You've probably noticed all of the diaries (e.g., this one, and here, and another) about mandating the purchase of health insurance after Elizabeth Edwards' comment that she "trusted" Hillary Clinton's plan for changing the health insurance system more than Barack Obama's because it included a mandate. For my part, I thought Edwards' comments were an opportunity to take a bit more in-depth look at the Massachusetts system and where it falls short. In Part One, I outlined the basics of the system. Today I want to go into some detail about what I see as the basic failings of the structure that the legislation put into place. I know that other diarists have covered some of this, but I wanted to add my perspective and emphasize that this conversation about mandates is kind of beside the point. While a mandate may expand access to coverage for some, it is hardly the cure for what really ails the health care system: the out-of-control escalation in costs.
Where the Act Falls Short
While the theoretical potential for expanding access to some form of health insurance plan does, at least initially, seem encouraging, there is cause for concern that the legislation will not deliver on all of the promises that seem to be implied in its title. This concern stems primarily from the fact that the Act does not do anything to contain the rapidly increasing costs of care. Because the basic framework of private health insurance and how medical care is paid for and delivered was left intact, costs will relentlessly increase, health insurance coverage will inevitably and rapidly become less affordable for more people, creating the potential to penalize residents, especially those on the lower end of the income scale, for failing to purchase insurance that they could not afford in the first place.
Massachusetts’ health care costs are by far the highest in the world, 33 percent above the national average. However, the Act is almost entirely silent on this issue of vital importance. There are no provisions for controlling administrative costs or the prices of prescription drugs, which are both major contributors to the rising costs of care. This omission is especially glaring since it is estimated that the citizens of the state spent $13.3 million dollars on health care bureaucracy in 2006 and given that administrative costs account for more than 31 percent of total health spending in the state. The Act is similarly deficient in its failure to even encourage consideration of other accompanying policy measures that have the potential for helping control escalating costs. For example, it does not mandate that the insurance plans offered through the Connector only use the most efficient providers or that they employ other strategies that have been shown to contribute to cost control, like disease management.
Down the road, rising costs will eventually mean that more and more employers will choose not to offer their employees health insurance through a plan because paying the Fair Share contribution and/or the Free Rider surcharge is less costly than contributing to insurance. This has the potential to put greater pressure on the Commonwealth Care program, as more citizens who qualify seek subsidized care. It is possible that the legislature and the Connector will then be forced to respond by either capping the number of people in the subsidized program or by cutting the benefits that insurance plans must provide as a minimum and by increasing the out-of-pocket expense that must be paid by those who enroll in either the Commonwealth Care or Commonwealth Choice plans. In turn, the requirement that the uninsured purchase the minimal creditable coverage will force those state residents to spend larger sums of money that they may or may not be able afford on stripped down policies that have high deductibles and other out-of-pocket costs.
Beyond the potential for future problems caused by the uncontained, constant escalation in health care costs, it is not even clear that the price of just the premiums for the plans currently offered under the Commonwealth Choice program are affordable for many individuals, especially those older residents who, if they live in Eastern Massachusetts, pay at least $309 per month for the most stripped down plan. In an initial study of what a sample of Massachusetts’ citizens can afford to pay for health insurance, the Greater Boston Interfaith Organization concluded that many residents cannot manage even the upfront costs imposed by either the Commonwealth Care or the Commonwealth Choice programs. The high price of the premiums faced by some residents is especially disconcerting considering that these figures do not even take into account the high out-of-pocket expenses that must be paid in the plans that offer more "affordable" premiums.
The financial structure of the plans offered by the Connector will mean that a great many residents will have to risk paying potentially large sums in co-payments, deductibles and other costs above and beyond their premium, imposing a disproportionate financial burden on those individuals who cannot afford to pay a higher level of upfront expenses for their health insurance. These out-of-pocket expenses are especially significant given the fact that 76 percent of bankruptcies caused by medical problems (a population that accounts for almost half of the bankruptcies in the country as a whole) had insurance at the onset of their illness. These people, who thought they would be covered if they got sick, had their bank accounts emptied by co-payments, deductibles, and uncovered expenses such as physical therapy. So even if, as the Connector has argued up to this point, premiums for the Commonwealth Care or Choice plans are much more affordable than they would be in the private market, the total costs of health care might not be, which makes the extension of access to coverage much less meaningful. In fact, what these reforms might really amount to in the end is a kind of regressive health care tax that shifts the burden of mandated premiums, deductibles, and co-payments onto lower income residents who can least afford it, while the wealthier, who already have good coverage that they can afford, are not asked to bear any greater burden.
The problems associated with failing to control costs and the attendant impact this has on what state residents will have to pay in both premiums and other health care-related expenses also extend beyond financial concerns. High out-of-pocket expenses impose added costs in terms of health outcomes because they may actually discourage people from seeking needed care when it can be most easily and cheaply provided. In a RAND Health Insurance Experiment, high deductibles reduced the use of preventive and primary care, and participants in these kinds of plans had higher blood pressure and higher risks of dying. While the guidelines for minimum creditable coverage do include a requirement that plans provide for at least three preventive care for an individual prior to having to pay any deductible, this does not do enough to ensure that individuals will actually receive care in the most appropriate setting or at the most optimal time, and mandating that residents pay for coverage that does not actually allow them to make better use of the resources that are available will obviously do nothing to improve existing disparities in health outcomes among low-income populations within the state.
While considerable attention was and continues to be paid to the idea of both individual and employer mandates as a means for expanding access to insurance, it is not yet clear that this piece of the Act will actually produce this desired result. A high rate of compliance with the individual and employer mandates are required if the state is to have any success in reducing the number of uninsured, spreading the risk of providing insurance in the newly combined group and individual insurance pool, or being able to continue the movement of funds from uncompensated care to subsidized insurance. But in April 2007, the Connector already had to exempt about 60,000 people eligible for the unsubsidized Commonwealth Choice program (approximately 20 percent of the population the state estimated was eligible) based on the fact that even the insurance at the lowest premium level was not deemed affordable.
There is also a good deal of skepticism about whether or not the mandates include penalties that are strong enough to encourage a mix of both healthy and sick people in the insurance markets to keep the risk pool balanced and costs from escalating at an even higher rate. For example, the tax penalty for most individuals for not obtaining insurance coverage was only about $200 for the first year and will only be about $1000 in subsequent years, which is significantly less than the cost of the cheapest insurance policy. If residents develop a perception that the insurance products offered through the Connector or by their employer are not good values, they may decide just to pay these penalties. The uncertainty about the effectiveness of the individual mandate is equaled by questions about both the reach and strength of the shared responsibility carried by most employers. For instance, the Fair Share Contribution that could be applied to an employer does not even reach employers with fewer than eleven employees. This fact is especially significant given the fact that, as explained above, many uninsured in the state work for small employers who have previously been unable to offer insurance to their employees. As for those employers who are covered by the Act, because the cost of contributing to an employee’s insurance is significantly higher than $295 per employee, it is not clear that this fee is going to induce those employers who do not already offer insurance to do so.
Enforcement of the fee and the impact that its collection will have on state coffers – despite policymakers’ optimistic projections – is also a matter that creates serious concern, and since the state is depending on the fee to generate some of the revenue needed to expand subsidized coverage for people on the lower income of the income scale in Massachusetts, it is possible that the fee may have to be raised over time. Meanwhile, the Free Rider surcharge on employers will probably have a limited impact as well because the surcharge is not applied until an employer’s employees use more than $50,000 in free care. Also, given the fact that the Section 125 cafeteria plans that this portion of the employer mandate requires do not actually can be offered without obliging the employer to make any premium contribution, so it is unlikely that many businesses would refuse to offer this kind of plan to their employees. Taken as a whole, all of these limitations to the mandates raise serious questions about whether, as currently constructed, they will be as essential to an expansion in access as their advocates claimed during the legislative process. The initial figures indicate that the state is taking in far less from the employer penalties than lawmakers estimated when they budgeted for the Act.
While Massachusetts' lawmakers could perhaps be commended for their decision to take what was, by comparison to the inaction at the national level, a relatively significant step towards providing health care coverage to more of the state's residents, serious questions remain about the means they chose to achieve this important objective and the long-term viability of the mechanisms the bill put into place to serve this end. These questions stem in large part from the fact that, although the Act makes important advances in increasing access to health care for a portion of the state’s citizenry, the Act fails to address the problem of escalating health care costs, a shortcoming that will almost assuredly undermine both the short-term gains that might be made in accessibility, as well as the reform’s ability to deliver on the second crucial component of universal coverage announced in the bill’s title: affordability. Unfortunately, as discussed above, for both those who brokered the reforms and for Massachusetts’s residents, the failure to address this aspect of the health care crisis has the potential to basically short circuit the possibility of long-term gains in guaranteeing affordable, high-quality health care for all or nearly all of the state’s residents.