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COVER STORY

The Lessons Of Massachusetts

Often viewed as a model for the nation, the state's drive for universal health care coverage is not an unqualified success.

Three years ago, when Massachusetts officials reached across party lines to enact a first-in-the-nation health insurance law requiring everyone to have coverage, health care experts hailed the legislation as a model for the nation. And politicians listened. Barack Obama and all of the other leading 2008 presidential candidates pulled core elements of their health care proposals directly from the law.

Today, as Congress nears major decisions about overhauling the nation's health care system, Democrats are seeking to follow Massachusetts' example in many important respects: They want to mandate that individuals have insurance and that all but the smallest employers either provide coverage for their workers or help pay for it. Democrats likewise envision requiring insurers to take all comers -- regardless of medical history -- and creating exchanges through which individuals could purchase insurance at more-favorable group rates.

 

But there is a noteworthy distinction. Massachusetts opted to delay trying to rein in the high cost of health care, while President Obama and most members of Congress are focusing on cost containment as one of the main ways of ensuring that national health care reform, which could exceed $1 trillion over 10 years, does not increase the federal budget deficit.

As Washington weighs taking a Massachusetts-style approach, a look at the commonwealth's experience is instructive. The Massachusetts model is not an unqualified success, at least so far. Universal coverage has proven to be an elusive goal: 2.6 percent of residents remain uninsured. On the other hand, the number without insurance -- 650,000 in 2006 -- has been halved.

State Sen. Jamie Eldridge, a Democrat who voted for the law, hails the expansion of coverage. Still, he warns that the program has its problems. "I think you'll see that the law, on the whole, has not been nearly as much a success as conventional wisdom suggests."

 

Recent academic studies indicate that insurance prices and the state's costs have been higher than anticipated, safety-net hospitals are struggling more than ever, doctors cannot keep up with increased demand, and some people who have insurance still can't afford care.

Four lessons from Massachusetts' experience particularly stand out.

Lesson 1: Put the carrots first.

Massachusetts learned this the hard way a long time ago. In 1988, the Bay State tried putting the sticks first when Democratic Gov. Michael Dukakis pushed a near-universal health care bill through the Legislature. The law contained no mandate for individuals to have insurance, but it required most employers to offer policies to workers or pay $1,680 a year toward their health costs. That's a stiff assessment compared with the state's current penalty, $295.

"There was a big celebration when it was enacted. Dukakis used it in the '88 [presidential] campaign," recalls Robert Blendon, a professor of health policy and political analysis at the Harvard School of Public Health and the John F. Kennedy School of Government. But it wasn't long before the business community rebelled. Massachusetts never implemented the law, which was formally repealed in 1995.

 

"If stakeholders feel the pain first, that could doom the bill," Blendon warns Congress. Massachusetts lawmakers took a far different approach in 2006 -- front-loading benefits and delaying the toughest requirements.

"In Massachusetts, they put high levels of subsidies way up the income [ladder]. They made free and subsidized plans available a year before any mandate. The [individual] mandate went into effect later," Blendon said. "The impression was, 'How wonderful!' " The penalty that was eventually tied to the employer mandate was small enough not to trigger a major push-back. The law also includes a well-publicized exemption: Individuals aren't required to have insurance if the cheapest policy available costs at least 10 percent of their income.

The legislation not only delayed mandates until after thousands of people had benefited from subsidized insurance, it also deferred any attack on soaring health care costs. Cost containment is a formidable task and one that often involves financial losses for a great many stakeholders. But the pain could be especially great in Massachusetts, where health care costs are about 25 percent higher than the U.S. average, according to a February report commissioned by the Physicians for a National Health Program, which advocates single-payer health care.

"Colleagues have told me horrifying stories of people putting off chemotherapy because they can't afford the medications." --internist David Himmelstein

A poll conducted by the Harvard School of Public Health and the Blue Cross Blue Shield of Massachusetts Foundation suggests that the carrots-before-sticks approach paid off. When the 2006 law was enacted, 61 percent of residents supported it; two years later, that number had risen to 69 percent, even after the mandates had kicked in.

Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector Authority in Boston, contends that Massachusetts was right to try to advance in stages. Cost containment is the toughest element of reform, he wrote in a May 28 Web article for the journal Health Affairs, and making it a prerequisite for covering the uninsured could doom the effort.

An all-at-once approach is too overwhelming, he argued: "Simply building on MassHealth (Medicaid), adding two new coverage programs, implementing employer requirements, phasing in a new tax-compliance policy for the individual mandate, redirecting public subsidies for safety-net providers, and explaining all this to the 6.4 million Massachusetts residents has taken three years. Trying to anticipate and address related cost, quality, and access issues in one national reform would be more than Herculean -- it would be Sisyphean; that is, proponents would be doomed to a cycle of Herculean effort, followed by failure, then a renewed attempt at reform, ad infinitum."

Distributing benefits early -- before the burdens kick in -- is crucial, Kingsdale said. "Because enrollment caps were removed from one Medicaid program and income eligibility was raised for two others, tens of thousands of the uninsured were newly enrolled just 10 weeks after the law was signed. The newly established Connector launched its first coverage program less than four months after it was incorporated, and, before the year was out, expanded the first program and launched a second one," he added. The Connector links uninsured individuals, enabling them to qualify for group rates, and also manages Commonwealth Care, a subsidized insurance program for low-income adults.

But leading Washington Democrats at both ends of Pennsylvania Avenue maintain that they must slow cost growth upfront. As a candidate, Obama insisted upon that approach; as president, he still does. What's more, congressional "pay-as-you-go" rules may make it impossible to pass any legislation that's not revenue-neutral over its first 10 years.

"This concern about the cost in the outyears was something that didn't have to be solved" in Massachusetts, Blendon said. "In Washington, you have to have cost estimates containing outyear costs, and that creates a whole series of dynamics we did not have in Massachusetts."

Now, however, cost pressures have intensified, and a state commission is readying recommendations for legislative fixes.


Lesson 2: Without effective cost controls, coverage expansion may not be sustainable.

Delaying tough cost controls helped Massachusetts enact and implement its breakthrough insurance law but strained the state financially. "Although major expansions in coverage can be achieved without addressing health care costs, cost pressures have the potential to undermine the gains," said Sharon Long, a senior fellow at the Urban Institute. That is particularly true now that the recession is putting more people out of work and into the state government's subsidized or free insurance programs.

When the 2006 law was passed, the assumptions were that the price of insurance premiums would fall as young, healthy uninsured people joined the ranks of the insured and that fewer people would use hospital emergency rooms for non-emergencies. Those changes were supposed to save Massachusetts money.

Neither happened, according to state Sen. Eldridge, "at least not enough to produce the cost savings we were told we would see." Eldridge, a proponent of single-payer, national health care, notes that the law has cost the state more than expected. Spending on Commonwealth Care, the subsidized health program that the law created, is estimated at $1.3 billion in fiscal 2009, up from $1.1 billion in fiscal 2008.

The price of the four insurance plans offered under Commonwealth Care rose 9.4 percent in 2009, according to the report done for the Physicians for a National Health Program. The study's authors said that the law has done nothing to stem the overuse of high-tech care and the "underdevelopment" of primary care. "Indeed, one little-known provision of the reform actually shifted resources away from primary care by lowering Medicaid payment rates for such services, while raising them for high-tech, tertiary-care services," they said.

Eldridge now thinks that the Massachusetts law should not be used as a model because it has become a boon to insurance companies: "At a time when every state government across the country is slashing direct services for the poor and the mentally ill, it is maddening that so many of our public health care dollars are diverted to HMOs and health insurance companies under the current employer-based Massachusetts health care system."

In Blendon's view, the state must find a way to lower costs if it is to sustain its approach to health insurance. "The system is running out of money," he said.

"The problem ... is that [Massachusetts] didn't build in cost containment. Their view is that [reform is] alive three years later and now we can start to deal with cost containment," Blendon continued. "People in Washington feel they have learned from Massachusetts and that they have to have cost containment first."

Grace-Marie Turner, president of the Galen Institute, a free-market advocacy group, complains that more than half of the residents newly enrolled in health coverage in Massachusetts are in free or heavily subsidized plans. "Rising costs for health coverage and health care pose the biggest challenge to the success of the reform effort," a Galen report concluded this month. "The biggest problem that Massachusetts had -- and still has -- is the high cost of health care and health insurance in the state."

Health care spending in Massachusetts in 2004, two years before the law was enacted, averaged $6,683 per person, almost 27 percent higher than the national average, according to Turner.

"The cost issue this year is in severe crisis," Eldridge said. In the state budget for fiscal 2010, the Legislature voted to eliminate health care coverage for 30,000 legal immigrants. Lawmakers are considering halting dental care for people on Medicaid.

Lesson 3: Having insurance isn't the same as getting treatment.

Internist David Himmelstein says he has seen patients who have insurance but can't afford drugs or office visits. "Colleagues have told me horrifying stories of people putting off chemotherapy because they can't afford the medications," he said. Himmelstein is an associate professor of medicine at Harvard Medical School and a primary-care doctor at Cambridge Hospital, a public institution.

Nearly every day that he is in the clinic, Himmelstein says, he sees a patient who has problems paying for care "despite this reform." Some of them had free care before the 2006 law took effect but are now expected to handle co-payments. "If you're not poor enough to get a subsidy, say you're making $30,000 a year, you're required to buy a policy that costs about $5,000 a year for the premium and has a $2,000 deductible before it pays for anything. For substantial numbers of people, it's effectively not coverage," Himmelstein said. The policy he described is about the cheapest Massachusetts plan available, according to the Physicians for a National Health Program report, which Himmelstein co-wrote.

"Although major expansions in coverage can be achieved without addressing health care costs, cost pressures have the potential to undermine the gains." --Sharon Long, senior fellow at the Urban Institute

For many Massachusetts residents, gaining insurance has improved their access to care. On the whole, working-age adults were more likely in 2008 to have an established place to go when sick than they were in 2006. They were also more likely to have visited a doctor during the previous year. The likelihood of having a preventive care visit rose 6 percentage points, according to a May article in Health Affairs by the Urban Institute's Long and Paul Masi, a research assistant.

Still, Massachusetts residents who identified themselves to pollsters as having been "directly affected" by the law were far from happy, according to the Harvard/Blue Cross survey. They tended to say that it hurt them financially and that their health care costs had risen because of it. Only 52 percent of them supported the law.

In their surveys of residents, Long and Masi found that one in five adults in 2008 was turned away from a doctor's office or clinic because it was not accepting new patients or their type of insurance. The problem was worse for low-income people: 29 percent reported problems.

Massachusetts residents covered by a public plan also experienced greater difficulty in getting an appointment; Medicaid and Commonwealth Care pay doctors and hospitals less than private insurers do. About 32 percent of people with public coverage (compared with 16 percent of those with private insurance) reported having trouble getting in to see a doctor.

About 55 percent of respondents said they turned to hospital emergency rooms for care if they could not get a doctor's appointment as soon as it was needed, dashing hopes that Massachusetts' expanded coverage would mean fewer residents using the ER for non-emergencies.

When patients do manage to book appointments with primary-care doctors, the wait is often longer than in the past. Moreover, government-funded community health centers, which offer only primary care and mainly serve the poor, are busier than ever. As a result, urgent-care clinics, such as the MinuteClinics in CVS drugstores, are proliferating in Massachusetts even though they are declining in most of the nation.

But for patients, clinics and ERs are not adequate substitutes for having a long-term relationship with a primary-care physician, many doctors argue. Urgent-care clinics are typically staffed by nurse practitioners, with physicians overseeing several facilities, and these clinics provide only basic services.

Community health centers, meanwhile, are generally respected and can provide some continuity, but they don't have specialists; their staffs can diagnose breast cancer, for example, yet surgery and chemotherapy are beyond their scope.

A recent survey by the Massachusetts Hospital Association found that two-thirds of member hospitals say their community has too few primary-care clinicians. The trouble has become severe, according to the Massachusetts Medical Society. A 2008 society report found that 12 of the 18 physician specialties had critical" or "severe" shortages. The problems were particularly acute in the fields of internal medicine and family medicine. The percentage of family-medicine physicians who no longer accept new patients rose from 25 percent in 2006 to 35 percent in 2008. Existing patients had to wait an average of 18 days for a routine doctor's appointment or regular office visit in 2008, up from 15 days a year earlier.

The Harvard/Blue Cross survey found that 33 percent of all respondents (which included 51 percent of those who said they were directly affected by the law) reported that their costs had gone up since the program began. Only 6 percent of residents (14 percent of those directly affected) said that their costs had declined.

Many of those experiencing difficulties used to be helped by the state's old free-care program if they earned less than 200 percent of the federal poverty level (now $44,100 for a family of four). But some of those people are no longer eligible for free care. Those making more than 150 percent of the federal poverty level ($33,075 for a family of four) get only partial subsidies and are hit with co-payments, premiums, and deductibles, according to the Physicians for a National Health Program report.

At Cambridge Health Alliance, a public health system in Massachusetts that includes Cambridge Hospital, some HIV and Hodgkins lymphoma patients have had their care interrupted because they couldn't afford the new co-payments, Himmelstein said. The situation is likely to worsen, according to the report. For fiscal 2009, the Connector negotiated higher patient cost-sharing to limit the state's cost increase to 9.4 percent, the report said; without the change it would have been 15.4 percent. That means higher co-payments and enrollee contributions. "Several safety-net providers are now demanding for the first time that patients whose condition is not immediately life-threatening make upfront co-payments before seeing a doctor," Himmelstein said.

Lesson 4: Safety-net hospitals may still need help.

Covering everyone -- or nearly everyone -- was supposed to virtually eliminate the need for government money to reimburse safety-net hospitals for uncompensated care, because insurance payments would cover the cost of most of their services.

In other states, the state and federal governments provide hospitals with what are known as disproportionate share hospital, or DSH, payments when they treat an excessive number of Medicaid patients.

Such payments essentially disappeared in Massachusetts when the state enacted universal coverage legislation in 2006. The state also lowered Medicaid reimbursement rates for hospitals. The problem is that things didn't work out as expected: Safety-net hospitals are treating nearly as many low-income patients, but those with Medicaid or Commonwealth Care are paying less than before.

At Cambridge Hospital, where Himmelstein works, the average government payment for low-income patients -- those on Medicaid or Commonwealth Care, or without insurance -- is only about 60 percent of what it costs to provide their care. Before the 2006 law, payments for Medicaid and uninsured patients covered 77 percent of the cost, according to the hospital.

Another major safety-net hospital, Boston Medical Center, is in a similar financial bind. Payments for low-income people covered 82 percent of treatment costs in 2006 but are predicted to cover only 64 percent in fiscal 2010.

The state is appropriating emergency funds, but they are insufficient, according to Himmelstein. Cambridge, which has about half of all the psychiatric beds in Massachusetts, is eliminating 50 percent of its psychiatric inpatient and outpatient services. It is closing its substance-abuse center and six of 20 clinics.

What will happen to the people who are turned away? "Some will end up in jail, some on the streets. Some will end up burdens on their families. Some will commit crimes. And some will suffer in silence," Himmelstein predicted.

This article appears in the July 18, 2009 edition of National Journal Magazine.

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