DAVID F. POLAKOFF, MD, MScChief Medical Officer,MassHealthCommonwealth Medicine, University of Massachusetts Medical School

Increasing Health Insurance Coverage in Massachusetts, United States:The Political Economy of Reconciling the Right to Health with

Budgetary Limits

First Latin American Conference on the Design,Implementation, and Adjustment of

Health Benefits Packages

Structure of Health Coverage in the USA

Private

(Commercial) Medicare Medicaid

Founded: 1920’s 1965 1965

Population: Employed Elderly (>65) and disabled

Poor and children

Benefits

Hospital ✓ ✓ ✓Physician/Clinic ✓ ✓optional ✓

Pharmacy ✓ ✓2006 ✓Lab./Diagnostic ✓ ✓optional ✓

Nursing Home/

Long Term CareLimited 100 Days ✓

Other Coverage

• Department of Veterans Affairs

• Department of Defense

• Bureau of Indian Affairs

• Supplemental/Secondary Coverage– Medicare– Medicaid– Private

Core Problems in the US Health Care System

COST:• 17% GDP

• 5-9% Annual Growth Rate

• Highest per Capita Cost in the World

QUALITY•International Comparisons Show

• Highly Variable, and inconsistent

ACCESS (COVERAGE)

• Uninsured 10 - 20% of population (varies by State)

MASSACHUSETTS: The Picture in 2006

• Population stable ~6 million• Relatively affluent: median

income 6th among US states• Lowest uninsured rate in the

USA: ~9%• Population ethnically and

socially diverse• Health care is high in quality

and high in cost• Strong liberal tradition

• Health care is a very important industry in the state

– Hospitals– Medical Schools– Biotechnology Companies– Pharmaceutical Companies– Medical Device Manufacturers

• Most private health insurers are local, non-profit, and nationally recognized

Recent Trends in Health Coverage in the USA

• Percent without insurance rising– Increasing cost of insurance

• Employers discontinuing coverage• Cost shifting to employees• More employees electing non-participation• Insurance unaffordable during periods of unemployment• Increasing numbers of self-employed can’t afford

coverage• Insufficient regulation of insurance markets leaves some

without options

Rationale for Reform at the State Level

• Social Safety Net made some health services (emergency and hospital) available to all

• Costs of this “free” care was shifted to other parts of the system

• Cost of private insurance rising at unsustainable rates

• Pressure from industry for reform rising• Quality was/is highly variable, and significantly

related to coverage

Short History of Attempts at Health Care Reform in the USA

• Teddy Roosevelt• Franklin Roosevelt• Richard Nixon• Ted Kennedy• Bill Clinton• George W. Bush• Barack Obama

Politics of Health Reform in the USATHE OPPOSITION

• Doctors– Specialists ☟– General Practitioners ☝

• Pharmaceutical Industry• Hospitals• Health Insurance Companies• Employers & Trade Associations• Unions• Conservative Politicians

The Public Perspective

• Colored by political views and party allegiance• Believes that the existing system is “better” than

reality• Holds strong misperceptions about health care

systems in other nations• Has lost the capacity to act as a “rational economic

actor, due to:– Generations of third party payment insulating from costs– Lack of contact with other national systems– Complexity of cost/price reimbursement structure

Massachusetts Health Care Reform 2006

• Priority on enhancing ACCESS– Target 100% coverage of the population

• Deliberate decision made to leave cost control to a subsequent effort

• Some modest efforts to improve quality

POLITICS IN MASSACHUSETTS IN 2006

Governor: Republican, Presidential aspirations

Legislature: > 80% Democratic

Powerful Medical Community: generally liberal philosophy, despite economic interests

Massachusetts Reforms of 2006

• Expanded eligibility for MassHealth-Increased income ceiling for children and adults

• Creation of the “Commonwealth Health Insurance Connector - a market or exchange– For individuals & small business (<50 employees)– Regulation of product offerings– Government subsidies for lower income

individuals– Premiums can be paid with pre-tax funds

(equivalent to employer sponsored insurance)

Massachusetts Reforms of 2006 (cont’d)

• Individual mandate to have insurance– Financial penalties for nonparticipation,

rising over time– Enforced through annual tax filing

• Employer mandate– >11 employees– Penalties for nonparticipation

Massachusetts Reforms of 2006 (cont’d)

• Health insurance market reforms– Small group and individual markets merged– Creation of “young adult plans” for 19-26 year olds– Young adults may remain on parent’s family policy

up to age 26– Existing small group regulatory structure was

maintained - guaranteed issue and renewability

So, What Happened?

• Uninsured declined from 9% 2.6% ➛(576,000 167,000)➛

• Government payments for care of the uninsured have declined >50%

• Employee “take-up” of offered benefits has increased– Result: collection of penalties below expectations

• Medicaid enrollment and expenses have risen sharply >20%

So What Happened? (cont’d)

• Health expenditure costs continue to rise at 5 - 9% annually• Medicaid and CommCare eligibility has increased more than

expected due to increased unemployment rate• State tax revenue has declined due to recession• The recession has raised questions around the decision to defer

cost control– Increased Medicaid enrollment– Decreased tax revenues to fund Medicaid and subsidies– Benefit cuts have been necessary

“It’s the economy, stupid!”

Bill Clinton, 1992

Costing of Public Health Benefit Plans

• Law requires that all Medicaid Plans be “actuarially sound”.

• Rates set after evaluation by consulting actuaries

• Benefit packages in Medicaid and other public HBP designed to closely follow those available to commercial population - to avoid appearance of a 2-class system.

Lessons from Massachusetts

• Design principles for benefit expansion:– Equity with previously insured population– Will likely cost more than expected– Previously insured population must

perceive a gain– Ideally, implement during a phase of strong

economic growth

Questions and Comments

Commonwealth Medicine is a public-sector consulting and services group, which is a part of of the University of Massachusetts Medical School. We manage large components of MassHealth, provide similar services to other US states, and are active in over 20 other nations

CONTACT: david.polakoff@state.ma.us

Other Complexities in the US Health Insurance System

• Multiple, overlapping coverage• Cost-sharing

– As cost control– As benefit design– Forms

• Premium sharing• Co-insurance• Co-payments• Prior authorization requirements• Tiering• Many otherings