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In Massachusetts, Health Overhaul Architects Take It a Day at Time

By John Reichard, CQ HealthBeat Editor

May 19, 2008 -- Just over two years into their overhaul of the state's health system, the architects of Massachusetts' historic law to bring nearly universal health coverage to the state have racked up an impressive list of accomplishments, navigating a minefield of potential threats to the law to increase the number of insured state residents by 340,000. So far, the political coalition that produced the law has held together, but legal, cost, and regulatory challenges loom, those architects acknowledged at a Washington, D.C., forum Monday.

"There is one state representative from Cape Cod who has spoken out against this," said John E. McDonough, executive director of Health Care for All, a leading consumer health advocacy organization in the state. "Everyone else is saying, this is important, we've got to do it, we've got to make this work," McDonough said at the forum sponsored by the nonpartisan Alliance for Health Reform.

Under the law, uninsured residents over age 18 must obtain health insurance if affordable coverage is available and pay penalties if they don't. Similarly, employers with 11 or more workers must contribute toward the cost of health coverage or pay a penalty of $295 annually per uncovered worker if they don't. The 340,000 who have gained coverage represent more than half of the estimated 650,000 residents who were previously uninsured, according to a Kaiser Family Foundation evaluation.

Of the three organizations created to provide coverage, Commonwealth Care provides the most. The program provides subsidized coverage for uninsured residents who have no other coverage options. They pay no premiums if their income is below 150 percent of the federal poverty line (about $15,300 for an individual) and a sliding scale of premiums if their income is up to 300 percent of the poverty line. For uninsured residents with incomes above 300 percent of the poverty line, unsubsidized coverage is available through a menu of private plans offered by a program called Commonwealth Choice.

Coverage through Commonwealth Care and Commonwealth Choice is offered by the Commonwealth Connector, an independent authority created to offer insurance plans under the law. A third program, MassHealth, consists of expanded public health insurance programs. MassHealth raised the eligibility limit under the State Children's Health Insurance Program from 200 percent of the federal poverty line to 300 percent ($63,000 for a family of four). Payments to doctors and hospitals were increased $90 million a year for three years.

Jon Kingsdale, executive director of the Connector, told the forum that "reasonably good progress" has been made under the legislation. Two-thirds of the 340,000 have gained coverage through the subsidized program, and one-third of the newly uninsured are now enrolled in private coverage, he noted.

Public support for the overhaul law increased from 61 percent of state residents in September 2006 who knew something about the law to 67 percent in June 2007, he said. Employer support has held, with 55 percent of employers in the state agreeing with the requirement to help pay coverage costs.

The public also appears to have tolerated the penalties involved for not having coverage. For those who did not have coverage by December 2007, the penalty was the loss of the personal deduction on state income taxes, or $219. Kingsdale noted that authorities recently went through the first tax filing season under the law. "I have beefed up our office security, but so far we haven't had to use it," he said.

Kingsdale noted that the law has driven premium costs down sharply for uninsured residents buying coverage on the individual market. Not only must they be offered coverage, premium costs have dropped by almost half. Before the law, the typical uninsured 37-year-old could expect to pay a monthly premium of $335 for individual coverage with a $5,000 deductible and no prescription drug benefit. Now that person can pay coverage for $184 a month that has a $2,000 deductible and prescription drug coverage with a $100 deductible.

Costs in the Commonwealth Care program of subsidized coverage are rising 6.5 percent per enrollee, he said. That's "below budget" but "we've got a lot of challenges," Kingsdale said. Overall, "this is a huge financial venture."

Spending under Commonwealth Care is expected to total $647 million in fiscal 2008, rising to $869 million in fiscal 2009. Lawmakers are considering a tobacco tax hike to pay for rising costs. Individual penalties for not carrying coverage in 2008 and beyond will rise to 50 percent of the average cost of a health insurance plan in the geographic region in which the resident lives, up to a maximum of $912. People can file for hardship exemptions and up to two percent of state residents are not subject to the coverage mandate because it has been determined that coverage will not be affordable for them, according to the Kaiser Commission evaluation.

Another panelist, Grace-Marie Turner of the Galen Institute, noted that taxpayer costs are rising. Although the state budget calls for $869 million in fiscal 2009, "the bill could be closer to $1.1 billion," she said. "The fines I think are going to be an issue particularly as they go up," she added. Other risks to the future of the program include a 12 percent insurance rate approved for next year, she said. And Turner said the program raises concerns about "crowd out" of private coverage. She said the employee share of job-based coverage can exceed that of subsidized Commonwealth Care. If 10 percent of those eligible shift from job-based insurance to Commonwealth Care, the cost could be an added $90 million, next year, she said.

Turner also noted that the waiver from Medicaid law Massachusetts authorities had to obtain is due to expire soon. That raises the question "is it still going to be legal under Medicaid law." Other issues include an Aug. 17, 2007, directive by the federal government blocking expansions above 250 percent of poverty if 95 percent of children below 200 percent haven't been covered.

McDonough noted that "we believe we've actually got pretty darn close to 95 percent."

Another potential threat is the possibility of a legal challenge under the Employee Retirement Income Security Act (ERISA). Law firms looking to make a name for themselves are scouring the country looking for plaintiffs to challenge the law under ERISA, McDonough said, which precludes state regulation of self-insured plans. So far that hasn't happened but "that could change this afternoon," he said.

Key to making a go of the law is the strong support it has enjoyed from a broad coalition of consumers, providers, businesses, and politicians, speakers emphasized. "Two years and one month in we're still standing and making this work."

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