Markets & Finance

In Massachusetts, Health Care for All?


Efforts to extend health insurance to more Americans have been stalled in recent years between liberals' insistence on more government spending and conservatives' advocacy of private-sector approaches. Now Massachusetts may have broken the gridlock with an innovative bipartisan plan designed to achieve nearly universal coverage.

The bill, approved by the heavily Democratic Massachusetts legislature on Apr. 4, marries conservative and liberal ideas. For the first time ever in the U.S., all state residents would be required to have health insurance -- dubbed an individual mandate. Gov. Mitt Romney, a moderate Republican expected to run for the White House in 2008, champions this as a conservative victory that leads residents to take responsibility for their own health insurance. He says he plans to sign the bill soon, although he may first try to change some smaller provisions.

HEAVILY SUBSIDIZED. The legislation also includes such liberal measures as huge government subsidies to help low-income individuals buy insurance. What's more, all companies with 11 or more workers are required to help pay for health insurance -- a so-called employer mandate.

"This is an historic precedent that creates a partnership involving the public and private sector, as well as employers and individuals," says Ron Pollack, executive director of Families USA, which represents health care consumers.

Pollack and other experts predict the bill will have an impact on the health-care debate far beyond Boston. Romney says he has already encouraged a number of governors to study the bill, and he's expected to make the Massachusetts plan the cornerstone of his Presidential bid, much as President Bush touted his education achievements in Texas during his first run for the White House.

"The eyes of the nation are on us," adds Senate President Robert Travaglini, a liberal Democrat who normally opposes Romney. "We led the way with same-sex marriage, and now we are doing it with health care reform." (See BW, 11/28/05, "The Health-Care Crisis: States Are Rushing In")

The bill aims to cover 95% of the state's 500,000 uninsured within three years. To do that, Romney and the legislature split them into three categories. One group is comprised of nearly 100,000 poor people who qualify for Medicaid but haven't yet signed up. Covering them will cost about $225 million a year, although the federal government will pick up half the tab.

The second group, numbering around 200,000, are low-income families and individuals who don't qualify for Medicaid but are too poor to buy health insurance on their own. Nationally, this is the core of the uninsured, since more than 70% of the 45 million uninsured Americans have family incomes under $50,000, according to Families USA. Massachusetts plans to cover these people with big subsidies.

Those earning up to 100% of the federal poverty level would get what amounts to a free ride -- they wouldn't have to pay any premiums or any deductibles. Those making between 100% and 300% of the poverty level would pay part of their premiums, based on a sliding scale.

PENALTIES AS MOTIVATION. That leaves another 200,000 or so uninsured higher-income individuals who are the prime target of the individual mandate. Massachusetts is taking a carrot-and-stick approach. The carrot: a series of insurance-market reforms to make it easier and cheaper to buy insurance. For starters, the state will create a "health insurance connector," an innovation "that will allow individuals and small businesses to buy insurance as if they were a large company," says Dr. Marylou Buyse, president of the Massachusetts Association of Health Plans.

The stick: Beginning in 2008, individuals who don't have insurance will be subject to a penalty equal to half the cost of health insurance. Last year, coverage for an individual ran about $4,000 a year, and nearly $11,000 for a family, according to the Kaiser Family Foundation. "That's a significant penalty," says John McDonough, executive director of Healthcare for All, a consumer advocacy group.

Advocates defend the approach, saying it's similar to requiring drivers to buy auto insurance. But it's still untested, and many Americans may resist being told to pay out for something at least some now choose to go without.

Another issue is how much Massachusetts would have to spend under the new law. Subsidies for low-income residents would total about $720 million a year, figures Massachusetts Secretary of Health Tim Murphy. But the law would tap into the large pot of dough his state has set aside to pay for the costs hospitals and other providers bear when the uninsured get free care at emergency rooms and elsewhere. Most other states don't have such available funds. The $720 million is also a lot less, proportionately, than the amount other states would have to cough up. About 25% of Texas residents are uninsured, for example, roughly twice the rate in Massachusetts.

STICKY POINTS. The employer mandate, while low, is another potentially controversial issue. The bill would require companies with 11 or more employees that don't provide health insurance to pay up to $295 a year per worker. Still, "there's strong support in the business community for this measure," says Michael Widmer, president of the Massachusetts Taxpayer Foundation. "This equalizes the burden between companies who don't provide health care and those who do."

How all this works in practice will also hinge on how affordable health insurance becomes. Murphy, who helped Romney design the individual mandate, predicts reforms authorized by the law -- including higher deductibles and cost-efficient provider networks -- could cut premiums in half, to $200 a month for individuals and $500 a month for families. But others are skeptical. "There's an awful lot that still has to be worked out, but I wouldn't hold my breath" that costs will fall that far," cautions Healthcare for All's McDonough.

Still, analysts believe this bill will vault Massachusetts ahead of all other states in providing health insurance to its citizens. And it will surely reinvigorate the ongoing national debate.


Steve Ballmer, Power Forward
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