By Laurie E. Felland, Debra A. Draper, Allison Liebhaber
Center for Studying Health System Change
July 2007
In rapid fashion, Massachusetts has made efforts to both ignite demand for health insurance and establish a marketplace for individuals and small employers to purchase coverage.
Perhaps the most fundamental challenge is the issue of affordability. While most market observers agree that the primary goal of the reform is to improve access to health insurance, they contend that its ultimate success depends on affordability–both in the short term, as well as the long term. If affordable coverage is not available, it is unlikely that small employers on the cusp of offering insurance to their workers will be motivated to do so.
Affordability is also a concern of individuals and, despite the individual mandate to have health insurance, there are likely to be some people who will forgo coverage and pay the tax penalty. They may decide this based on individual assessments that they cannot afford coverage, which for lower-income individuals, in particular, may mean that basic needs such as housing and food take precedence over obtaining health insurance. Efforts in other states to reduce the number of uninsured by creating purchasing pools, offering insurance subsidies to employers and employees, tax credits or limited benefits often have struggled for precisely this reason–individuals’ perceptions that they cannot afford coverage or that what they are buying is not worth the cost. In April, the Connector board reported plans to exempt nearly 20 percent of uninsured adults (approximately 60,000 people) ineligible for state subsidies from the individual mandate after determining that even the lowest cost insurance is unaffordable for them. The Connector board currently is revisiting the premium levels that will be considered affordable for people at all income levels, after learning that its proposed schedule would exempt significantly more people from the individual mandate than originally intended.
The challenge of affordability extends to a policy debate about what should be the balance between the financial obligations of individuals and the state. The less affordable coverage is for consumers, the more likely the state will have to commit additional monies to subsidize people to achieve near universal coverage.
There is also the issue of whether the Connector adds additional administrative costs to the system. Evidence from other states’ purchasing pool initiatives suggest that the administrative costs of marketing, enrollment processing and premium collection, for example, can be significant.
What happens, however, if people forgo health insurance coverage, but still receive care?
The reform is being implemented during a time when the state’s economy is strong and unemployment is low. What happens if there is an economic downturn?
The issue for Massachusetts may come down to how close to the goal of universal coverage is realistically attainable. The state has a lower percentage of uninsured people compared to most other states, which increases the feasibility of achieving near universal coverage. But at what point do the costs to the state getting one additional individual insured outweigh the benefits?
http://www.hschange.org/CONTENT/939/
Comment:
By Don McCanne, MD
It is an appropriate time to revisit the new Massachusetts program for universal coverage since it went into effect on July 1, and we now have this assessment from the Center for Studying Health System Change, a highly credible source of unbiased information. It is important that we understand this program since it is being touted as a model for other states to emulate.
The issue of affordability was of primary concern from day one. But rather than addressing the crucial problem of the affordability of health care, the architects of the program decided to tackle the problem of the affordability of private insurance plans.
It rapidly became clear that the private insurers could not provide a comprehensive product with premiums that average-income individuals could afford. Although the program subsidizes premiums for low-income individuals, they did not consider extending subsidies to average-income individuals. That wouldn’t make sense. Why would you subsidize inefficient private plans for the majority of individuals when a single publicly-funded program would be much more efficient and more equitable?
Insisting that the program must be administered through private plans, the architects tinkered with the policies behind the concept. They gave up on enacting standard comprehensive benefits for everyone, and established four levels of coverage: bronze, silver, gold, and young adult. Since the less expensive plans were still unaffordable for many, they tinkered with numbers that would excuse many from the penalty that would be assessed for not buying the insurance that they could not afford. But in trying to come up with reasonable numbers, it turns out that a great many more will have to be excused from the penalty. Thus their universal program is not universal, and it will be even less so as the health care financing crisis deteriorates further.
Of all states, Massachusetts had the most favorable health care environment to enact an individual mandate to purchase private insurance. It is not working in Massachusetts, and the outcome would be worse in any other state that tried the same.
The primary flaw in most reform proposals is that they begin with the assumption that we must include private insurance plans in any system of universal coverage, no matter how much is wasted in administrative excesses. Not only is it the most expensive model of administering health care funds, private plans also diminish our choice of providers, limit benefits, and shift more costs to those with health care needs. Talk about flawed assumptions. All objective criteria would indicate that we should begin with the assumption that private plans must be eliminated in order to recover much of the profound administrative waste of our fragmented system of financing health care.
By transferring the affordability concern from individuals to the administrators of a national health insurance program, we could begin to address seriously the real cost drivers of excessive health care spending. Nothing short of structural reform will work.