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Report: Mass. Health Program Provides Preview of Reform's Impact

By Roy Maurer  4/20/2012
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As the nation awaits the U.S. Supreme Court’s decision regarding the Patient Protection and Affordable Care Act (PPACA), Democrats celebrated the birthday of Massachusetts’ health care law, nicknamed “Romneycare” after its creator, then-Gov. Mitt Romney.

April 12, 2012, marked the six-year anniversary of Romney’s signing into law the health care reform model that President Barack Obama and Congress adopted, in some respects, for the nation in 2010, with the intent of expanding health coverage to millions of Americans. Romney, the expected Republican candidate for president, has said that if elected he would repeal the federal law, dubbed “Obamacare.”

As Romney himself has argued, there are differences between the federal PPACA (more than 2,000 pages long) and the Massachusetts statute (about 70 pages), including the range of health services that must be covered and the scope of regulatory requirements that providers and payers (including employers that sponsor group health plans) must comply with. However, to some extent the Massachusetts reform law offers a preview of how the federal law could impact the country. According to a report from the Massachusetts Taxpayers Foundation, the Bay State has achieved near universal health care coverage with only modest additional costs to state taxpayers.

The report, Massachusetts Health Reform Spending, 2006-2011: An Update on the “Budget Buster” Myth, found that state spending attributable directly to the health care reform law grew from $1.04 billion in fiscal 2006 to $1.95 billion in fiscal 2011. The state’s share after accounting for federal reimbursements was $453 million, which equates to 1.4 percent of the state’s $32 billion budget in fiscal 2011.

“Despite the claims of critics, the health reform law has not posed an undue burden on state taxpayers,” said taxpayers foundation President Michael J. Widmer. “Because the cost increases have been modest, the commonwealth has been able to pay for the reforms even during this global recession that has placed enormous pressures on the state’s finances.”

Massachusetts has the highest level of health care coverage in the country with more than 98 percent of its residents having health insurance, but the state ranks 48th in the nation in health care expenditures.

Commonwealth Care

The taxpayers foundation, a nonprofit research organization that received funding for the report from the Blue Cross Blue Shield of Massachusetts Foundation, an affiliate of the insurance provider, found that the biggest expense was in creating the Commonwealth Care program. As an entirely new program, Commonwealth Care accounted for the largest increase in state spending for health care reform—approximately $442 million of the increase between fiscal 2006 and fiscal 2011. The program uses a combination of state funds and the federal matching dollars available through the state’s MassHealth waiver to provide income-based premium subsidies for adult residents earning up to 300 percent of the federal poverty level. As a condition of eligibility, applicants cannot have access to employer-sponsored health insurance or Medicaid coverage. The state enrolls Commonwealth Care members in private health plans that are selected through an annual procurement process conducted by the Commonwealth Health Insurance Connector Authority, the agency established by the 2006 legislation to oversee the health insurance exchange.

The Connector has released new information concerning the performance of the program. The agency’s release noted that the Commonwealth Care program will provide health insurance to eligible residents in 2012 at a lower cost than in 2011. This is the second consecutive year in which the price of health insurance has dropped from the previous year. The Connector claims that the reduction is brought about by more private insurance companies participating in the program. These insurers are offering policies that are, on average, 5 percent less expensive than policies found outside of the exchange program, according to the agency.

There are 173,000 Commonwealth Care members; enrollment may exceed 200,000 during the coming year, the Connector release said. In the six years since health care reform became law, the per-member per-month rate the state pays to insurance carriers has increased by an average of less than 2 percent, while member satisfaction remains consistently high, the agency found. In the most recent survey, conducted during fiscal year 2012, most members rated their Commonwealth Care experience favorably, with 77 percent of all members being satisfied or extremely satisfied with the program.

“A key driver of overall cost reduction is unit cost improvement achieved through contract renegotiations with providers and referral management,” said Commonwealth Health Insurance Connector Authority Executive Director Glen Shor. “Several of the insurance carriers achieved significant success in persuading provider organizations to serve Commonwealth Care members at a lower cost,” he added.

Uncompensated Care

A major premise behind Massachusetts’ enactment of health care reform was that the added costs of expanding public health insurance coverage would be offset largely by reductions in spending for uncompensated care that would occur as previously uninsured residents enrolled in Commonwealth Care or other coverage. Annual state spending for uncompensated care dropped by $118 million over the first five years of reform, the Massachusetts Taxpayers Foundation report found.

Annual Health Safety Net (HSN) spending fell by one-third from fiscal 2006 to fiscal 2008, reflecting a more than 50 percent decline in the number of inpatient discharges and outpatient visits for which HSN payments were made during that period, the report documented. “Since fiscal 2008, the use of the HSN has trended back up as a result of the economic downturn, but it is still well below pre-reform levels,” the report found.

The Health Safety Net Fund—which replaced the Uncompensated Care Pool—pays for medically necessary health care for those who do not have access to health insurance and for the underinsured; it is funded through assessments on acute care hospitals and surcharges on payments made by insurers and self-insured employers for hospital and ambulatory surgery services and from state and federal funds. The private-sector contributions are fixed at $320 million annually. The state’s contribution is subject to appropriation.

“It would be premature to claim that the state’s historically high health care costs have been tamed, but there are encouraging signs of progress,” the report noted. For example, in the latest round of proposed premiums for the merged health insurance market for small businesses and nongroup individuals, health plans sought average increases of just 2 percent to 3 percent, compared with increases of 15 percent to 20 percent two years earlier. “Although the trend of slower premium growth is currently a nationwide phenomenon and may be, in part, a function of the economic recession, Massachusetts is experiencing a notably slower rate of growth than the national average,” the report stated. Family premiums for private, employer-sponsored coverage in Massachusetts fell by an average of nearly 1 percent from 2009 to 2010, while the country saw a 6 percent increase, according to the report. Individual premiums for Massachusetts workers rose by just 2.8 percent in 2010 vs. 5.8 percent for the nation.

Next Step: Cutting Costs

The 2006 Massachusetts health care reform law was designed to expand access to affordable coverage, not to address the cost of care, the Massachusetts Taxpayers Foundation report noted. “It did, however, help trigger a series of legislative, regulatory and private-sector initiatives directed at controlling the state’s historically high costs, and there is early evidence that a transformation is under way, centered around provider payment reform.”

Gov. Deval Patrick and leaders of the Massachusetts House and Senate have said they expect to approve some form of cost-containment legislation in 2012 that would accelerate reform of provider payment and health care delivery and set the stage for sustainable reductions, the report said.

Roy Maurer is a staff writer for SHRM.

Related Articles:

Health Care Reform Lessons from Massachusetts, SHRM Online Benefits Discipline, March 2011

Health Care Exchanges Will Alter Competition and Choice, HR News, March 2010

Quick Links:

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SHRM Online Health Care Reform Resource Page

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