A year after the passage of health care reform, fewer than half of Americans support it, a similar percentage believe that it has already been found unconstitutional or soon will be, health care costs are continuing to rise far faster than the CPI, and the Republican Party has seized on the issue as a sure election winner.

The Obama administration and congressional Democrats, now thoroughly on the defensive, are clearly surprised at the public and political reaction. But should they be? This post—on the reliance on Massachusetts as a model—is the first of three that will look at some of the miscalculations—and sheer bad luck—that have helped to undermine reform. When Governor Mitt Romney signed Massachusetts’ reform bill into law in 2006, it was widely regarded as a bipartisan political triumph, and one that was supported by the public and by most of the state’s insurers and providers. Massachusetts would be the first state to require virtually all legal residents to have coverage (with tax penalties imposed on those not complying), while providing subsidies for lower-income individuals not eligible for government programs, as well as to implement a state-administered brokerage function (the Connector) to allow competitive selection of health plans. By the fall of 2008, as congressional efforts to design national health care reform moved into overdrive with the election of Barack Obama, the Massachusetts legislation was widely regarded as a success. Public reactions were generally positive, the numbers of uninsured had fallen, and there had been no dramatic increase in costs. It was scarcely surprising that the Massachusetts model emerged from the field of competing proposals as the favorite of most Democratic lawmakers.

Unfortunately, the elected officials in Washington DC failed to recognize that Massachusetts was an exceptional state in terms of health care. Even before the state’s reform bill was enacted, the percentage of uninsured was very low. It was also a socially very liberal state, far more likely than most to support reform efforts (in fact, Massachusetts had passed, but then revoked, a slightly different version of health care reform a dozen years earlier). And, of course, the economy was still in its boom period when the new law was passed. Massachusetts had other advantages that would not transfer to national reform. As a small state, with only a small percentage of the population likely to be directly affected by reform, implementation could be much faster—less than a year for most provisions of the state’s new law.

Similarly, interfaces between programs like Medicaid and the state subsidy program could be handled at the state level, without federal involvement. In fact, even some of Massachusetts’ apparent success proved illusory or at least oversold, presaging criticisms that would later be leveled at national reform. Although Massachusetts does now have the highest rate of insured in the country, the goal of universal coverage has not been achieved, with some five percent of the state’s population still without insurance. The Connector has failed to influence costs for either public or private payers, and government program expenditures are creating an ever bigger hole in the state budget. The Connector also has had only marginal success in attracting non-subsidized enrollees (although a revamped small business offering is finally showing some gains). And, of course, along with the rest of the nation, Massachusetts has continued to suffer from the effects of the prolonged recession.

Massachusetts clearly has some value as a prototype for national reform, but the Accountable Care Act might have been very different if its authors had recognized just how small a percentage of the state’s population had gained coverage (and added to overall expenditures), or realized that the state’s efforts had had no discernable cost control effect.

Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies.  He is editor of Health Care REFORM UPDATE.

17 Responses for “The Massachusetts Mistake”

  1. Matthew Holt says:

    Roger. You sure? They didn’t know? You really think that MIT’s Jonathan Gruber-architect of the Mass plan and senior health policy wonk to the White House didn’t know? You think Harvard’s David Cutler–the Obama campaign’s first health policy guru–didn’t know that Mass was different to the rest of the US?

    What exactly did you think was going to be the alternative? We know what will actually fix the US health care system, and it ain’t the Mass plan. (Try the German, Dutch or British plan) But we also know that the political calculations of Axelrod, Emmanuel et al was that Mass was the best we’d get given the conservatism of even the majority of the Democratic Senate.

    But saying that the White House didn’t know is just wrong.

  2. Jonathan Halvorson says:

    I would add to Matthew’s comment that while we all know the Mass plan by itself won’t fix healthcare, that doesn’t mean it isn’t an important first step, given a political climate that would blow up when real cuts are proposed because the public didn’t understand where the costs are coming from.

    I’ve said for years and it is bearing out to be true: universal coverage is the first step. It allows the left to stop focusing almost exclusively on coverage and forces the left to deal with the massive problem of costs. It also brings the right to stop defending the status quo (Get your hands off my Medicare! Best healthcare in the world!) and start proposing real cuts to the money spigot flowing into the American healthcare sector (the Ryan plan outline).

    Think about it: Almost no one is talking about access as a big problem today (even though very few have gained coverage at this point due to the legislation). Washington is united in talking about big cuts to Medicare and other major changes to reduce medical cost trend. Even though Democrats and Republicans will still fight bloody battles with each other and with the health care establishment (assuming they write bills to back up their words), the train on cost reform is leaving the station at last.

    I would say that PPACA is looking to be a stunning success in getting America to finally get real about moving from a nation on a path to 25% of GDP for healthcare to something more sustainable, like 15%, in 20 years. But the biggest obstacle of all is still the American people, who do not understand the cost drivers. Just as Americans vastly overestimate how much we spend on foreign aid or food stamps, they also greatly overestimate how much of the increases in costs are due to insurance profits, or defensive medicine. That ignorance the media should take as its civic duty to correct, or future reforms are going to be uglier and harder than they have to be.

  3. “But the biggest obstacle of all is still the American people, who do not understand the cost drivers.”

    Not sure I like the sound of this…

    American people indeed don’t understand how it is possible for insurers to thrive in a recession, not to mention that American people can’t figure out why they have to pay 25 cents on a dollar to these middle men. Most American people don’t know what defensive medicine is, but they do know that Hospitals get bigger and bigger every day, and their administrators make 7 digit salaries. American people also understand that many (not all) physicians seem to be making more money than most American people, by far. American people are also aware of the killing drug companies, device companies and their investors, are making in this “market”.
    And finally, American people wouldn’t mind all this prosperity if American people were not the only ones paying for it while being told that “we”, whoever that “we” is, cannot afford to pay for their health care any more.
    Perhaps due to “that ignorance”, American people were under the impression that all along they were paying for their own health care through taxation, premiums, out of pocket, higher prices of goods (to cover employers’ “contributions”) and loss of tax revenue to “non-profits”.
    At this point, American people who are not blinded by the Conservative snow job of voodoo economics, would very much appreciate if health care reform would require that anyone feeding at the health care trough, eat a little less, because American people cannot support these ever increasing rates of gluttony, and just letting American people suffer a bit longer or die a bit sooner, so corporate profits are maintained at satisfactory levels is not a good option in the eyes of American people.

  4. tcoyote says:

    Not the case, Roger, that the feds were not involved. They were deeply involved, in the sense that they (Bush White House and CMS) insisted that the reform reallocate some $380 million in disproportionate share funds from hospitals (a handful received most of the subsidy) to individuals through a new state subsidy program as a condition of renewing the state’s waiver. Federal DSH funds were a major piece of the funding puzzle, but were not enough to close the fiscal gap. The state subsequently shafted the same two hospital systems losing the DSH payments by slashing its state Medicaid rates in the ensuing fiscal crisis.

    The reality is that “far to the left” Massachusetts was barely able to achieve a key element of the plan, the employer mandate- a final sticking point between Governor Romney, who opposed the mandate, and the Legislature. What won’t happen in most other states is the apparently widespread voluntary uptake of coverage by employers large and small.
    The non-subsidized (e.g. non-Medicaid like) part of the coverage expansion was only about 40 thousand lives. But Massachusetts added about 450 thousand people to coverage, and it happened very quickly- people began signing up only seven months after the bill was signed into law. The law remains popular with most citizens in the state, even though the vast majority of those covered received 100% state subsidies.

    This country’s ideological chasm and its fiscal gap have both widened sharply as a result of the recession and the “center” of American public opinion have moved noticeably to the right since Commonwealth Care was enacted. Scott Brown’s election to Ted Kennedy’s Senate seat should have been a signal to the Democrats that the country wasn’t going to buy a “Massachusetts-like” solution to this problem. The 2010 Congressional elections delivered control of one House to the Republicans; barring a miracle, the 2012 elections will give the Republicans the Senate. Both majorities will be committed to repealing the legislation.

    ACA is unimplementable in this fiscal and political climate. It lacks both crucial public support and funding. Only 36% of the uninsured have a favorable opinion of ACA, according to the March Kaiser Tracking poll.
    It’s time to begin searching for Plan B.

    Sorry, Matthew, but it isn’t going to look like Germany’s “workers’ paradise”, or squeaky clean little Holland’s, or the ossified British care monopoly called NHS. For better or worse, we’re not Holland, Britain or Germany. We’re going to have to find our own way through the political/fiscal wilderness to an American solution.

  5. Richard L. Reece, MD says:

    Massachusetts thought it was true blue,
    Democrats thought the rest of us were too.
    But when Bay Staters turned to Brown,
    It was the beginning of a big let down,
    The fading of blue in the voting queue.

  6. nate ogden says:

    (Try the German, Dutch or British plan)

    Would that be the british plan 5 years ago or the one today that the telegraph and mirror blast daily? NHS is falling apart faster then our system.

    “I’ve said for years and it is bearing out to be true: universal coverage is the first step.”

    universal coverage at $7000+ per person is not possible. It will never happen. The first step is cost, it is much easier to achieve universal coverage when it only cost $3500 per person. That is the major flaw of liberal reform, they want universal cvoerage no matter the cost and won’t accept anything else till they have it, even it if means they never get it and bankrupt a nation chasing it.

    ” (even though very few have gained coverage at this point due to the legislation)”

    Because most of those without coverage choose not to be covered and if and when they do need coverage have access to it. Outside politics access was never the issue.

    “American people can’t figure out why they have to pay 25 cents on a dollar to these middle men.”

    Here is an example of that ignorance, name any major carrier Margalit who only spends 75% on claims and related expenses. In rebutting his comment you prove it, thanks.

    ” so corporate profits are maintained ”

    Speaking of snow jobs, are you picking up for maggie since she left? Random conservative attacks for no reason and that don’t even make sense. Seeing as how the two largest and failing programs are Medicare and Medicaid what corporate profits are you referring to Margalit? It appears the need to sustain government funding and increase it is where the problem lies.

  7. Paul Levy says:

    tcoyote has it exactly right on rebutting “Similarly, interfaces between programs like Medicaid and the state subsidy program could be handled at the state level, without federal involvement.” Ditto on many other points.

    Unlike the federal government, which can only look to itself for funds, a major component of the puzzle for MA was access to federal funds that otherwise would have disappeared. This is what brought in many players. In particular, some of the wealthier hospitals were worried about having to pick up the cost of caring for unsubsidized poor patients. Insurance companies, too, were worried about having to make up this potential shortfall and charge their commercial customers for it. It also explains Romney’s personal involvement, both in the state and in DC.

    All that being said, the law was well conceived, and the Connector has done quite a good job setting up the insurance exchange. Whether all of this can be or should be the model for the US is another question.

  8. Plus, Romneycare is now upside down in the polls, too (http://tinyurl.com/3m73429). It looks like that by hitching his wagon to MA reform, Obama didn’t increase support for Obamacare, but decreased support for Romneycare!

  9. Matthew Holt says:

    And tcoyote, John Graham and Paul Levy prove my point…..we ended up with a mish-mash that looked a little like Massachusetts BECAUSE the alternatives of EITHER Enthoven style managed competition (Holland), OR properly done employer mandates with wraparound (Germany) OR Government provided VA-style for all (UK) are politically unavailable to Americans.

    The “Mass plan-lite” we got in the ACA wasn’t the best we could have had, it was the best we could get! Of course we only JUST got that. And as many people delight in pointing out, apparently much if not most of the US public apparently doesn’t want even that, and is happy with the gong show chaos that passes for our current health system…

  10. “Here is an example of that ignorance, name any major carrier Margalit who only spends 75% on claims and related expenses. In rebutting his comment you prove it, thanks.”

    I assume your dissent is based on the published MLRs. Care to explain what exactly is included in the MLR, and why is it that administrative expenses are in double digits for these carriers? I am pretty sure that as private corporations, they are more efficient than what they would like us to believe.

    “Seeing as how the two largest and failing programs are Medicare and Medicaid what corporate profits are you referring to Margalit?”

    The ones that Medicare and Medicaid cannot have because they cannot turn around and raise premiums twice a year by double digit percentages, and they cannot cherry pick healthy folks, or overcharge sick ones.

  11. nate ogden says:

    “I assume your dissent is based on the published MLRs.”

    No its based on the renewals they give groups, their filings with State DOIs, and their financial filings. I’m talking strait claims paid and reinsurance, not including any operating cost at all.

    “The ones that Medicare and Medicaid cannot have ”

    ” letting American people suffer a bit longer or die a bit sooner, so corporate profits are maintained at satisfactory levels”

    Nice cover for your argument that makes no sense. why rant about corporate profits then claim they don’t exist?

  12. “Nice cover for your argument that makes no sense. why rant about corporate profits then claim they don’t exist?”

    They most certainly do exist in the corporate side of the house. Not so much on the public side, as evidenced by the wailing doomsday statements made by certain folks.

  13. nate ogden says:

    The problem in America is not with private insurance, its the failed government programs. You want to talk of Conservative snow jobs, what ever that is, but ignore the problem which is the government plans crated by liberals that have been over budget from day 1.

  14. “The problem in America is not with private insurance”

    I disagree. The problem is cost. It affects both private and public. Public is perceived by some to be everybody’s problem and private is perceived to only be the problem of those who can’t afford it. I think both problems are everybody’s problem.

  15. nate ogden says:

    Most of the private problem is derived from public failure. For 45 years Washington has been trying to “fix” private insurance and they only succeed in making it more expensive and increasing the number of uninsured. If you want to fix insurance remove government

  16. Nate, I just saw this video on Greg Mankiw’s blog. You absolutely have got to watch it. It is surreal…… I’m not sure if the guy is serious or if it’s a joke, but I think he is serious. You’ll love it :-)


  17. nate ogden says:

    lol, funny how one’s perspective scews what we view as sarcasm or satire. What do you think of it? I agree almost 100%, I want to go back to a time minus all the government fixes when people could easily afford to pay most if not all of their lifetime medical cost out of pocket. When needing assistance to buy healthcare was the rare exception.

    I don’t think you agree with that though. Thanks for the link though, its nice to start the day with some validation, even if it is from Harvard

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