Three years after mandating that residents get health insurance and requiring employers, insurers and taxpayers to chip in, Massachusetts has yet to control soaring costs that are eating up half its budget. So it's considering an equally radical idea: changing the way doctors and hospitals are paid to reward results.
As Washington wrestles with the idea of overhauling the nation's health care system, the Bay State offers an object lesson in how to do it in stages. It's an approach favored by state officials but rejected by the Obama administration, which is intent on addressing coverage, cost and quality all at once.
Massachusetts dealt with coverage first: just 2.6% of state residents remain uninsured, compared with more than 15% nationally. That's due in part to the 2006 law, which said most residents must get insurance, most employers must help provide it, and most taxpayers must help pay for it.
Dealing with cost and quality has proved trickier. Higher health care costsfueled a combined $9 billion gap in the state's 2009 and 2010 budgets that had to be closed last month, leaving less for education, public safety, the environment and other services.
"There are a few other things people want us to pay for," quips Leslie Kirwan, state secretary of administration and finance.
Quality has been an issue, too. Because more people have insurance, some doctors and safety-net hospitals are overwhelmed. A study by the non-partisan Urban Institute found one in five adults in the state have been turned away by a doctor's office or clinic.
Using Massachusetts as a partial model, President Obama is trying to tackle even more difficult coverage, cost and quality problems all at once. The president seeks to extend insurance to up to 46 million people without it. At the same time, he wants to slow the growth of Medicare and Medicaid, now projected to rise from 5% of the nation's economy to more than 17% by 2080.
Still, Massachusetts offers lessons for national policymakers as they debate the biggest change in health care delivery since Medicare and Medicaid were created nearly a half century ago:
• Peddle the plan to the public. A Republican governor at the time, Mitt Romney, and a Democratic Legislature sold it to state residents as both a moral imperative and a common-sense addition to the requirement that residents have automobile insurance.
• Don't alienate powerful interest groups. Insurers and businesses, rebelling in Washington, signed on here. The state did not create a public plan to compete with private companies; it has only a state-subsidized plan for low-income earners who don't get Medicaid or employer insurance. It required only a $295-per-worker annual fee from companies with 11 or more employees that do not offer health insurance. Plans percolating in Congress include much bigger fees.
• Prepare for years of trial and error. Government officials, providers and consumers here say they expected a lengthy, often troublesome implementation.
"This is never over," says John McDonough, who ran the statewide advocacy group Health Care for All when the law passed and is now a senior adviser to Sen. Edward Kennedy, D-Mass. "It is always messy."
The demand for insurance didn't take long to materialize.
No sooner did Massachusetts require health insurance in 2006 than hundreds of thousands of residents signed up. The number of insured soared by more than 200,000 in the first two years, at least 40,000 more than forecast, according to Commonwealth Connector, the state agency created to oversee the health plan.
The state plan is set up so that those who receive government subsidies pay no premium if their income is below 150% of the federal poverty level — $16,620 for individuals and $33,084 for a family of four. Others pay premiums based on a sliding scale and choose from an array of plans chosen by the state.
Nearly everyone is required to get insurance, unless the state deems all the available premiums too expensive. Those who don't comply face penalties up to $1,068 per year if they are at least 27 years old and earn three times the poverty level.
Exemptions can be sought by individuals earning up to $54,600 if they can't find monthly premiums below $342, and by families earning up to $114,400 if they can't find premiums below $820.
Overall, nearly 430,000 residents out of about 600,000 who were uninsured now have coverage. Virtually every type of insurance has increased: Medicaid, the new Commonwealth Care subsidy program, unsubsidized plans and those provided by employers, state data show. About 163,000 residents have taken advantage of government subsidies. Another 150,000 have chosen employer plans.
Most of those who got insurance under the Massachusetts program are grateful. Francisco Diaz of South Boston, 54 and unemployed, pays nothing for his care at the South Boston Community Health Center and is scheduled for a hip replacement next month. Lizete Rosa of Fall River, 56, laid off from her factory job in September, pays no premium and a low $10 copayment. Sandra McInerney of Chicopee, 50, a private school teacher who was unemployed for a year, pays $194 a month and $15 a visit. "I guess it's fair," she says.
Cost is 'somebody's income'
The major task facing Massachusetts now is the same one confronting the nation: controlling costs that were spiraling long before the 2006 law.
Expanding access to insurance has made that problem tougher by adding more than $700 million in annual costs, split evenly with the federal government, according to the Massachusetts Taxpayers Foundation. The annual cost to care for those who were uninsured in 2006 has risen from $1 billion to $1.7 billion.
The state saved money by reducing payments to hospitals for uncompensated care and increasing the cigarette tax by $1 per pack to help pay for the expansion. Then came the recession, forcing thousands of laid-off residents to sign up for subsidies.
Phone counselors at Health Care for All are fielding 1,100 calls a week — a demand not seen since the program's inception.
"The only thing that went wrong is we ramped up faster than we anticipated," says Jonathan Gruber, a health economist at the Massachusetts Institute of Technology and a board member of the agency that runs the state's new health insurance program.
Jon Kingsdale, that agency's executive director, says putting access before cost was intentional. It made covering the uninsured a moral imperative without forfeiting the support of providers, insurers and employers — many of whom could lose money when costs are cut. "It's a lot harder to do cost and access together," he says. "Everybody's cost is somebody's income."
The problem was punted to the payment commission, which last week recommended a system in which health care providers would be paid a set amount for each patient, with adjustments for health status and other factors. Doctors, nurses and hospitals would work as a team to manage the patient's care.
If you offer it, they will come
Once people had insurance, the state reasoned, they would flee emergency rooms for neighborhood doctors and drug stores. As a result, state funds intended to pay safety-net hospitals and community health centers for serving the uninsured have been reduced by $660 million.
But if anything, demand has increased as the newly insured seek more medical attention. "The funding levels are not keeping pace with the volume that we're seeing," says William Halpin, CEO of South Boston Community Health Center. "There's been a little bit of robbing Peter to pay Paul."
Boston Medical Center, the state's largest provider to the poor, filed a lawsuit against the state last week charging that it's getting only 64 cents on the dollar to care for low-income patients.
"We kept the patients, but we didn't keep the money," says Thomas Traylor, vice president for federal, state and local programs.
The situation is even worse at Cambridge Health Alliance, the second largest such provider. Six health centers have closed, mental health and substance abuse services cut, and Somerville Hospital no longer admits inpatients.
As the state faced a budget crisis this spring, other health care services were threatened, including dental care for 92,000 residents and all care for 28,000 legal immigrants with fewer than five years in the country. The cuts were put on hold last month, but funding still must be found.
"The message is wrong," says Eva Millona, executive director of the Massachusetts Immigrant & Refugee Advocacy Coalition. "We have been a model in the country. We should sustain that."
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