Fueled by ideology or misunderstanding, a virtual cottage industry of skeptics has arisen around Massachusetts’ landmark health reform law. And perhaps the favorite issue of the critics is the contention that the reform is unaffordable and will break the bank.

The Taxpayers Foundation has released a new report which debunks this myth. The analysis concludes that the public cost of achieving near universal access has been modest and well within early projections of how much the state would have to spend to implement the reform.

Based on actual and projected spending data for the first four years of health care reform, the Foundation concludes that state budget spending on health reform has grown from a base of $1.041 billion in fiscal 2006 to a projected $1.748 billion in fiscal 2010. That is an increase of $707 million, half of which is supported by federal reimbursements. The $353 million state share translates into an average yearly increase of only $88 million.

The analysis found that new spending for Commonwealth Care and MassHealth was largely offset by decreases in uncompensated care pool payments and in supplemental payments to Medicaid managed care organizations.

Fears that the initial rapid enrollment in Commonwealth Care would continue unabated never materialized. Read more…

The administration’s decision to revise the employer “fair share” formula is breathtakingly shortsighted for a host of reasons. They’re fighting the wrong battle against the wrong enemy at the wrong time, and, in the process, endangering the broad coalition that has been critical to the success of health reform.

Contrary to the claims of advocates, the current fair share regulations reflect the carefully crafted compromise that broke the logjam and led to passage of the landmark legislation in 2006. The administration’s rationale for blowing open this hard-earned agreement is that employers aren’t paying their fair share. Let’s look at the facts.

It’s true that people with state-subsidized insurance are paying higher out-of-pocket costs this year – up to $25 million in the aggregate – but the increased price tag for the business community is far more. Not only are Massachusetts employers paying an additional $500 million to cover 85,000 previously uninsured employees and their dependents, but the $35 million being transferred from the Medical Security Trust is paid by employers, and $100 million of the $300 million in new corporate taxes will fund state health-care spending.

The ultimate irony is that the state’s increased assessments on employers, insurers, and providers may be covering a “shortfall” that does not exist. Read more…

As the debate over the funding of health reform reaches a critical juncture, several key points should guide the discussion:

- It is essential that state leaders and others get a better handle on the scale and nature of the “problem” that needs addressing. For example, what are the factors that are driving the larger than anticipated enrollment in Commonwealth Care? Is enrollment likely to peak in the next year or will it continue to grow indefinitely? National medical inflation is driving up health costs for everyone so we need to focus on the incremental increase in state spending beyond the norm.

- There is a danger that revenue raising proposals, unless carefully thought through, could undermine the longer term sustainability of health reform. One of the key underpinnings of health reform was to encourage individuals to accept employer coverage. This is working, according to a recent survey by the Massachusetts Association of Health Plans, which concluded that an additional 85,000 individuals enrolled in employer-sponsored coverage in 2007 at a time that employer coverage is dropping in most other states.

- The funding of health reform is part of a large fiscal challenge facing state leaders and should be addressed in that context. Read more…

The Taxpayers Foundation has just published the first comprehensive analysis of the broad scope of employer participation that is essential to the success of Massachusetts health care reform. Our report finds that employers will increase their health care spending by about $175 million a year as more employees accept employer-sponsored health insurance and as employers add new prescription drug benefits to help employees comply with the Connector’s minimum creditable coverage standards.

The beauty of the Massachusetts law is that it uses a combination of individual and employer incentives and responsibilities to build on our state’s historically high level of employer-sponsored coverage, increasing both the number of insured and the amount employers spend on health care by creating a strong incentive for previously uninsured employees to sign up for employer health coverage. Our study estimates that 50,000 employees and dependents who were previously uninsured will now enroll in employer coverage, increasing employer spending by about $150 million a year. Employers will spend an additional $25 million to offer employees new prescription drug benefits.

Our analysis highlights the fact that employer participation in health reform goes way beyond the so-called “fair share” provisions that have received most of the public comment and have been widely misunderstood. Read more…

The issuance of proposed regulations governing the Health Safety Net Trust Fund represents another critical step in implementation of the state’s landmark health reform law. As with the affordability schedule and minimum creditable coverage standards, the Health Safety Net regulations represent a balance among competing needs and interests.

In our view, the Division of Health Care Finance and Policy has struck just the right balance – providing a legitimate safety net for low-income individuals who do not have access to affordable coverage on the one hand, while not creating a disincentive for individuals to purchase health insurance on the other.

Reforming the Uncompensated Care Pool, the precursor to the Safety Net Trust Fund, was a driving force behind health reform – moving the uninsured from “free care” into health insurance with its broader range of services and better medical care. The regulations help achieve this goal by promoting enrollment in affordable health insurance coverage in a way that is consistent with MassHealth and Commonwealth Care.

The funding of health reform critically depends on reducing the cost of free care so those dollars can be used to subsidize coverage for lower-income individuals.
The transfer of funds from uncompensated care to an insurance-based system is also an absolute precondition to negotiating a new federal waiver and securing all-important federal dollars that are essential to the success of health reform.

Michael J. Widmer
President
Massachusetts Taxpayers Foundation

Any reevaluation of the employer “fair share” provisions, as suggested by Senator Moore, should consider the specifics of the agreement reached on this issue as part of the health reform legislation. The “fair and reasonable” test to implement the fair share requirement has been widely misinterpreted as setting a minimum standard of employer coverage. That is simply not the case.

Rather, the fair share contribution was specifically tied to equalizing the obligation on employers to pay for free care. Massachusetts employers that provide employee health insurance contribute to the funding of uncompensated care through an annual $160 million insurance surcharge; the very small number of employers that don’t provide coverage, don’t contribute. The agreement captured in Chapter 58 was to level the playing field by having “non-contributing employers” with 11 or more employees pay for the uncompensated care costs of their uninsured employees. The $295 was the per-employee cost of free care in 2005 for all employees working for employers who made no contribution toward their health coverage. Using this same methodology, the amount of the fair share assessment will be calculated each year, an amount that should decline over time as the use of free care decreases.

The law charged the Division of Health Care Finance and Policy with setting a standard that will differentiate between employers that do contribute to uncompensated care and those that do not – the so-called “fair and reasonable” test. The two-step test established by DHCFP – at least 25 percent employee participation in the employer’s plan or a minimum 33 percent employer contribution to the premium – appropriately reflects the intent of the law. The definition was never intended as a standard for what employers should provide; rather, it is a way to determine whether or not an employer is making a contribution to free care.

Those who argue that a 33 percent contribution threshold is too low miss another point. Read more…

One of the key features of the health reform law is that it represents a true partnership among government, employers, and individuals. While the discussion of employer responsibility has centered on the “fair share” assessment, a much more critical element has been largely ignored – namely, under health reform there will be a major increase in employer-funded insurance to cover those employees who previously declined employer-offered
coverage but will now accept it because of the individual mandate.

An estimated 100,000 of the state’s uninsured are working for employers who provide health insurance; the majority of these individuals will take that coverage for the first time under health reform. This will produce a major infusion of additional employer dollars into the health care system – a minimum of $200 million and probably much more. This is several orders of magnitude larger than the estimated $31 million to be raised by the fair
share assessment. Read more…

The Connector Board is about to make two decisions that are critical to the success of health care reform – the elements of minimum creditable coverage (MCC) and the standards of affordability for enforcing the individual mandate.

There is a tendency on the part of advocates and others to overreach in both areas – setting the MCC requirements too high and establishing affordability standards that are too broad. Doing either, or both, risks dealing a fatal blow to reform. Read more…