Lessons from Massachusetts for National Health Care Reform and the Affordable Care Act
With the approval of the United States Supreme Court for the Affordable Care Act, the focus of conversation in health insurance turns now from the halls of the courtroom to the halls of commerce. The full effect of Obamacare takes place on the first day of 2014. By then it will be seven years since most of the effects of the similar Massachusetts health care reform implementation. While Massachusetts had lower levels of uninsurance and a highly subsidized state support program before its reforms, the leadership position of Massachusetts begs some important questions. What have we learned from Massachusetts health care reform? How will it be a model for the country? How will it be so very different?
Massachusetts health care reform succeeded in two important ways. It increased health care access by increasing health insurance to almost everyone in the state. A small number of persons pay a tax surcharge (mandate!) for failing to buy health insurance even though they do not qualify for subsidies. Insurance policies sold through the insurance exchange built into the law were modest and still went to private insurers. The exchange acted something like a residual market, a bit like Workers Compensation pools. Group insurance sales through private insurers increased slightly. Individual insurance policy sales increased slightly. But perhaps the largest increase in insured persons came from individuals and families that qualified for health insurance through their employers but had been choosing not to buy coverage because they did not want to pay the employee share of health insurance costs. So, enrollment through traditional insurance products rather than through alternative state-run insurers have ruled the day.
The other way that Massachusetts health care reform has succeeded is that it was and remains very popular. Public opinion polls since the start of the law have remained favorable by large margins. That is important in many ways but including the reminder that it gives to those in political and other power that there is support for health care access even if it does cost more in taxes. So, providers, insurers and consumers have all worked to support the law rather than to undercut the law.
There have been some problems. There was a small but marked population of free riders that jumped in and out of the exchange and private policies only when they anticipate claims. This was addressed in subsequent legislation that limited enrollment periods. More significantly, the MA law did little to control costs. It did set up some mechanisms to investigate and consider cost controls by the use of technology. But the law never intended to do anything but achieve access and kick the can down the road on cost.
Today, the cost debate is reaching its crescendo as the Massachusetts state legislature debates a new health care reform bill focused on reducing the rate of increasing costs. The House and Senate have passed versions of a bill to control costs and the debate has now moved to a conference committee. The governor, who initiated the debate with his own proposal two years ago, has been broadly supportive of the efforts of the legislature. All of the political leaders in Massachusetts are Democrats and it is not unfair to suggest that the debate has been more effective since there is little political party point-gathering when all of the players in power know that they need to control health care costs for the benefit of the state economy and the state budget.
The legislation includes several key elements. The most controversial is a cap on the overall spending on health care in the state. Exceeding the cap might impose new price controls on providers – something they are fighting. The law encourages Accountable Care Organizations (ACOs) that change the fee-for-service pricing model to an insurer payment on populations based on risk-adjusted outcomes. This presents a shifting of health care utilization risk from insurers to providers. The insurers in MA have been promoting ACOs and other forms of outcomes based payments for several years now without the law. The results suggest that ACOs, or some other factors, are starting to make a difference. Before ACOs, MA had the highest cost of health care as measured in dollars per person, in the country. The latest measures drop MA to ninth place. And other calculations that adjust for the cost of living of doctors and the overall state economy suggest that as a percentage of economic activity, health care in MA costs are at about the average for the country.
Lastly, the law encourages new corporate wellness initiatives. While modest, the law proposes tax credits and other incentives for employer to enact qualified wellness programs and it also allows for community grants to encourage wellness in other settings. Indeed, the need to reduce health care costs may be most fruitful with efforts on the pre-chronic disease state population by controlling diet and encouraging exercise. The state is also discussing an end to the sales tax exemption for soda and candy as another way to make certain that government policy is not supporting activity that costs businesses and state more. Other issues, such as end-of-life care remain a third rail, even in Massachusetts.
In sum, Massachusetts is many years ahead of the nation in health care reform. Access has been achieved and now cost control is the focus. The country may find cost control to be more elusive due to an inability to bridge the wide gap between the two political parties.
About the Author
Phil Edmundson is the Chairman and CEO of William Gallagher Associates (WGA), insurance brokers and consultants for businesses with over 30 years in the insurance industry. He manages strategy, talent acquisition and development, and management / acquisitions at WGA.