Massachusetts Health Strategy Offers Halfway House to Universal Care

Last month, the federal appeals court for the D.C. circuit unanimously rejected a constitutional challenge to President Obama’s Affordable Care Act. The U.S. Supreme Court will resolve the question next year, and the landmark federal reform, scheduled to take full effect in 2013, could well survive.

To glimpse the future, take a close look at Massachusetts. Though politicians from Mitt Romney to Obama himself tend to downplay the parallels, the 2006 Massachusetts health reform served as a close model for the national law.

How is the Massachusetts strategy doing? It depends on what you want to emphasize. The state’s reform has more than achieved its coverage goals — between 94{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} and 98{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of its residents now have some kind of insurance. The Census Bureau says 5.6{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} are still uninsured; the state’s own surveys put the figure at just 1.9{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}.

Costs, however, continue to spiral. Gov. Deval Patrick’s administration has responded to the cost crisis by nipping and tucking, removing some 30,000 legal immigrants from high-quality coverage, pressing contractors for savings that translate into reduced payments to doctors and hospitals. Still to come is a general reform in the payment system.

The prolonged economic slump has added to these stresses. As people have lost jobs, more are either on Medicaid (MassHealth) or on the new subsidized program known as Commonwealth Care for people above the poverty line. Some 1.3 million state residents — about one in five — are now on Medicaid, and another 150,000 are on Commonwealth Care.

It is conventional to divide people into those with insurance and those without. But as Massachusetts health reform collides with rising costs, there is a third category ­— people who are underinsured because of high deductibles, co-pays, and difficulty finding doctors who accept the insurance they have.

According to a new report by Mass-Care, a group that promotes universal national health insurance, the number of employers who offer insurance has continued to increase, to 77{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} in 2010, but the percentage of workers who elect to buy the insurance keeps declining, to a low of 54{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}. Why? Because the employee share of premium costs keeps rising, and so do deductibles and co-pays, as businesses shift to plans with deductibles of $1,000 or more.

With the budget pressures in the state, payments to doctors and hospitals under both Medicaid and under Commonwealth Care policies have not kept pace with costs. According to a survey by the Mass. Medical Society, the percentage of medical practices accepting new patients has steadily declined.

In addition, so-called safety-net hospitals that serve the poor and the underinsured have taken a huge hit. Before health reform, a budget appropriation to compensate hospitals for treating people without insurance, known as the free care pool, covered these costs. Much of that money has been diverted to Commonwealth Care. The assumption was that, with more people insured, there would be less demand for safety net hospitals and clinics. But the number of patients receiving care at these facilities actually increased by 31{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} between 2005 and 2009, leaving a $75 million hole in their budgets.

So is the glass half-full or half-empty? According to Glen Shor, executive director of the Commonwealth Connector, the agency responsible for carrying out reform, the state is aggressively containing costs by getting insurers to bid against one another for contracts, “but we want to be sure this does not compromise patient access to care.’’ Critics, such as Benjamin Day of Mass-Care, contend that the access to care is already compromised by the rising deductibles, co-payments, and increasing difficulty in finding doctors who will accept low reimbursement rates.

By pursuing a brand of reform built on the existing insurance system, both Massachusetts and President Obama have opted for a strategy that increases complexity and administrative cost, then responds to fiscal pressures by shifting costs onto patients and doctors. Some of this squeezes out inefficiencies, but it often squeezes out care as well. The kindest reading is that our health reform is a useful halfway house. But eventually, this nation will reach a crossroads, where we must choose between seamless universal coverage or relentless incursions on care. –

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is “A Presidency in Peril.’’