Source Date: December 11, 2006
Author: Martin D. Sellers
Attached File
The Impact of Massachusetts Medicaid Reform throughout the Nation
By Martin D. Sellers, CEO, Sellers Feinberg & Associates
In the not too distant past, health care reform, real reform aimed at radically increasing access to affordable health insurance for all, seemed to be at an impasse. Over the years, some well-intentioned attempts to revise the health system have been made with varying degrees of success (including Hawaii, Minnesota, Vermont, New Hampshire, Maine and California), but all came short of the transformational change states so desperately need.
Today, states all across the U.S., both red and blue, still desire the kind of marketplace revolution that brings real-world, practical results. They are looking to reduce their number of uninsured and protect employer-sponsored insurance through a variety of approaches that combine Medicaid options, insurance reform, market-based competition, better managed care and improved consumer responsibility.
Without major changes to the health care system, low-income Ameri¬cans' access to affordable health insurance is at risk. And as most health care experts and thought leaders will acknowledge, when addressing big issues and policy challenges, effective reform (i.e. sustainable long-term solutions) must be driven by sound public policy that deftly balances public sector mandates with private industry objectives.
As governors and state legislatures are and have been passionately interested in expanding health care coverage, the advent of Massachusetts' recent plan now offers proof that universal coverage is indeed possible. With the serious need to address Medicaid and health care reform remaining, the Massachusetts-style reform has sparked a reemergence of state-based solutions to a pervasive, complex problem.
States are eager to understand how Massachusetts' bipartisan legislation combines the concept of personal responsibility through an individual mandate on the purchase of health insurance with government subsidies to ensure affordability. Governors and their top staff are certainly curious to see if - whether in part or in whole - the big idea emerging in the Northeast can be adapted to their situations and effectively work in tandem with policy solutions tailored to their own unique circumstances.
The action taken by the Commonwealth of Massachusetts this year has encouraged a vigorous national debate not just throughout federal and state governments but among industry stakeholders and the general populace about how to successfully address the country's problem of the uninsured.
ENTER MASSACHUSETTS
With health care costs skyrocketing and the nation's uninsured population swelling to 46 million, frustrated states have taken matters into their own hands, not willing to adopt a "wait and see" attitude with regard to ongoing efforts in Washington. Massachusetts, like many states, has been continually working to find a way to provide access to affordable health care for its uninsured population.
In April 2006, Massachusetts announced that through determined work and inventive thinking it had discovered a breakthrough solution that would allow the Commonwealth to expand health coverage to nearly all those who need it and to realize innovative changes in Medicaid, transforming it into a more impactful program.
This caught the attention of the Centers for Medicare & Medicaid Services (CMS), which allowed the Commonwealth to keep $385 million in federal funds (through its s. 1115 waiver). Expertly navigating through all aspects of the Medicaid financing component was critical to the identification of alternate terms under which these dollars could be retained.
Simply put, the Massachusetts solution provided a new approach to achieving universal coverage by incorporating sound thinking from government policymakers, public & private sector providers, advocacy organizations and industry stakeholders.
Due to the nature of the political dynamics within the Commonwealth and the potential risks for the main safety net providers - Massachusetts' major hospitals, any discord between these parties would have derailed the proposal.
In fact, it is this broader vision that grabbed the interest of the federal government and encouraged it to help Massachusetts redirect funds away from hospitals providing unmanaged care directly to uninsured individuals and reformulate these dollars as subsidies to purchase private health insurance.
Now, Massachusetts is promising to deliver universal coverage (with individual mandates) in an environment where government ensures the availability of affordable coverage for all and provides subsidies through Medicaid, relying on the private market and competition to suppress costs and increase quality.
Governor Mitt Romney, his administration, a team of state and federal lawmakers from both parties and the lead consultants at Sellers Feinberg were able to develop a plan designed to reduce the growth in overall health care costs, increase provider reimbursements and improve coverage and care for a large portion of the Commonwealth's uninsured people, approximately 420,000.
It is important to note that all participants in the process understood this reform effort with its promise of universal coverage would not succeed unless the final plan was truly comprehensive. Therefore, Massachusetts worked to ensure that certain efforts were made to contain provider costs, modernize the health delivery system and improve the mandates placed on insurers and employers.
While employers remain the primary source of insurance for individuals and families, the architects of the new law made certain a key principle - the individual mandate - was an integral component of the reform. As such, all residents must obtain health insurance by July 1, 2007.
The individual mandate requires that people who can afford insurance buy it. Individuals who fail to get health insurance by July 2007 will first lose their personal exemption on their state taxes. In subsequent years, they will have to pay a penalty that could be as high as 50 percent of what an affordable health care premium would cost.
The central mechanism by which health insurance is purchased and provided, the Commonwealth Care Health Insurance Connector, will be a clearinghouse linking groups of people and businesses to pools of private insurance plans and products. The Connector, a quasi-governmental entity that is state-appointed (but independently run), will help make insurance more affordable by banding people together to secure discounted group rates.
To further encourage the purchase of insurance, the plan provides public subsidies for low-earning families on a sliding scale according to income level. Residents making less than 300 percent of the federal poverty level, who are currently not eligible for Medicaid, will receive government-funded premium assistance to aid their purchase of private insurance plans. Those with incomes above 300 percent of the federal poverty level will be able to purchase new lower-cost policies from private health insurance companies through the Connector.
The Massachusetts' reform agreement has caught the attention of elected officials and health care stakeholders across the country, and many are engaged in new efforts to determine what is possible in their states. Since Massachusetts revealed its plan, many want to know if this dramatic reform can be recreated in their state or even nationwide.
Not only is the significant restructuring of health care good social policy, but as it now has the potential to drive the market in a new direction, it engenders good economics as well. With its sweeping proposal for comprehensive Medicaid and health care reform, the success of Massachusetts' plan has launched the Commonwealth into the spotlight - leading many to wonder if Massachusetts' approach will emerge as a national model for states seeking similar reform initiatives.
WHAT ABOUT OTHER STATES?
While Massachusetts continues to move forward with its ambitious plan to provide health coverage to its uninsured residents, other states are trying to find answers to the same problem. Could the effort being undertaken in the Northeast work in other areas of the country? Each with its own distinct challenges and obstacles to overcome, states are being inspired by the Commonwealth's all-encompassing compromise and are examining whether elements of the Massachusetts model will work in their own states.
MICHIGAN
Since taking office in 2003, recently re-elected Governor Jennifer M. Granholm has worked to reduce health care costs and expand access to health care in Michigan. Through her administration's efforts, she has extended affordable prescription drug coverage and health care coverage to more than 292,000 people and streamlined the State's Medicaid system, allowing for greater coverage at significantly reduced costs.
Governor Granholm announced earlier this year that she wants to dramatically reduce the number of uninsured individuals in the State. For Michigan, this means insuring the State's 1.1 million uninsured through the Governor's proposed Michigan First health care Plan, and providing subsidized premiums to enable improved access to affordable health care coverage.
The Governor's plan would establish an Exchange (a Connector-type entity) to help to provide access to affordable private insurance products for individuals and small businesses. Her proposal would provide premium subsidies for people to buy private insurance through the Exchange and would cover adults with incomes up to 200 percent of the poverty level.
WASHINGTON
Governor Christine Gregoire is also considering major health care reform for Washington State. Currently, the Governor co-chairs the Washington Blue Ribbon Commission on health care Costs and Access, which is exploring ways to deliver accessible, affordable, quality health care for all Washingtonians. Today, the State believes its health care system does not sufficiently meet these quality-of-life concerns.
By the end of December 2006, the Blue Ribbon Commission must recommend a sustainable five-year plan to substantially improve access to affordable health care for all Washington residents. Over the course of the next five years, the Legislature will move to implement the vision of the Commission to create a health care system that provides every Washingtonian the ability to obtain needed health care at an affordable price.
Presently, Washington provides health care to about 1.3 million children and adults. The State's projected cost for health and health-related programs will be $4.5 billion in 2006, which is nearly 28 percent of all State expenditures. One of many reasons to reform the State's system is to enable it to provide high-quality health care at lower costs. Many hope such reform will also positively impact the manner in which private sector health care systems operate in the Washington marketplace.
By 2012, the Commission envisions a system that will provide every Washingtonian the ability to receive necessary health care at an affordable price (all children should be covered by 2010). To realize this vision, both public and private sectors in Washington will need to significantly improve access to affordable health coverage while advancing the overall well-being of citizens through preventive medicine and wellness programs.
NEW MEXICO
This summer, New Mexico Governor Bill Richardson proposed a major Medicaid expansion and possible universal coverage for all residents of his State. Depending on the findings of the commission he appointed to explore universal insurance coverage options, expected next year, New Mexico may embark on a proposal to provide universal health care by 2008.
In addition to appointing the task force, Richardson's proposal included four other major elements. First, New Mexico would phase in employer-sponsored health insurance benefits for companies doing business with the State. Second, the State would determine the number of State government employees who lack health coverage. Currently, if employees decline enrollment, the State doesn't check to see if they have coverage through a spouse or other entity.
Next, New Mexico would look to maximize its Medicaid coverage. For fiscal year 2008, Richardson will seek funding to increase coverage for adults through a two-year, phased-in approach. The initiative will be specifically designed to help low-income adults earning up to 100 percent of the federal poverty level.
And finally, Richardson would expand the State's insurance coverage program to help more working adults, raising coverage to those individuals under 300 percent of the poverty level with cost-sharing based on income. Expanding this public/private partnership with small employers will help cover working New Mexicans who currently do not have access to reasonably priced insurance.
INDIANA
This month Governor Mitch Daniels of Indiana proposed a simple yet original health plan that would provide health insurance coverage for more than 100,000 Hoosiers, reduce smoking rates and immunize more Indiana children. The health initiatives would be funded by an increase in the State's cigarette tax.
An estimated 14 percent of Indiana's population, more than 550,000 individuals, currently has no health insurance. The proposed plan would be funded by an increase in the State's cigarette tax - which is the 36th lowest rate in the country - and a variety of federal funds.
The governor has suggested an increase of at least 25 cents but will ask the legislature to determine the precise amount. The number of uninsured who could receive coverage would increase based upon the size of the cigarette tax increase. With a 25-cent increase, it is estimated up to 120,000 people could receive coverage. With a 50-cent increase, about 200,000 could receive coverage.
The governor's three-part health insurance coverage plan would help Hoosiers who can least afford coverage. It would be available to those who earn less than 200 percent of the federal poverty level and who are without employer-sponsored health insurance. If the plan receives approval by Indiana's General Assembly, the proposed effective date would be January 1, 2008.
STATES CONTINUE TO LEAD REFORM
Medicaid is rapidly changing, and Governors are leading state-based Medicaid and health care reform across the country. Even as Congress enacts major changes at the federal level, including the new opportunities provided in the Deficit Reduction Act of 2005, the pace of reform is likely to accelerate in the coming years.
Now that the 2006 mid-term election results are in, so is the very real possibility that come January the Democratic-held Congress may work to reinvigorate its own brand of national health care reform - even as many states pursue their own initiatives. It will remain to be seen whether any such movement at the federal level will work in tandem with the states' efforts.
Following Massachusetts' health care transformation, states across the country have been taking bold and creative steps to improve health care for their own residents. Governors, operating as the country's agents for change just as they did with welfare reform, are modeling different, effective ways to expand health coverage to specific groups of people who need insurance but cannot afford it.
In the past, "state health care reform" meant expanding public programs to cover tens of thousands of uninsured. Now, Governors are considering reforms that would cover hundreds of thousands of previously uninsured persons by using a combination of public and private sector approaches.
Oftentimes, states have been the ones to develop and implement new policy solutions. The current health reform environment is no different. As state legislatures convene in 2007, the challenge may well become balancing their desire to move forward with waiting to see if transformational change will be adopted at the national level. Many will argue that it is the states that must continue to lead.
Reproduced with permission from BNA's Health Care Policy Report, Vol. 14, No. 48 (Dec. 11, 2006).
Copyright 2006 by The Bureau of National Affairs, Inc. (800-372-1033)