News & Events

A Lesson on Health Care From Massachusetts (MC)


In any effort to restructure American health care, two interconnected goals inevitably compete for primacy. One is providing health coverage to the uninsured, counted in 2007 at 46 million, or 15 percent of the population, and almost certainly more now. The other is slowing the relentless and unsustainable growth of health costs, which threaten virtually every family, in imagination if not in fact.

As President Obama takes on the health care behemoth in concert with Congress, his positioning suggests he has put cost first. His campaign plan did not mandate health coverage for every American, only for children. His comments since taking office, informed by polls showing broader concern about cost than access, have focused on health care’s bankrupting potential for families, the economy and the government. Just last week, in a news conference, he argued that reducing health spending was central to prospects for economic growth.

Mr. Obama’s strategy is to sell the expansion of access — largely through public insurance programs — as inseparable from serious efforts at innovation and restraint. This month, he pointedly opened a White House forum on health care by asserting that exploding costs pose “one of the greatest threats not just to the well-being of our families and the prosperity of our businesses, but to the very foundation of our economy.”

But there is only one real-life model in this country for the kind of sweeping change being considered in Washington, and that is in Massachusetts, where a landmark law signed in April 2006 has achieved near-universal coverage. And in that state, leaders decided from the outset to decouple access and cost, and to deal first with covering the uninsured.

Predictably, rising costs now threaten the viability of the Massachusetts plan, leaving Gov. Deval Patrick and his Legislature to play catch-up. Mr. Patrick has warned he might try to regulate insurance premiums if insurers and hospitals do not demonstrate self-discipline. And lawmakers are awaiting recommendations from a state commission charged with reinventing the payment system so doctors and hospitals are rewarded for preventive care rather than the quantity of treatment they provide.
Health policy experts differ about how much one state can do. However, they agree that misplaced financial incentives are responsible for tremendous waste in American medicine, contributing to premiums that have grown this decade at four times the rate of inflation.
Yet, even now, the lawmakers and strategists behind the Massachusetts plan strongly defend their incremental approach. Only by deferring the big decisions on cost containment, they said in recent interviews, was it possible to build a consensus among doctors, hospitals, insurers, consumers, employers and workers for the requirement that all residents have health insurance.

The coalition held last year, when Mr. Patrick and the Legislature spread the pain in filling a deficit in the state’s new subsidized insurance program. It will now be more seriously tested by attempts to change the payment system, but the gamble is that stakeholders are now so invested they cannot back away.

The times and the politics are different in Washington, where the recession has convinced both parties that cost containment cannot wait. But by addressing costs and access simultaneously, the White House and Congress risk alienating key interest groups from the get-go.

“When you start talking about cost, you create winners and losers and that leads to a political challenge,” warned Andrew Dreyfus, executive vice president of Blue Cross and Blue Shield of Massachusetts.

Universal coverage should itself bring down costs over the long run by preventing chronic disease and reducing the amount of non-urgent care provided in emergency rooms. But it requires increased government spending in the form of subsidies for those who cannot now afford coverage.

Under Mr. Obama’s framework, half the cost of providing those subsidies would be raised through tax increases on top earners. The rest would come from savings wrung from the health system. That level of savings may prove elusive, as the estimates attached to many of the proposals to cut costs, like expanding electronic record-keeping and improving management of chronic conditions, are considered highly speculative.

The designers of the Massachusetts plan stress the importance of distributing the burden evenly and deferring at least some of the discomfort until the benefits of expanded coverage can be seen.

Jon M. Kingsdale, director of the Commonwealth Health Insurance Connector Authority, which oversees the new subsidized coverage program, suggested that Congress pass legislation to expand access while delegating cost-control decisions to a commission. Like the military base-closing commissions of the past, it would make recommendations that would be subject to an up or down vote.

“The concept,” Mr. Kingsdale said, “is to sequence reform in some way to do the really hard thing, which is expanding access, before we do the nearly impossible thing, which is containing costs. We don’t want to end up holding 50 million uninsured hostage to cost containment.”

John R. Sasso, a longtime Massachusetts political strategist who represented the state’s largest insurer and largest hospital network in 2006, said that moderation and gradualism had been critical.

“My experience has been that if you start out trying to design the perfect plan you will fail,” he said. “The goal has got to be to deal with all the levers that affect cost and access and quality but to not overreach in any of those areas. Everybody had a certain responsibility but not so onerous, not so tough on the front end, that it would cause people to lose faith in the prospect of covering everybody.”

Among the initiatives already generating heat in Congress is Mr. Obama’s proposal to create a new government insurance plan that would provide subsidized coverage to the working poor. Insurance companies say they fear that they would not be able to compete, and that consumers would eventually migrate to public plans, creating a backdoor government insurance system.

Massachusetts did not create such a plan, choosing instead to offer subsidies that make commercial policies more affordable. Diane Archer, co-director of the Health Care for All Project at the left-leaning Institute for America’s Future, questioned whether that put enough competitive pressure on insurers. “If we want to bend that cost curve down, it’s through the public option that we’re going to do it,” she said.

But those on the right cite the success of Mr. Kingsdale’s Commonwealth Connector in negotiating commercial insurance contracts that will leave premiums flat in the coming fiscal year (following a nearly 10 percent increase in costs this year).

“The Connector has worked without any need for a public plan option and the dangers it brings,” said Douglas Holtz-Eakin, who served as a top domestic policy adviser to Senator John McCain’s Republican presidential campaign.

Although health reformers in Massachusetts acknowledge that the fiscal and political landscape in Washington is profoundly different, there is broad agreement among them about the importance of mandating coverage for adults. That provision is supported on the federal level by Democratic leaders like Senators Max Baucus of Montana, chairman of the Finance Committee, and Edward M. Kennedy of Massachusetts, who leads the Health, Education, Labor and Pensions Committee.

The insurance lobby has said that if Washington required coverage for all, it would end the practice of denying coverage to those with pre-existing health conditions. To sweeten the pot, major insurers announced last week they also would be willing to not base premiums on a patient’s health status.

If history is a guide, the success of health reform may depend on whether the White House and Congress can give interest groups enough to keep them on board. By tackling cost at the same time as access, they have made their political challenge more difficult.