Can Massachusetts Health Plan Work Elsewhere?

Massachusetts’ new push to ensure that every resident has health insurance is gaining national attention as states take the lead in exploring ways to cover the 46 million uninsured Americans.

The plan to require every resident to obtain health insurance by July 2007 and to penalize employers that don’t provide coverage takes advantage of Massachusetts’ unique financial arrangements and low rate of uninsured. But that hasn’t stopped lawmakers from Rhode Island, California, Louisiana and Maryland from considering using parts of the Bay State’s approach back home.

Enacted last month, the Massachusetts law is the first in the country to require that every person have health insurance, in the same way states routinely require drivers to have auto insurance. But Massachusetts is only one of several states experimenting with ways to combat the rising number of uninsured while Congress has made little headway addressing the issue.

Two years ago, Maine passed an expansive law to drive down health care costs and use those savings to pay for insurance for more residents. The Maryland General Assembly, over the veto of Gov. Robert Ehrlich (R), this year took aim at the nation’s largest employer – Wal-Mart – and enacted a first-in-the-nation law requiring large employersto spend a certain amount on employee health benefits.

At least six Democratic governors are pushing to cover children from families of all incomes. For example, Illinois Gov. Rod Blagojevich signed a law that will offer children under age 18 insurance starting this summer. The Democratic Governors Association is making health insurance a major theme this election year, when 36 governorships will be decided.

A handful of Republican governors are revamping state Medicaid programs, offering more narrowly tailored benefits for different types of recipients in order to cover more people.

Meanwhile, Congress has failed to come up with a plan to cover those without health insurance, although there’s chance for action this year. The U.S. Senate is poised to take up legislation, already approved eight times by the House, aimed at reducing the number of uninsured Americans by 900,000 using nationwide insurance plans for small businesses. The bill, named after U.S. Sen. Mike Enzi, a Wyoming Republican, has angered state officials around the country because it would weaken state insurance powers.

The state health insurance plan hammered out on Beacon Hill is notable for its ambitions and its innovations. It’s ambitious for trying to cover every resident in the state, where 460,000 are uninsured. It’s innovative for its mandates on workers and employers, as well as for its mechanisms for connecting customers to cheaper insurance options.

On a recent trip to Washington, D.C., Massachusetts Gov. Mitt Romney (R) told members of the U.S. Chamber of Commerce that the plan was custom-made for his state’s problems and unique circumstances, although he said other states could borrow some ideas. Because of high private insurance rates and an expansive Medicaid program, Massachusetts estimates only 7 percent of residents are uninsured – compared to the national average of 15 percent.

In addition, Massachusetts can subsidize premiums with funds that other states don’t have. It already spends $680 million in state and federal money to support hospitals serving the poor. Now it will redirect that money to buy insurance for lower-income residents instead. Federal regulators had threatened to cut off $375 million in Medicaid funds for charity care unless the state found a more effective way of spending it by July.

“It’s obvious in some respects that, if we could do it there, we could do it in other states. I believe that’s true. I’m not sure that it would be done in exactly the same way. Some of the principles we found to work in Massachusetts may well be able to be applied in other states, others perhaps not,” said Romney, who isn’t running for re-election this year so he can consider a presidential bid.

One component of the law that Romney suggested other states could adopt is the “Commonwealth Connector,” a new agency that would work as a clearinghouse to help both workers and small companies buy insurance.

A company buying insurance for its workers would chip in a defined contribution for every employee. Then the employee would choose a coverage plan from one of several participating insurance carriers and buy it with pre-tax dollars.

The Connector allows individuals to maintain coverage from job to job and even between jobs. It also cuts down the administrative costs that make it so expensive for insurance companies to market to small businesses and their workers.

All residents of Massachusetts must be covered by health insurance by July 2007 as long as there is “affordable” coverage available. The state will subsidize premiums for residents making less than three times the federal poverty level. Residents who remain uncovered face income-tax penalties that amount to half the cost of buying insurance.

Alice Burton, the director of State Coverage Initiatives , a Washington, D.C.-based group that monitors state efforts to expand access to health insurance, said other states likely would consider the Connector idea. But, she noted, the concept depends on merging the individual and small group health insurance markets, a giant leap for most states.

Another feature already getting attention in Louisiana is the way Massachusetts redirected money for hospitals serving the poor into insurance premiums for the poor, said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured.

It’s appealing to Louisiana because Hurricane Katrina wiped out the capacity of charity hospitals in New Orleans to care for lower-income residents, Rowland said.

She said states also will watch to see how successful Massachusetts is in convincing employers to offer health insurance. The new law will impose up to a $295 fee on companies for each employee they don’t insure, a sum far less than the cost of providing health insurance. In addition to the fee, companies that don’t offer health insurance and don’t make it possible for employees to buy insurance with pre-tax dollars also could be billed for treatment costs if their workers end up in the hospital.

Rowland said states tend to take a “wait-and-see” approach when looking at ambitious state experiments, but states do hop on when they see new ideas working.

Burton, with State Coverage Initiatives, said comprehensive reforms are harder for other states to emulate than smaller changes, because sweeping plans like Massachusetts’ depend on so many intertwined ideas.

For example, Maine’s Dirigo initiative generated lots of publicity when it passed in June 2003 but no states yet have copied it.

Dirigo offers insurance subsidies to low-income individuals and families and a statewide insurance plan for businesses and self-employed workers. But businesses and Republicans object to the way it’s funded. The state clamps down on expensive practices by hospitals, doctors and other providers, then demands money from insurance companies based on estimates of their savings.

John McDonough, executive director of the Boston-based Health Care for All advocacy group who was involved in negotiating the Massachusetts deal, called the agreement between the Democratic Legislature and a Republican governor “more relevant as a political blueprint than a policy blueprint.”

The final agreement was the culmination of three years of effort by Romney, legislative leaders, federal regulators, interest groups and voters.

On Tuesday (May 9), a panel of Rhode Island lawmakers were scheduled to hold a hearing to take a closer look at Massachusetts’ new health insurance law to see what, if anything, they can learn from their northern neighbor’s quest for nearly universal health insurance.

“We don’t know whether to move quickly or to move cautiously,” said Rhode Island state Rep. Brian Kennedy (D). “It’s great to be first, and it’s even better when it works. But there may be a reason nobody else did it already.”