Three years after Massachusetts enacted its sweeping health-reform legislation, rising health costs continue to bedevil the state and threaten to derail reform efforts.
Despite a significant restructuring of the state's health sector and dominance of nonprofit health plans, Massachusetts still has the highest health-insurance costs in the nation, averaging $13,788 for a family, according to the Kaiser Family Foundation.
One of the reasons so many people supported the reform effort in Massachusetts is that they were told universal coverage would lead to lower costs. With universal coverage, Massachusetts politicians argued, as many in Washington do today, people would no longer have to pay the medical bills of those who don't have insurance—the "free riders"—and therefore health-insurance premiums would fall, or at least level off.
Ex-Massachusetts Gov. Mitt Romney, who led the reform effort, wrote an opinion piece for The Wall Street Journal (April 11, 2006) at the time the law was adopted, saying: "Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced."
But such a reduction is proving much more difficult to achieve. Indeed, the state's major insurers plan to increase premiums by 7% to 12% next year, with small businesses facing the largest increases.
In fact, those premiums may be going up because more people are in plans that pay doctors and hospitals at lower, government rates, causing a shift in costs to private insurance payers. The Seattle-based actuarial firm Milliman Inc. estimates that the average U.S. family in a private plan pays an additional $1,788 a year to compensate for lower payments by public plans, representing a hidden tax on private insurance.
The nonpartisan Center for Studying Health System Change, in Washington, D.C., conducted a 2008 study of the Massachusetts reforms that included interviews with representatives of employer groups, benefits consultants, health plans, health-care providers and policy makers. Many of these parties said they were concerned that unless the costs of health care in the state were brought under control, "the current trajectory of the reform is financially unsustainable."
According to the U.S. Census Bureau, Massachusetts had a relatively low uninsured rate of less than 10% before July 2007, when residents were required to have secured coverage. Census estimates from 2008 show the state's uninsured rate is now 5.5%. (My opponent uses numbers from the state, but Massachusetts is going to be compared to other states and to the nation, so we must use standard numbers.) Today, 56% of those newly enrolled in health insurance in Massachusetts receive taxpayer-subsidized coverage.
Many business owners now are wondering if the effort was worth it. State audits of sample groups of businesses showed that as many as 40% of employers in the state may be violating the requirement that they pay a set portion of their workers' insurance premiums or pay a penalty. (I base this on the results of the audit in at least one sample group. Many of the firms audited were small businesses, such as restaurants and service providers. Some may be offering coverage but not meeting any number of other tests the law imposes.)
Auditors said most noncompliance is due to confusion as employers struggle to figure out the requirements of the law. In a 2008 National Opinion Research Center survey, 74% of businesses with more than 1,000 employees said they found the paperwork requirements burdensome. (In the same survey, 52% of employers agreed with the statement "the health-care reform plan has been good for Massachusetts," while 33% disagreed.)
This year, the state made it harder for businesses to comply. The law originally required companies with more than 10 workers to have 25% of their workers enrolled in a plan or pay 33% of their employees' premiums. Otherwise they would be assessed a penalty of $295 a worker. But now, companies with more than 50 full-time employees must meet both requirements or pay the penalty. Many smaller firms employ retirees and secondary wage earners who have coverage from another source. The new policy makes it very difficult for them to meet the new test and avoid paying the penalty.
Another undelivered promise of the Massachusetts health reform is that unpaid-for emergency-room visits would decline if everyone had access to doctors. A sizable number of patients who now obtain state-subsidized insurance have continued to use emergency rooms for routine care. Among people with subsidized insurance, the percentage who sought non-urgent care from emergency rooms was 14% higher than it was among Massachusetts residents overall, according to state data reported in 2008 by the Boston Globe.
Meanwhile, based on the argument that uncompensated care would decline because more people would have insurance, payments designed to support hospitals that serve the needy in Massachusetts were reallocated to finance the expansion of health-insurance coverage.
But many people still show up at the safety-net hospitals, especially those in the poorest urban communities, and the hospitals say they now receive much less if any compensation for treating these patients. Some of these hospitals are threatening to file for bankruptcy protection.
Massachusetts is a problematic model on which to base federal health-care reform because the state relies heavily on Medicaid. Washington in 2008 agreed to provide the state with $10.6 billion over three years as part of its Medicaid waiver request, which allows the state to subsidize insurance for people with incomes higher than Medicaid rules normally allow.
Unlike Massachusetts, the federal government doesn't have a back-up source of funds to help it pay for national health care. Washington might want to see how Massachusetts does in solving these problems before proceeding with a similar model for the country.
— Ms. Turner is president of the Galen Institute, a nonprofit research organization based in Alexandria, Va. She can be reached at email@example.com.
Published in The Wall Street Journal, October 27, 2009.