverage for nearly all.