The Coverage Connection

Two years ago, when Massachusetts legislators began debating near-universal health insurance, a lot of smart people helped them craft the package. And all of these...
by | November 30, 2008

Two years ago, when Massachusetts legislators began debating near-universal health insurance, a lot of smart people helped them craft the package. And all of these very smart people acknowledge that, to a large extent, they were flying by the seats of their pants. No one, for instance, knew how many uninsured people lived in Massachusetts. Making a guess, the state pegged the number at 400,000.

This summer, Massachusetts reported some exciting news. So far, its health care law has extended coverage to 439,000 of the state's uninsured. What about that 400,000 estimate? "Obviously," says Rick Lord, president of the Associated Industries of Massachusetts and a co-crafter of the plan, "that was low."

And what about the sign-up rate? "I'll bet," says Michael Widmer, the president of the Massachusetts Taxpayers Foundation, "if you had gone to the key players and asked them to write a number down two years after passage how many new enrollees there would be, nobody would have dared to put down 400,000. Not even close.On a wild day, I might have said 200,000."

Two years into one of the boldest state efforts to expand access to health care, not everything is going as expected. More often than not, the surprises have been good ones. In addition to the sign-up rate, public support remains surprisingly strong for a law that requires virtually every individual in the state to obtain health insurance. Even as government-funded programs are expanded to cover more low-income workers, employers are insuring tens of thousands more people. In short, the state is reducing its rolls of the uninsured far faster than anyone expected.

All of that sounds like great news. And it is. And yet, almost no one in Massachusetts is fully certain that their experiment will survive. Expanding access is straining the state's health care system, with primary care physicians especially burdened. Worse still, Massachusetts is dealing with the same escalations in health care costs as the rest of the country. In the current economic downturn, those costs, if not controlled, could force the state to scale back its efforts. To meet these challenges, state officials are counting on the broad but fragile political coalition that shepherded the plan through its promising first two years. And on its unique structure -- an agency known as the Connector that pulls everything together and makes it work.

A Balancing Act

What makes Massachusetts' experiment so interesting is that the state is trying a variety of audacious steps, all at the same time. The state expanded Medicaid -- something several states have done -- but also created a new program, known as Commonwealth Care, to subsidize health insurance for people who fall just outside Medicaid-eligibility limits. Then, to encourage businesses to maintain coverage, the state imposed a $295-per-employee annual fee on companies that don't offer health insurance. And it became the first state to require (with very limited exceptions) every individual to have health insurance or pay a fine.

Finally, it created a new agency: the Commonwealth Connector. The Connector is charged with overseeing Commonwealth Care, as well as making key decisions about implementation of the law and serving as a clearinghouse for private health insurance. The latter concept -- using a state agency to link individuals to the private health insurance they can afford -- is one of two innovations (the mandate to carry insurance is the other) that states around the country are watching closely.

The goal is universal health insurance -- or something very close to it. And that objective is nearly being achieved. Ninety-two percent of Massachusetts' residents now have health insurance, the highest rate in the country. (The national average is below 85 percent.)

What's just as interesting as the number of newly insured people in Massachusetts is how they're getting insurance. From the beginning, the law depended on a series of balancing acts. If the public programs -- Medicaid and Commonwealth Care -- were not generous enough, lower-income people would have no way to get health insurance. Yet if they were too generous, employers would have an incentive to drop coverage and send their workers into taxpayer-funded programs.

When the law was written, the authors hoped to give employers reasons to keep offering health insurance, such as the $295 penalty if they didn't do it, without forcing them into a cost that could harm their business. As the program rolls out, says Jon Kingsdale, executive director of the Commonwealth Connector, the idea is to "keep employers in the tent." That is, the state doesn't want the program to shut down businesses -- close small restaurants that can't afford health insurance or push them to lay off two people so that they can afford the premiums. And yet, it wants to nudge employers to offer insurance. "Getting that balance right, whatever it is," Kingsdale says, "is important."

There are signs that the program has found its equilibrium. Of the 439,000 newly insured, around 160,000 are signed up for employer-based health insurance -- far more than anyone expected. That means that, so far, government-subsidized programs aren't crowding out private insurance.

The Mandate

Part of the reason more people are receiving employer-based health insurance isn't so much that more employers are making it available. Rather, it's that workers who chose not to accept employer insurance in the past -- because they would have had to pay part of the premiums or just weren't interested -- are changing their minds. This group includes a lot of single men in their twenties or thirties, who saw themselves as invincible in terms of their health and didn't think they needed insurance.

One reason they changed their minds: the individual mandate. Massachusetts is the first state to make health insurance like car insurance -- a requirement. Those who don't have it and who haven't received a special exemption, have to pay a $219 fine when filing their taxes. When those fines were assessed this spring, they hit 86,000 people. The law's supporters braced for a backlash -- which hasn't come. "We went through our first tax season here," Kingsdale says, "and they haven't strung us up over the mandate."

For now, public opinion polls show that support remains strong for the individual mandate And that's a point those watching the Massachusetts approach are following carefully. After all, no other state has tried an individual mandate, in part because of the political risks and arguments against it from both sides of the political spectrum. Critics on the left claim that a mandate imposes financial hardships on low-income people; those on the right view a mandate as another way for the nanny state to run amok. So far, though, criticism in Massachusetts has been muted.

No one sees this as proof that mandating health insurance is without risk. Instead, observers in Massachusetts say that the key to the success of the individual mandate -- and the health care initiative as a whole -- has been a series of low-profile, often technical decisions that make all of the pieces fit together. State officials, for example, were concerned that recent college grads would have no way to meet the mandate's requirements. So they created the "slacker mandate," allowing dependents to stay on their parents' plans through age 25. Another major concern was that low-income workers would shift from employer-based coverage to Commonwealth Care. So, the state barred anyone who is eligible for employer coverage from receiving Commonwealth Care. If an employer drops coverage, there's a waiting period to sign up for Commonwealth Care -- giving businesses reason to think twice before trying to push their workers into the government-subsidized program.

To date, more often than not, these types of decisions are achieving positive results. Reverend Hurmon Hamilton, who, as the head of the Greater Boston Interfaith Organization, has been a key advocate for expanded health care, expresses it this way: "While people say that the Devil is in the details, God is, too."

Warning Signs

The success of the innovations has been energizing, but the new steps also create a series of problems that threaten the program's future. One starts with the real-world consequence of insuring the uninsured. When people have coverage, they're more likely to visit their doctors. That becomes an issue when, as is happening in Massachusetts, there aren't enough doctors to go around. A new report from the Massachusetts Medical Society cites critical shortages of internists and family medicine specialists. Those findings square with anecdotal evidence about what people around the state are experiencing: Wait times to see primary care physicians are long -- if you can find one accepting new patients.

Health insurance, it turns out, doesn't necessarily translate into health care. "Universal coverage," says Bruce Auerbach, president of the Massachusetts Medical Society, "does not equal universal access." Auerbach thinks the state erred by not focusing on expanding the capacity of the state's health care system at the same time as expanding access to insurance.

Now, Massachusetts is trying to make up for that gap. The state passed legislation this year that addresses the problem in a variety of ways. It is increasing slots for primary care doctors at medical schools and offering loan forgiveness to doctors and nurses who set up shop in underserved areas of the state.

The state also is allowing in-store retail clinics at pharmacies -- a move it had resisted even as the retail-clinic movement grew quickly elsewhere. Now Massachusetts officials hope to relieve the crush at doctors' offices by making it convenient for patients to go to retail clinics at neighborhood stores for basic health services such as vaccinations and treatment for earaches. The first clinic in the state opened in September.

Even though the primary care problem is a serious one, it pales in comparison to the largest challenge Massachusetts faces: the program's price tag. Cost concerns entered the spotlight when news broke in January that Commonwealth Care was a quarter of a billion dollars over budget. That was largely because people were signing up for subsidized care faster than expected. As enrollment has leveled off, the fiscal forecast has gotten brighter. Nor has the cost story been entirely a negative one. As the ranks of the uninsured have thinned, fewer people without insurance are showing up at hospitals, which is saving the state money. Massachusetts also learned this fall that it will receive $10.6 billion over three years in the form of renewal of a federal Medicaid waiver to expand coverage beyond the regular scope of the Medicaid program.

Yet the financial challenge is a fundamental one. In Massachusetts, as in every state, the cost of health care has been growing far faster than the rate of inflation. As a result of its 2006 law, the state now has around 70,000 more people covered under Medicaid than it had before and about 170,000 people newly covered under Commonwealth Care. The cost of providing coverage for less-affluent residents is what has stopped other states, such as California, from following Massachusetts' lead.

Supporters of the plan say they understood the health-cost danger when they passed the law but opted to act anyway. "Do you hold the uninsured hostage to our inability to control costs?" asks Nancy Turnbull, a member of the Commonwealth Connector's board. "We very deliberately took the approach of coverage first. It's the morally right thing to do, and it makes sense for the health and economics of the state."

One effect of that approach has been to make clear to everyone, from legislators to advocates, the importance of controlling costs. People like Reverend Hamilton, who describe health care as a right, suddenly have a reason to care just as much about cost as access -- because access now depends on controlling costs. In effect, Massachusetts, which just two years ago became a laboratory for experiments in expanding access, now is set to become a laboratory for controlling costs.

The legislature began to tackle that issue this year with a new law that pushes the state forward on electronic health records, in the hopes that they can help root out wasteful and duplicative care. The law also requires health insurers and providers to reveal at public hearings the causes of cost increases. The hope here is to drill down to the reasons premiums are going up -- or persuade insurers not to raise them in the first place. Other states are acting on similar ideas, but Massachusetts' push to do them all at once is unusual.

Those plans will take time to work, but Massachusetts' health reform is in immediate danger from the souring economy. Like most states, Massachusetts is struggling with a large budget shortfall -- and next year is likely to be worse. "If the governor and legislators have to cut $500 million from the budget, can they spare health reform?" asks Michael Widmer. "I don't know."

If Massachusetts can't make its plan work, it will be a devastating blow to efforts in other states. Massachusetts has lots of factors working in its favor. Despite the current economic picture, it's a wealthy state with lots of employers who have been offering insurance for a long time. Even before it passed its health coverage law, it had an unusually low rate of uninsured -- around 11 percent. In addition, it is being generously aided by the federal government. If Massachusetts can't afford universal health care, there's a good chance that no state can.

Josh Goodman
Josh Goodman | Former Staff Writer |