Crossposted from the Worldhealthcareblog, this is the interview I did at WHCC with Jon Kingsdale, who created and is running the Massachusetts Connector–the organization at the center of that reform effort. Many of you have many opinions about what’s going on in that state, so now you’ve heard it from the horses mouth, feel free to comment.
Matthew Holt: This is Matthew Holt, again on the floor at the World Healthcare Blog this afternoon. Coming towards the end of the session, I have Jon Kingsdale with me. Jon is the executive director of the Commonwealth Insurance Health Connector Authority, better known as the Massachusetts Connector. This is the central body in the middle of the new Massachusetts Health Plan arrangement. And Jon gave a very interesting talk about how that is playing out in a session early this morning. So I thought I would grab him and grab a few minutes of his time. So Jon, thanks a lot for doing the conversation.
Jon Kingsdale: My pleasure.
Matthew: Let’s start in with the basics. Most people know that Massachusetts has gone in with some kind of individual combined with an employer mandate. And know that there’s some arrangement in the middle of that so people can actually buy into an affordable health plan. There’s been come controversy about what affordable means. But what’s the Connector doing in the middle of all that? What does the Connector do?
Jon: Well, we have a number of functions, Matt. One is a whole set of regulatory functions to decide some of the tough policy issues, frankly, that the legislature grappled with and decided they wanted to let the next generation of decision makers handle.
Jon: You might well say that. I wouldn’t. So those include, what is the affordability schedule? So adults in Massachusetts, starting later in 2007, need to have health insurance if they can find something affordable. Well, given your income, what is determined to be affordable? And what is the minimum amount of insurance that you would have to have? So regulatory policy decisions like that, on the one hand.
And on the other hand, we’re actually running a couple of insurance programs, one that’s subsidized for low-income uninsured. And we set the benefits and the enrollee contribution and actually enroll people, and serve as a market for them. And the other is, private unsubsidized health insurance, particularly for uninsured individuals above 300% of the federal poverty level, who are going to be buying out of their own pocket. And a big piece of what we do there is organize the market for them and try to do almost like some group buying for them. And create sort of a shopping mall for health insurance.
Matthew: So there are a couple of questions that come to
mind about that. The first one is, how do you, when you get
the–ignoring for the moment the Medicaid dollars and the federal and
state dollars that have been put into the plan for the poorer
individuals. For the folks who are above 300% of the poverty level who
are uninsured, who are typically young or may have had trouble getting
insurance before in the individual insurance market, is that going to
be completely self-pay for them, or are there going to be subsidies
available for them?
Jon: I think there are going to be a couple of different
things that are going to happen. First of all, the impact of requiring
most adults in Massachusetts to buy health insurance is that it’s
actually going to spur more employers to offer and cover their
employees. So that happens in a couple different ways. First of all,
some employers do not now offer group coverage. Some of them will do
that. Secondly, some of their employees don’t take the offer. Those
employees will find that an irresistible financial proposition. And
then finally, even for folks who don’t get employer sponsored or paid
for insurance, there’s a variety of mechanisms set up to reduce the
premium costs in general for non-group insurance, and to create some
tax subsidies. So that you can do payroll deduction, pretax dollars, to
pay for your premiums even if your employer’s not contributing. That
pretax subsidy is worth about 41%, on average, in terms of the real,
net, after tax cost of premiums coming down 41% by switching it to a
payroll deduction plan.
Matthew: And I assume that the other thing that you
already have going in Massachusetts, but has been a problem in most
individual markets, is that you don’t–you currently already have
community rating, but by age, correct? And also, essentially, it’s a
guaranteed issue. But what you have in that is the third leg of the
stool, which is that they’re being forced to buy into that central
pool. Of course, one side of that has got you criticized by people from
Cato on the Libertarian right. The other side David Himmelstein and
Steffi Woolhandler. They all are equally upset about this. So let’s
start with the right. The folks on the right who say that, in essence,
you’re forcing people into buying insurance, those who would rather
spend their money elsewhere. Have you seen much of that? Obviously,
there are people who wanted to get insurance who now can get it. What
about the other side? How many of these what in insurance are being
called the young invincibles who are being forced into buying are very
upset about this, and what do you think the ramifications of that are?
Jon: Well, it’s a little early to tell, because the
mandate really doesn’t go into effect until July 1. But let me take the
more theoretical criticism from the Cato Institute and so forth. I
think there are two essential points, one of which, I would argue, is
not really a very credible argument. The other one, I will concede, is
a real argument. One is the Libertarian argument about forcing people
to buy something that they might not otherwise choose. Clearly there is
a principle of solidarity here. There is a principle at work in the
universal obligation to participate that everybody is expecting, when
they step off a curb and they get hit by a car, God forbid, or they
have a skiing accident, or they get a chronic diagnosis, out of the
blue, of leukemia, that they’re going to be cared for. But there are a
lot of people, particularly those who think of themselves as young and
invincible, who don’t want to prepay for that now. They just expect
society to step in. We as a humane society say we will step in. This is
about everybody also participating. There’s clearly also an element of,
in servicing solidarity, an element of obligation or requirement here.The
other issue I would take real issue with, which is the charge that this
is a government program, this is really trying to restructure and
improve the market. Everything we do works on the principle of choice,
on market discipline, on consumer choice, and creating a more effective
competition between health plans. One of the problems, frankly, with
the non-group market, is that it’s dysfunctional, because the sick buy
and the healthy don’t. Well, the universal obligation creates a
statewide credible insurance pool where now everybody is buying. And
frankly, the people who are coming in are the most price resistant. We
get them into the market and we organize choices for them through
competitive bidding. They’re going to be a very potent vehicle for
bringing market discipline to the pricing of health insurance. So I
think this is absolutely consonant with market principles of
Matthew: Now let’s take the criticism from the other
side, which is the single payer advocates who are centered in your
state with Steffi Woolhandler and David Himmelstein. Essentially, there
are many arguments they have against what are market principles in
general in healthcare. But perhaps the major one is that if you’re
going to end up with a system in which there’s a expansion of separate
insurance for the poor, and that the people in the middle and upper
incomes are going to be able to maintain essentially their old style
system, that, in the end, that lower grade will be cut back and will
end up being sort of a second class system. Which is kind of where we
have been, honestly, with Medicaid over the years. That’s one of their
arguments against it, and maybe they’ve made several others to you.
When you’re debating, David, what do you say?
Jon: Well, organizing a centrally budgeted health
program is something that a lot of countries have done and done
successfully, and they’re relatively happy with it. I don’t frankly
have a strong argument that says we should never do that. I do have a
strong argument that says we’re not going to do it in my lifetime. I’ve
signed up 70,000 uninsured people in our program in Massachusetts.
We’ve expanded Mass Health by another 50,000 just since last June. So
that’s 120,000 people who are newly insured. I think it’s very, very
important to move those people from charity care: episodic, emergency
room and inpatient acute care crisis care, into comprehensive,
well-coordinated, and third party financed health insurance. My
argument is, great. If we can get there some other way, I’m all for it.
But right now, I want to get people insured. I think this is first
class medicine. If you had talked to the folks that I have, people who
have been going to emergency rooms to treat a sore throat which turns
out to be cancer. Or people who have been falling down with seizures,
not knowing they needed certain meds. Then they get into a health plan.
They get a comprehensive risk assessment. They get their meds. They get
their specialty diagnoses. There’s nothing second-class about that.
They’re leaving second-class about that. They’re leaving second-class
to come to real medical care and medical care with some dignity. They
have a card. If they’re not getting proper treatment from one doctor or
one hospital, they can actually go to another one and demand services.
And I just think that is so important in a wealthy society, that most
people, everybody really, have that kind of health security.
Matthew: So let’s talk a little bit about some of the
issue around the price of the plans. And I guess the whole issue of, to
make them affordable for people who are buying individually, you have
to essentially go to some kind of high deductible model. But we haven’t
really seen–although you pointed out that in some cases they’re
getting a cheaper plan with a lower deductible, some of the very high
deductible ones are the ones available on the individual market. I
think an example is a 37-year-old, who for the same amount of money can
go from a $5000 deductible to a $2000 deductible. But nonetheless, if
you work out the math and end up with everyone in the high deductible
plan, there isn’t enough money left in the pool to pay for the sick
people. And essentially, and this is something I’ve argued about long
and hard on my blog–if you wanted to say that everyone could all get
on these high deductible plans, a high deductible plan can’t afford to
insure sick people. So at the moment you’re not doing that. You have,
obviously, other variations for the poor, and then there are people in
private care and people in Medicare. So we’re not there, obviously,
universally in Massachusetts. But do you see the high deductible plan
as a stopgap? Where you see your piece emerging?
Jon: Well, this is where choice is really important. One
of the disadvantages, and there are many advantages to a uniform
national system. But one of the disadvantages is, you have to have the
right plan for everybody. We’re not saying anyone has to buy minimum
creditable coverage, which is the deductible, the $2000, $4000
deductible plan that you’re referring to. They can buy first dollar
coverage. They can buy comprehensive benefits with virtually no cost
sharing. Or they can buy something that has a lower premium. And it’s
really somewhat of a choice of, do they want to pay at the point of
service and pay less for a premium? Or do they want to pay less at the
point of service and more up front every month for the premium? It’s
giving them a choice. Now for folks who don’t have insurance, and who
are above 300% of the federal poverty level. So they’re not subsidized.
This is a big step forward even if there’s some deductibles. There are
a lot of kids in their 20s who really don’t want to have insurance at
all. I just don’t think it’s more affordable to have no insurance than
it is to have insurance with a deductible.
Matthew: What’s been the actual experience of the plans
who come back? You showed a chart today which didn’t have the plans
names outlined, but had some different pricing. There was a fair range
of pricing there. You were also somewhat interested in talking about
paying–in the interim model, seeing some employers paying a certain
amount, paying a flat amount. And people having a choice between plans
to pay the extra themselves. Can you explain how that’s working?
Jon: Well, we’re about to go live in about a week. May 1st.
Matthew: So you’ll tell me then, right?
Jon: So, so far it’s been without a hitch. [laughter]
Matthew: I’m thinking about the theory behind it. When
the plans came back, why did you see these wide variations between
pricing from the different plans, for essentially the same benefit
packages? Is that right?
Jon: For very similar benefit packages. I think they are
a number of factors at work. One of the reasons is that some of plans,
as we asked them to, came back with select or high performance
networks. Let me give you an example. In Massachusetts, we are a very
academically medically oriented medical culture. Whereas across the
country, about 16% of Medicare admissions are to academic medical
centers, in Massachusetts 40% of admissions are to academic medical
centers. And yet, for many things, the other hospitals–and we don’t
actually have any community hospitals in Massachusetts. They’re either
major or minor teaching hospitals. They virtually all have residents.
But people drive right by their community hospital for an uncomplicated
vaginal delivery to the downtown AMC for twice the price. And there’s
zero difference in outcomes. In fact, you could argue you’re driving by
the hospital with the experienced 40-year old obstetrician to go get a
kid to practice on you–a resident delivering your baby. There are lots
of opportunities for reduction in premiums and reduction in claims
costs by doing select networks, so we’ve encouraged that. But we only
gave the health plan six weeks. This is all very rapid-fire
development. We gave them literally six weeks, from December six till
January 16, to bid. In that six weeks, some developed limited networks,
and some were not able to do it. I think we’ll see more health plans
next year, next round of bidding, come up with select networks and more
affordable products. But that’s part of the reason for the disparity.
Matthew: We can talk about the employer mandate end of
it in a second, but what’s going to be the enforcement on individuals
to actually make sure they buy into this thing?
Jon: Well, this is probably the most difficult and
controversial element, and yet, a very essential element of the reform.
Particularly in the early years, Matt, we’re going to be very flexible
in administering this requirement. First of all, we have a schedule of
affordability that automatically exempts some people, particularly at
the lower income levels, from the requirement. And then we’re going to
have an appeals and waivers process, so you can actually get a waiver
ahead of time if you apply, or retrospectively, you can appeal the
decision and get exempted from the requirement. And that’s going to
have to be a very generous and constructive process, particularly in
the early years.
Matthew: But on the other hand, you do want to get
everybody involved. Now, you think there’s a certain natural flow to
the employer part of this, because people will be simply bargaining
with their wages, given that they can now take some of them tax-free,
and that may change the model a little bit. But there’s been some
criticism. The employer mandate part of the legislation has been pretty
toothless, because it’s a very low amount compared to the cost of
buying a plan. What’s your sense of where the employers, especially at
the low wage end, are going to go?
Jon: I’m glad you asked me that. Matt, I want to correct
one thing. It was never the stated intent to cover everyone. We’d like
to, but the objective was to get near-universal coverage. And I think
that’s an important distinction, just so that we’re not criticized two
years from now for covering 99 percent, and not for the last one
Matthew: [laughs] Right. OK.
Jon: But in terms of the employer mandate part of it, I
think there’s a lot of rhetoric around it, and it really misses the
point. So here’s the point. One of the impacts of the universal
obligation to have health insurance is that, on top of substantial
demand that already exists from employees for employer-sponsored
insurance, we’re going to have substantially increased demand, so that
even employers who are not subject to the mandate at all–those below
11 employees–are going to find increased labor market demand and
priority on providing health insurance. Now, specifically for those
with 11-plus full-time equivalent employees, they have to do two
things. One is, they have to make a fair and reasonable contribution
towards insurance for their employees. They never had to do that
before. If they don’t do it now–they could stop doing it now, come
July 1–they could always stop doing it, but now they have an
additional penalty of $295 per employee per year. So this is an
increase, on top of the labor market demand for it, there is now a
government penalty, or assessment, if you will, for not having
insurance. So that’s going to increase the incentive for them to do it.
Matthew: But is that enough? In California, they’re
proposing a four percent payroll tax in the payer-payee system, and 295
bucks here doesn’t sound like that much.
Jon: Well, I think it is enough, because most employers
already offer insurance. With the $295 penalty, the increased demand
from their employees for employer-sponsored insurance, there is going
to be even more pressure for them to do that. And then the other thing
that we’re asking employers to do is, for those, say, below 11, or for
their part-time or temporary employees, who would not be eligible for
employer-sponsored insurance, to set up this pre-tax payroll deduction.
And that’s worth, on average, 41 percent savings to employees who can
do payroll-deduct, rather than pay the premiums out of their own
pockets. So there’s a substantial set of activities employers in
Massachusetts are being asked to undertake.
Matthew: By the way, personally I think that, given
where you’re to come from or to go to, it’s not a bad approach. It’s
interesting. It’s better than nothing. But the final question and
criticism of the Massachusetts plan is: there isn’t much written into
the legislation about actually containing costs within the system or,
in fact, restructuring the system. We’ve heard all kind of stories
about how to reformat chronic care, and I just spent a lunch with Jack
Wennberg discussing how we would reduce supply, and all that sort of
stuff. And I’m not sure reducing supply is, perhaps, the desire of the
big AMCs downtown in Boston. So where do you think that’s going to come
into the picture, and do you think there’s going to be enough market
clout in the Connector to deal with that, or do you think that’s going
to be an issue that has to be raised separately?
Jon: I don’t know. Most people who know me would be
surprised to hear me say this, but I am naively optimistic. I think
that the cost issue is going to come bubbling up in a way that’s never
happened before, as a result of this reform. The problem we have now in
this country is we have two separate dialogs that go on. It’s sort of
like the authorization and the appropriations process. On the one hand,
the dialog at cocktail parties or in the press or public meetings
about: "My doctor’s great," "This hospital screwed up," "Isn’t it great
they can now replace my hips with artificial hips, and I can walk
again?" And then you have this conversation about affordability and
cost, and how outrageously expensive it is. And those two conversations
go on separately. We’re actually going to bring them together. And by
bringing everybody in to health insurance, we’re going to then focus
the public dialog on the trade-offs that are required, whether it’s
deductibles or aggressive pharmacy management or limited networks or
other items, to try to bridge that gap between what you can afford, and
what you want, and what you need. Maybe everybody won’t get exactly
what they want; they will get what they need at a price that they
decide for themselves is affordable. And I think that’s going to have a
tremendous impact on competition in the market.
Matthew: That’s great. I’ve been talking with Jon
Kingsdale. He’s the executive director of the Massachusetts Connector,
and, from what I can tell, has built it from the ground up in just a
very short period of time. It was great talking to you, Jon.
Jon: Thank you, Matt. My pleasure.
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HELP in choosing plan? I need some one on one help. I have cobra tufts POS plan that runs out March 13 and need to choose a MA connector plan that is closest to my previous plan. I am self employed. I want to know what I need to be concerned about? The basic difference with POS vs HMO which it looks is my only choose?
Can someone lead me to someone I can TALK to about this?
thank you for any assistance. Lwins
Plenty of us are protesting this lousy legislation that makes it a crime to refuse to buy poor quality insurance products from private industry. Our politicians have sold us out to corporate interests, and they will be held accountable.
this is a sham law and for the state to decide $300.00 monthly with a $4000.00 deductable is “affordable” makes me sick.
Nobody is protesting any of this. Freedoms are being taken away along with money. Mandate to buy from a select group of providers, or else? This is probably going to hit divorced fathers hardest…Everyone, run screaming!
I don’t understand why the Connector is being hailed as securing affordable coverage when their less generous Blue Cross/Blue Shield family plan is hundreds of dollars more per month than a similar BCBS plan I currently obtain through COBRA for $1188.90 per month. If Commonwealth Choice can’t even equal COBRA rates – which are supposedly full group rates plus a 2% administrative fee – I don’t see what they have accomplished. Why is the Connector unable to negotiate rates at least as good as the 150-person business from which I obtain COBRA coverage? I really was counting on the Connector for affordable coverage and this is very disappointing.