Editor’s Note: This is the fifth in a five-part series about the business implications of health care reform produced by PricewaterhouseCoopers.
Massachusetts set the blueprint for current and future health care reform, and the nation could learn about pitfalls and success by studying the state’s model.
Implemented during 2007, Massachusetts reform included a weak employer mandate to provide insurance, a limited public option for people who cannot afford insurance and tax penalties for people who do not obtain insurance.
Two years later, the state’s successes are clear: only 2.7 percent of people don’t have insurance; more people have taken advantage of their employer’s health plan, business has not been adversely affected and there are more active insurers and health plans — giving residents more options for insurance.
But the pitfalls are also clear: access to care, cost containment and increased demand have put pressure on providers and payers.
Jon Kingsdale, executive director of Massachusetts Health Connector — the government agency that oversees the state’s public options, addressed the program’s successes and failures during the final segment in PricewaterhouseCooper’s reports about health care reform.
“Since this clearly is the architecture behind the bills in Congress, it is helpful to see how Massachusetts has done,” he said. “The architecture is not in question — the money is what people are shouting about now.”
Kingsdale points to the program’s achievements: of the newly insured, 35 percent pay for the insurance themselves and 98 percent of taxpayers comply with the laws that say they have to have insurance.
“And while the program is controversial outside of Massachusetts, it is very popular inside the state,” he aid. “Before the great recession, 75 percent of the people were in favor of the plan, since then, it’s about 60 percent.”
And the state’s costs? Slightly higher than 1 percent of it’s budget, or $350 million.
One of the key elements from the Massachusetts plan that the nation’s leaders should consider including is the idea of “shared responsibility.”
Residents were responsible for obtaining insurance, the government offered premium assistance and expanded Medicaid eligibility. Employers had to make a fair contribution and set up a plan that met state requirements.
“And the insurance industry also had to be reformed,” Kingsdale said. “They have guaranteed issue, guaranteed renewal. And they had to adjust their community ratings slightly. These requirements were solely for the non-group market, which was very dysfunctional. Our objective was to make health insurance work for the sick as well as the healthy.”
As executive director of the Health Connection, Kingsdale “hawks insurance.” He operates two exchanges that offer 13 plans for uninsured and low-income residents, and also connects residents and businesses to commercial health insurance products
The final effect: Massachusetts has more carriers with more plans at 25 percent less cost than before reform, he said.
The nation can learn from the state’s growing pains, Kingsdale said. Implementing widespread changes can lead to confusion — so it’s important to campaign for the programs.
“The campaign doesn’t stop when the bill passes,” he said. “That’s just the beginning. Businesses and individuals are going to know they need health insurance — and they are going to know they need to do something — but they won’t necessarily know what.”
In addition to providing updates about the reform legislation, Kingsdale recommends the program roll out tangible benefits every few months — and attacks should be expected.
“We were labeled a failure before the legislation was even signed,” he said. “And that’s going to be magnified on the national level. On day one, reform will be labeled a failure, and on every day after.”
That’s why it’s important to have clear, outside information about the program. In Massachusetts, the research is performed by the Blue Cross and Blue Shield Foundation.
The other big lesson: “gentle” mandates can work. None of the mandates in the state’s laws are stiff, fines for employers and individuals are fairly mild, he said.
“And yet, people responded,” he said. “In fact, more people signed on to their employer benefit, because they knew they needed insurance.”
Only 67,000 people have been penalized for not having insurance, and only 160 companies were fined for not offering insurance, he said.
“Health reform begets more health reform,” Kingsdale said. “To address access, we had to create legislation for retail clinics and minute clinics staffed by nurses. We are now looking at cost containment by researching options other than fee-for service.”
But the news isn’t all positive, said Jack Rodgers, managing director of PWC’s health policy practice.
“Increased demand and payment cuts are creating financial pressure for some providers,’ he said. “Payment cuts to hospitals will create an underpayment gap of $500 million.”
The median Massachusetts hospital operating margin declined to 0.3 percent during the first quarter of 2009, said the Massachusetts Hospital Association. Seven community hospitals are suing the state for higher Medicaid payments.
And while they are dealing with lower reimbursement rates, Massachusetts doctors are seeing more patients — and wait times are getting longer.
“But the state is working on incentives to providers,” Rodgers said. “And they’re recruitment and retention efforts are working. I am enthusiastic about the Massachusetts plan, and how it is working.”