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The Massachusetts Question

Two years ago lawmakers in Massachusetts made the state the first in the nation to mandate that residents purchase health insurance. The proposal quickly caught on, inspiring similar efforts on the state level and eventually becoming the blueprint for the national health reform efforts of Democratic presidential candidates Sen.  Barack Obama and New York Sen. Hillary Rodham Clinton.

More than a year into the experiment the first returns are in.  And reviews are mixed. Not surprisingly, the program is costing far more than backers had initially predicted. On the other hand, the ranks of the uninsured in the state have dropped sharply. (See Matthew’s podcast with Jon Kingsdale, executive director of the Massachusetts Connector, the agency created to administer the program, for more on the back story.) The Massachusetts experiment  is clearly not something to be dismissed — nor is it something to
defend for the sake of argument.

In brief, the Massachusetts health care reform law appears on its way to:

  • Covering two-thirds of those who did not have health insurance on the day it was enacted — about 400,000 people by the end of 2009.
  • Covering most of those who were uninsured in households with incomes below 300 percent of the federal poverty level–below which the plan pays all or most health insurance premiums.
  • Offering health insurance plans to middle-income people that are still largely unaffordable for those families making less than $110,000 a year –– people for whom the state has generally canceled the individual mandate that they must buy coverage.
  • Racking up costs well above what was first estimated. The plan looks to be coming in 38 percent higher than originally estimated for its first year and the Governor is now estimating second year costs 50 percent higher than the original estimate –– from $725 million to $1.1 billion for the 2008-2009 fiscal year.
  • Developing an annual cost trend for the program’s insurance programs, Commonwealth Care and Commonwealth Choice, in the 10 percent to 15 percent range.

So, lots more people, particularly lower-income residents, are covered but the program’s costs are unsustainable.

Massachusetts was a bold and very difficult piece of legislation to
accomplish. It has often been described as an experiment. The greatest
contribution experiments make is to tell us a lot about what works and
what doesn’t so we can move on successfully from there.

Massachusetts policymakers will now work to improve the plan. But
without a major cost containment effort — way beyond anything they are
even talking about now — they won’t make much progress.

The Massachusetts plan closely parallels Barack Obama and Hillary Clinton’s national
health reform plans. Whatever happens next in Massachusetts likely now undermine both state and federal
attempts to copy it. Neither Congress or any state legislature is
going to embark on a plan whose costs have quickly become so
problematic for such an incomplete result.

Now before all my readers in the Bay State quickly complain I’m
deriding the Massachusetts plan again, let me be clear that this is not
a bad outcome. If there has been one primary frustration in the health
care debate since the 1960s it’s that we too often just debate things,
never try anything, and never build on our successes and failures.

The Massachusetts health reform law is valuable because it tells us so much.

My primary takeaway from the Massachusetts health reform law is that
attempts to incrementally deal with access first, while avoiding a
major restructuring of the system to simultaneously deal with costs,
will only lead to an incomplete result in improving access and costs
that cannot be sustained.

What Massachusetts has accomplished in passing this law is the most
any state or Congress could have done — or ever did. As I have said many
times, the political leverage just hasn’t been available
to do the job in full. That was true in 2006 when this law passed
and it’s true even today.

But in the coming months, results from the Massachusetts health care experiment are going to become well known.

While many will say, "Look at that cost mess let’s forget major
health care reform." I would hope more people would say, "It’s clear we
are going to have to take a more fundamental look at real health care
reform that cuts across both the access and cost-containment lines."

Even bolder plans, that everyone says are politically impossible
today, just may take on a new life because it will be clear the
Massachusetts outline isn’t going to do much more than bust the budget
for an incomplete result. Moving the debate to a more viable place
would be a very worthwhile contribution for Massachusetts to make.

A few weeks ago, I said watch the Wyden-Bennett health care plan. It
combines many of the things conservatives want — a decoupling from the
employer-based system using an individual defined contribution
model — with many of the things liberals want — adequate premium support
for consumers and open access for everyone. The fact that the CBO rated
Wyden-Bennett revenue neutral early in the game also looks pretty good
in light of what’s happening in Mass.

Other fresh ideas are on the table. Ezekiel Emanuel’s health plan,
for example, that also decouples health care from the employer, puts
private health insurance in the hands of the consumer, and substitutes
the many ways we pay for health care today with a single VAT tax that
automatically creates a national budget for health care expenditures,
has also gained lots of attention.

The National Leadership Coalition on Health has had a comprehensive
plan on the table for sometime. Its bipartisan approach and many
supporters from a broad cross section of the stakeholders also makes it
a serious proposal that could now get more attention.

To me, progress is a matter of keeping the debate moving forward toward a successful outcome by building on valuable experiences.

That, I will suggest, is what the Massachusetts experiment can now
become.

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Paul GriffithsPeterjdEric Novack Recent comment authors
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Paul Griffiths
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I appreciate the thoughtful comments in this dialogue so far, but one point which is probably worth underscoring is that the value of this initiative is largely in the long run. The very long run. The cost of the uninsured and under-insured in MA — the state where I live — is largely ignored in the calculations about cost. The small business groups are right to be concerned about tax increases and the downward pressure on them to either provide benefits or pay more to their employees, but don’t ignore the societal costs of the uninsured. Granted, Massachusetts may not… Read more »

jd
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jd

Eric, I take it these comments are meant to indicate inconsistency in what I wrote, but I don’t see how. Costs matter, period, as do medical cost inflation and outcomes. However, the point of my post was that we aren’t realistically going to fix all of these at once. Increasing access to the system through universal healthcare is proposed as a first step that will trigger other changes to reduce costs and cost inflation, reduce perverse incentives in the system and improve the use of evidence-based medicine. The trigger I’m proposing is pressure from those who are mad about new… Read more »

eric Novack
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eric Novack

JD- quick thoughts:
1. costs matter in your post, except when they don’t, like in your MA analysis– the press releases make the statement about ‘victim of success’ cost issue– but that comes from those who are running/ promoting the plan
2. medical inflation is a regular topic of concern, except when it’s not– 10-15% compared to 4.5% nationally
3. outcomes matter, except when they don’t– the bar is now simply ‘get people into the system’, which, while it seems compelling, was not benefit that proponents claimed would come from the program

Peter
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Peter

Good analysis jd. Why is it that local property taxes are held in check by voters and federal income taxes artificially kept low – because local communities can’t print money to hide overspending/incompetence, it’s PAGO for property tax payers. Your point about a 2 or 3 stage step to universal coverage with cost controls would be ok if mandated premium payers could hold out long enough to see system costs reduced – I don’t think they can because providers will always push (through political contributions) to get the state to just give more and more premium subsidies. It’s morally wrong… Read more »

jd
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jd

It’s hard to get a straight answer on what is going on with the high costs in MA. I’ve read in several places that part of the cause is higher than expected enrollment of those who qualify for subsidies. To the extent this is responsible, there is no grounds for hand-wringing. The whole point was to get these people into the system, it’s just happening faster than was budgeted for. In the long run, not a big deal, and not something that critics like Eric can say voters would have rejected if they knew in advance. I’ve also read that… Read more »

Eric Novack
Guest
Eric Novack

Bob- my first issue with your analysis is your semi-dismissal line “Not surprisingly, the program is costing far more than backers had initially predicted.” The issue is that if the real cost was appreciated– or acknowledged, since many claimed this would be the case (and so did those in Mass responsible for estimating state bond needs)– it never would have been passed in the first place. Since the entire effort was financially driven– to preserve federal funds– to minimize the impact of massive cost overruns, and a cost increase rate that is now more than 2x the national rate for… Read more »