California may be the most populous state, but tiny Massachusetts — with its own health reforms and a pivotal Senate election — has had an outsize impact on the nation’s health policy.
Policymakers and pundits have cited Massachusetts’ 2006 health overhaul and coverage expansion both as an example of positive social legislation and the danger of costly entitlements. The model also served as a template for President Obama’s own reform push.
The Massachusetts and national plans aren’t identical, but they do share policy DNA. Both aim for near-universal coverage by relying on Medicaid expansions, payer regulations and an exchange that allows patients to shop for insurance.
In some respects, Massachusetts lawmakers realized their goal: the state has achieved “record low levels” of uninsured residents and sustained those gains across the economic downturn. But what lessons does the Bay State hold for the Golden State? A handful of new reports illuminate the persistent challenges of Massachusetts’ health plan and serve as a reminder that coverage expansions alone cannot curb emergency department overcrowding, reduce costs or stop residents from “gaming” the system.
Emergency Care Rises as PCP Access Falls
Massachusetts officials had hoped that their reforms would curb use of emergency care in favor of less-expensive physician office visits. That hasn’t come to pass, with the latest report finding that visits to Massachusetts EDs increased by 9% from 2004 to 2008, with about three million total visits in 2008.
However, state officials said that newly insured residents aren’t driving ED utilization, pointing to a lack of access to primary care physicians as the culprit. While Massachusetts lawmakers are discussing tactics like hiking reimbursements for primary care, efforts to build the PCP pool to meet demand are expected to take years.
The findings from Massachusetts reinforce concerns that the national overhaul might increase wait times for physician appointments and contribute to overcrowding in hospital EDs. Analysts predict that the newly insured will continue to seek care in EDs, citing research that found the insured are just as likely as the uninsured to use the ED.
Ahead of many national reforms taking effect in California, the state already wrestles with issues of ED overcrowding and physician access. An unpublished survey from the Hospital Association of Southern California last year found that nonemergency patients at Los Angeles County EDs wait an average of seven hours before being seen. California also faces a PCP shortage, and many doctors there are reluctant to treat patients enrolled in government health insurance programs, such as Medicare and Medi-Cal, because of low reimbursement rates.
No Solution for Spiraling Costs
Rising health costs are another major problem for Massachusetts lawmakers, who appear to have abandoned plans to overhaul the payment system this year.
State officials and health providers generally agree that the current fee-for-service system is flawed and contributes to the Massachusetts’ growing health costs, by encouraging unnecessary utilization. However, they cannot agree on how a new payment system would function and whether it should include aspects like a payment oversight board.
As a near-term tactic to suppress costs, state officials have sought to curb insurer rate hikes — a tactic also pursued by California policymakers — but some have criticized proposed caps as an arbitrary measure that ignores drivers of health costs. “The deeper problem is that price controls seem to be the only way the political class can salvage a program that was supposed to reduce spending and manifestly has not,” Joseph Rago writes in a Wall Street Journal editorial.
Massachusetts officials also were dealt a blow when a state insurance appeals board last month ruled that premium increases sought by Harvard Pilgrim Health Care for plans in the individual and small group markets were not excessive and should not have been blocked by the state’s Division of Insurance. Following the ruling, the division approved single-digit rate increases for 63 insurance plans in the small-group market covering individuals and small businesses, a marked contrast with its earlier rejection of 235 out of 272 proposed increases.
Gaming the System
Finally, the number of people who appear to be “gaming” Massachusetts’ insurance system by purchasing coverage when they become ill and then dropping it when they believe they no longer need it has quadrupled from 2006 — when the state approved its health reform law — to 2008, according to a new report conducted for the Massachusetts Division of Insurance. As a result, insured state residents subsidize some health costs related to people dropping their insurance, and the resulting effect on premiums adds “as much as $300 million” to the state’s health care spending, according to a Blue Cross Blue Shield of Massachusetts spokesperson.
Fortune magazine notes that “the federal plan will encounter the same problem” — and possibly a worse situation — given that the national overhaul imposes lower penalties for workers who go without coverage and offers subsidies for higher-income workers. Citing these “perverse incentives,” John Goodman, president and CEO of the National Center for Policy Analysis, warns that the federal overhaul could even cripple payers and lead to “the death knell for private insurance.”
More Reforms to the Reform
Perhaps the most apparent takeaway is — like the national reform — the Massachusetts plan will need future tweaking to ensure fiscal sustainability and long-term success.
The state’s lawmakers are considering proposals to make it more difficult for consumers to purchase and then quickly drop insurance coverage. Gov. Deval Patrick (D) has filed a bill that would restrict insurance enrollment to two annual periods in June and December. The measure would include exceptions for people facing “life changes,” such as birth of a child or loss of employer-provided coverage.
Meanwhile, some insurers are calling for a new payment model intended to control costs and ED usage. Andrew Dreyfus, executive vice president for health care services at Blue Cross Blue Shield of Massachusetts, says that implementing global payments — which pay physicians a fixed fee to cover a patient’s care across a year — would encourage PCPs to schedule more office visits and reduce the need for ED care.
If Massachusetts makes major changes, look for California Healthline to carry news of the implications. In the meantime, here’s a look at the key health reform stories from across the nation.
In the States
- Virginia Attorney General Ken Cuccinelli (R) on Thursday opened his state’s effort to overturn the new health reform law — the first of several such lawsuits — by arguing that the overhaul equated to an “unprecedented overreach” by the federal government. Virginia is one of 21 states challenging the constitutionality of the law’s mandate that individuals must obtain health coverage, which the states argue oversteps Congress’ power to regulate interstate commerce. The Virginia case is the first to reach oral argument after the U.S. Department of Justice filed a motion to dismiss the lawsuit. The 20 remaining states have filed a separate suit in Florida, with oral arguments slated to begin in September (Helderman, Washington Post, 7/2).
- Connecticut Gov. Jodi Rell (R) on Thursday sent a letter to state health officials asking them to defer executing contracts with the federal government for the state’s high-risk insurance pool amidst concerns that premiums for eligible state residents might be excessive. The consulting firm Milliman estimates that a 30-year-old state resident would have to pay $436 monthly for coverage in the pool, while older residents would face higher rates, according to Rell’s letter (Pecquet, “HealthWatch,” The Hill, 7/2).
Insurance Industry Fallout
- Health reform is accelerating the insurance industry’s consolidation, with the sector headed toward an “oligopoly” dominated by a handful of large insurers, according to a WellPoint executive. HealthLeaders Media notes that it might be easy to blame the new law’s regulations and price controls for the possible phenomenon, but the industry actually has been consolidating for years. There were more than 500 health insurer mergers between 1998 and 2008 (Bakhtiari, HealthLeaders Media, 6/30).
- The new health reform law this fall will begin requiring health insurance plans to offer certain preventive health services at no direct cost to patients, and many women’s health advocates and employer groups hope that contraception is included among those benefits. Coverage for many services will be based on recommendations from the Health Resources and Services Administration. The agency could take up to one year to solidify its recommendations (Andrews, Kaiser Health News/Washington Post, 7/6).
On the Hill
- Senate Minority Leader Mitch McConnell (R-Ky.) and other leading Senate Republicans have not yet endorsed a GOP bill to repeal the new national reform law, potentially eroding the party’s election-year claim that the law will “do more harm than good.” The repeal measure has won endorsements from Senate Minority Whip Jon Kyl (R-Ariz.) and National Republican Senatorial Committee Chair John Cornyn (R-Texas). However McConnell and GOP Conference Chair Lamar Alexander (R-Tenn.) and Vice Chair Lisa Murkowski (R-Alaska) — who have publicly advocated for a repeal of the health overhaul — have withheld their support for the repeal measure (Lillis, “HealthWatch,” The Hill, 7/5).
- Congressional Budget Office Director Douglas Elmendorf on June 30 predicted that the federal deficit will continue to grow in coming decades despite the cost-containment provisions of the new health reform law (Montgomery, Washington Post, 7/1). Presenting CBO’s projections to the 18-member, bipartisan White House Commission on Fiscal Responsibility and Reform, Elmendorf said the law made a “dent” in overall health care spending but that it “did not substantially diminish the challenge” of cutting costs (McKinnon, Wall Street Journal, 7/1).
HealthCare.gov
- The Obama administration last week unveiled its new HealthCare.gov website. U.S. residents can apply for the high-risk pools through the site, which also provides information on a wide range of public and private health insurance plans. For example, the site offers insurance plan information based on an individual’s income, job status and ZIP code, as well as allows users to see how their coverage options might change as provisions of the new reform law take effect. Federal health officials expect the site to list prices and offer plan comparison charts by October (Aizenman, Washington Post, 7/1).
- eHealthInsurance.com — a California-based insurance broker established in 1997 to help consumers compare prices and benefits of private health plans and also enroll in them — has made a bid for a federal contract to administer HealthCare.gov. Industry experts say it is a leading contender to win the contract. Whether it wins, company officials are confident that where HealthCare.gov falls short in information and services, eHealthInsurance.com will be able to make up the deficit (Galewitz, Kaiser Health News, 7/1).