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Despite Bay State Breakthrough, Money Still the Big Obstacle to Covering the Uninsured

APRIL 6, 2006 -- Health policy analysts praised the political accomplishment of Massachusetts lawmakers Tuesday in enacting a plan that covers almost all of the state's half a million uninsured residents, but they said money is a big obstacle to replicating that model nationwide.

The plan makes Massachusetts the first state in the nation to require residents without health insurance to obtain coverage, just as drivers are required to buy automobile insurance. Uninsured residents with low incomes will receive state subsidies to buy health coverage.

Not only does Massachusetts have a relatively small uninsured population, it also has a relatively large "free care pool" whose funding will be shifted to providing subsidies for the purchase of insurance, analysts noted Wednesday. That's not the case in big states like California and Texas where many of the nation's uninsured reside, they note.

But the Massachusetts plan may have shifted the debate over how to cover the uninsured to a new focus on "the individual mandate" even as President Bush tried Wednesday to play up health savings accounts, or HSAs, as the solution to what ails health care.

Enactment of the plan advanced by Mitt Romney, the Republican governor of Massachusetts and a potential presidential candidate, "raises the bar" for candidates offering plans to cover the uninsured, said Chris Jennings, a health policy adviser during the Clinton administration. "I'm sure they are looking at this very, very carefully," Jennings said of potential Democratic presidential candidates, including Sen. Hillary Rodham Clinton of New York.

'Giant Leap Forward' Politically
That Massachusetts lawmakers were able to reach agreement on a plan sharply increasing coverage of the uninsured in today's budgetary climate impressed veterans of the perennially gridlocked inside-the-Beltway debate over coverage of the uninsured.

"It's a giant leap forward," said Chip Kahn, who as a senior health insurance industry official successfully opposed President Bill Clinton's plan to cover the uninsured. The movement to ensure coverage for all "is worthy of attention and deserves commendation," said Jennings, Kahn's opponent in that battle.

By relying on private plans to cover many of the uninsured and holding individuals responsible for obtaining coverage, the plan would, at least in theory, appeal to conservatives. And by covering virtually all of the uninsured, at least in theory, it would be attractive to liberals.

But that in practice the plan attracted the support of virtually every member of the Massachusetts Legislature was unexpected. "I was surprised by the vote," said John Holohan, an insurance analyst with the Washington-based Urban Institute. Holohan attributed the result to a greater willingness to compromise in an atmosphere of growing anxiety about health costs. "People are worried about losing coverage," he said.

Uncertainty Over Subsidies
But Holohan noted that Massachusetts has a low percentage of uninsured residents—about 7 percent—while other states where many of the nation's uninsured reside have much higher rates. Texas, for example, has a 27 percent uninsured rate, he noted.

"At the national level, it would require some significant new taxes" to fund subsidies, he said.

Massachusetts is funding its subsidy program by switching a pool to compensate hospitals for treating uninsured residents to a fund that helps those without coverage buy health insurance. The plan also raises funds by deciding not to use a recent budget surplus to lower taxes. And the plan reportedly calls for charging employers with more than 10 workers up to $295 a year for each employee they do not cover.

Fierce employer resistance, particularly by small businesses, helped doom the Clinton plan, which mandated employer coverage of workers. But the $295 charge is far less expensive than any health insurance benefit that businesses can provide today, said Jennings. Most employers want to be able to provide health coverage to attract and retain workers, he said. Holohan similarly suggested that the penalty wouldn't necessarily stir strong employer resistance nationwide, noting that it did not do so in Massachusetts.

But Kahn, while praising the political achievement in Massachusetts, portrayed employer resistance as a major potential obstacle to widespread national adoption of the Massachusetts plan.

"Because the employers are required to do things ... I think at the national level it would be awfully difficult to pass something like that within the current configuration of politics," said Kahn, who is now president of the Federation of American Hospitals. Kahn agreed that $295 is a relatively low amount for employers to have to pay. But from an employer's point of view, "small mandates today can get to be big mandates tomorrow," he said.

Jennings said the $295 charge may be problematic from another point of view—whether it's enough to allow the Massachusetts subsidy program to be viable. "That's the question," he said. "Ask 10 different people and you'll get 10 different answers in Massachusetts," he added.

Holohan indicated that Massachusetts ultimately may have to increase taxes to fund the subsidy program, but not necessarily by much. "They put some new money in this, but I think they're going to need more at the end of the day," he said.

Despite likely bumps in the road, "I think it's a good model," Holohan said. "We've gone the route of trying to get employers to pay for this and it didn't work. It's just a battle that's unwinnable."

Insurer opposition to federal rate controls and regulation in the Clinton plan also played a big role in its demise, but Kahn held off on any prediction that insurers would try to shoot down a Massachusetts-type plan at the national level. "I hate to use the quote, but the devil is in the details," Kahn said. It would be premature to predict how insurers will react "until you see the whites of the eyes of the plan," Kahn quipped.

For now, at least, the nation's largest health insurance lobby is saying nice things. Karen Ignagni, president of America's Health Insurance Plans, praised the legislation as a "path-breaking attempt to apportion responsibility for expanding access among all stakeholders." She added that "policy makers left many of the details of implementing the new law to the regulatory process. We will be working with our members to help create the environment necessary for this legislation to succeed."

But Sen. John Ensign, R-Nev., predicted that Republicans will not embrace the individual mandate approach in the Massachusetts plan as a national solution. "As Republicans, we're not usually in the business of mandating things. We're mostly trying to free up and let market forces work better," he said in a press briefing Wednesday.

"Certainly the polarization at the federal level is a big barrier" to national adoption of a Massachusetts-type plan, said Paul Ginsburg, president of the Washington, D.C. Center for Studying Health System Change.

But at the state level, states in the Northeast and upper Midwest could be interested in following the lead of Massachusetts, he added. The political and business culture of those states is more hospitable to a Massachusetts approach, he said.

Despite questions about Massachusetts as a model for the nation, the state is clearly now a laboratory that will be closely watched nationally by those hoping for a compromise on the issue of the uninsured. "I believe you have to mix and match a variety of approaches," said Ron Pollack, executive director of the liberal advocacy group Families USA.

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