As the details of the federal
healthcare reform legislation continue to unfold, experts are
still trying to get a clear picture of how the laws will
actually impact the healthcare industry and its consumers down
the road. While effects of several reform provisions
will not be felt until 2014 and beyond, supporters suggest the
laws will eventually have a positive effect on healthcare
costs and lead to more accessible care. Detractors,
meanwhile, claim the laws will eventually lead to an even more
financially-unstable U.S. healthcare system lacking quality
care and limiting access. But if anyone is looking for a
true gauge as to how federal healthcare reform will play out,
they may only need to look as far as the reform provisions
enacted in Massachusetts three years ago.
The Massachusetts reform model
contains several similar components that were incorporated
into the national reform legislation recently passed by
Congress. Currently, Massachusetts residents are
required to have health insurance or pay a tax penalty unless
they fall below a minimum income threshold (currently $66,000
for a family of four or 300% of the federal poverty level),
and employers of a particular size (over 11 employees) are
required to offer health insurance or pay a penalty. The
program also expands Medicaid coverage to cover more of the
poor and provides subsidies for low- to middle-income
residents, and creates an insurance exchange where individuals
can purchase coverage from private insurers.
Now in its third year, the program
has succeeded in providing healthcare coverage to more people
across Massachusetts. In fact, 97% of the state’s
population now has health coverage – the highest percentage in
the U.S. Further, the Massachusetts Taxpayers
Foundation, a non-partisan research group, recently concluded
that the overall cost has been “relatively modest and well
within early projections of how much the state would have to
spend to implement reform.” However, critics of the
program are quick to point out that there are several
deficiencies that need to be addressed.
Since the program’s inception: more
people began to need subsidized assistance from the state;
initial benefit levels started being mitigated (reduced) as
premiums continued to rise; new taxes were levied and cuts to
other state sponsored programs were implemented to help pay
for the reform; more people began reporting trouble paying
their medical costs; access to care was being limited with the
addition of more uninsured into the pool; more people were
being exempted from the penalty due to medical hardship; and
people without subsidized assistance began complaining about
their increasing health premiums. But the most
significant problem may be its lack of effect on the rising
costs of healthcare.
Traditionally, Massachusetts has
seen some of the highest healthcare costs in the U.S.
When United Benefit Advisors conducted a survey of employer
health benefits in 2007, Massachusetts had the highest annual
health plan cost per employee in the country, with an increase
from $8,631 in 2006 to $9,304 in 2007. The cost
increases have not abated in the three years of the program’s
existence, and now many residents are facing increasing
premiums while being forced to make the choice to purchase
lower cost plans with reduced benefits – something that could
become a concern for the rest of the nation as federal reform
provisions take effect.
Massachusetts politicians are
responding by promising to place caps on insurance premiums
and on medical services, but that may have an adverse effect
on the state’s insurance carriers, which are not-for-profit
groups. These carriers are already being forced to hold
their rates at 2009 levels until their proposed rate increases
can be reviewed, which has prompted the carriers to refuse
sales at current rates.
Thus, the state is left with the
option of enforcing governmental price control measures, which
is something that could be seen on the federal level.
The concern with price controls is that they would put
additional strain on the state’s budget and possibly drive
suppliers of medical services out of the market, further
restricting access to effective care. As discussed in
the Eyes on Benefits dated January 14,
2010, price
controls in the healthcare sector can eventually lead to a
significant loss of jobs and incentive for
innovations.
With the similarities between the
Massachusetts and federal reform programs, experts will
continue to draw parallel conclusions regarding both.
But as long as one of the main goals of reform is to lower
overall healthcare costs, all eyes will be on the direction
taken by the Massachusetts experiment.
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