Massachusetts Health Care Reform

1
Massachusetts Health Care Reform
Presentation to the US Chamber of Commerce

• Governor Mitt Romney

April 25, 2006
2
The healthcare status quo is unsustainable

• Double-digit, annual increases in insurance
  premiums
• Half a million uninsured in Massachusetts, 40
  million nationwide
• Many businesses, particularly small businesses,
  are dropping health insurance benefits due to
  costs
• Hospitals mandated to provide emergency care
  (EMTALA)
• 1.2 billion spent by state to reimburse free
  care in MA
• No consequences to individuals who choose to
  free-ride they get care
• Limited information available to consumers and
  businesses that would allow for informed cost and
  quality decisions
• Significant barriers to entry for individuals and
  small businesses who want to buy coverage
• Part-timers, contractors, workers with more than
  one job, sole-proprietors
• Participation and contribution rate requirements

3
A fully insured population is the cornerstone
to controlling health care costs
Insure the uninsured
Premium Assistance
Affordable Product
Medicaid
HealthcareReform
Contain healthcare costs
Program Integrity
E-Health
Transparency
4
The Uninsured in Massachusetts

• Total Commonwealth Population

6,400,000

• Currently insured (93)
• Employer, individual, Medicare or Medicaid

5,940,000

• Currently uninsured (7)

460,000

• lt100 FPL

106,000
Medicaid Eligible but unenrolled

• 100-300 FPL

150,000
Premium Assistance

• gt300 FPL

204,000
Affordable Private Insurance
Note Based on August 2004 Division of Health
Care Finance statewide survey
5
Through outreach and technology, MA has enrolled
77,000 Medicaid eligible uninsured
Other
77K
80K
Disabled
Essential
60
Non Qualified Immigrants
(MassHealth Limited)
40
20
Familes and Children
0
New Medicaid enrollees last 12 months
Note Based on total MassHealth enrollment
snapshot data through December 31, 2005.
6
Requiring enrollment of Medicaid eligibles is
reversing free care utilization trends
Free Care visits and admissions
Growth in Free Care charges
40
29
30
32
25
30
20
20
15
10
10
0
5
4
-4
-10
0
FY03 to
FY05 YTD
FY03 to
FY05 YTD
FY04 Growth
Growth
FY04 Growth
Growth
Note Based on Uncompensated Care Pool claims
data through September 30, 2005.
7
The Uninsured in Massachusetts

• Total Commonwealth Population

6,400,000

• Currently insured (93)
• Employer, individual, Medicare or Medicaid

5,940,000

• Currently uninsured (7)

460,000
-lt100 FPL
106,000
Medicaid Eligible but unenrolled

• 100-300 FPL

150,000
Premium Assistance
-gt300 FPL
204,000
Affordable Private Insurance
Note Based on August 2004 Division of Health
Care Finance statewide survey
8
Premium increases are hurting small businesses
and may lead some to drop insurance
Annual premium growth MA small group family
plans
20
17
14
15
11
9
10
5
0
2001
2002
2003
2004
9
Market reforms allow affordable products

• Enhances insurance product flexibility in all
  markets particularly for small businesses
• Permits deductible levels consistent with Federal
  HSA laws
• Updates PPO and HMO law to permit value-driven,
  tiered networks
• Permits co-insurance
• Existing high-deductible plans can now be tied to
  HSAs
• Creates a class of insurance products targeting
  19-26 year olds
• Mandate free appropriate benefit level for a
  very healthy cohort
• Levels the playing field for individuals buying
  health insurance
• Eliminates non-group market where only two
  products were allowed
• Pools risk with small group market dropping
  prices by 25-40 while increasing product choice
• Adds tobacco usage as a rating category
• Extends definition of dependent up to 25 years of
  age for family policies

10
Insurance reform allows products that represent
good value, and are comprehensive
Standard Small Group
Affordable Products
Primary care
Yes
Yes
Hospitalization
Yes
Yes
Mental Health
Yes
Yes
Prescription Drugs
Yes
Yes
Provider network
Open Access
Defined
Annual deductible
First Dollar Coverage
250-1,000
Co-pays
Low (0,10,20)
Moderate (0,20,40)
Exclusions permitted for young adults
Mandated benefits
Included
No
Yes
Coinsurance
350
200
Monthly Premium
11
The Connector makes it work
Insurance Connector
MMCOs
Blue CrossBlue Shield
Tufts
NHP
Harvard Pilgrim
New Entrants
Fallon
12
The Connector is an efficient nexus between
buyers and sellers

• Small businesses will be able offer multiple
  affordable products to their employees
• Premiums paid with pre-tax dollars
• Eliminates minimum participation and contribution
  hurdles
• Market signaling ease of purchase and good
  value
• Purchase of insurance by the individual, not the
  employer
• Employer shifts to defined contribution model
• Employee and individual choose and own the
  insurance
• Mechanism for reaching non-traditional workers
• Part-timers and seasonal workers
• Contractors and sole-proprietors
• Individuals with more than one job
• Health insurance will be portable between small
  businesses

13
The Uninsured in Massachusetts

• Total Commonwealth Population

6,400,000

• Currently insured (93)
• Employer, individual, Medicare or Medicaid

5,940,000

• Currently uninsured (7)

460,000
-lt100 FPL
106,000
Medicaid Eligible but unenrolled

• 100-300 FPL

150,000
Premium Assistance
-gt300 FPL
204,000
Affordable Private Insurance
Note Based on August 2004 Division of Health
Care Finance statewide survey
14
Contrary to the common perception, this
population is eminently insurable

• Substantially younger than the average
  population
• Predominantly male and single
• Representative of statewide mix of race and
  ethnicity
• 82 are high school graduates, of which 15 have
  college degrees
• 78 are working, with the majority working
  full-time
• Like others, these individuals respond very well
  to insurance-like features

15
Premium assistance makes private insurance
affordable for the low-income individuals

• Redirects existing spending on the uninsured away
  from opaque bulk payments to providers to direct
  assistance to the individual
• Premium assistance up to 300 of the Federal
  Poverty Level (FPL)
• Zero premium for individuals under 100 FPL
• Premiums increase with ability to pay up to 300
  FPL
• No cliff glide-path to self-sufficiency
• Private insurance plans offered exclusively
  through Medicaid Managed Care Organizations
  (MMCOs) for first two years
• No deductibles permitted for low-income
  individuals
• The Connector will serve as the exclusive
  administrator of Commonwealth Care premium
  assistance program
• Works closely with Medicaid program to determine
  eligibility

16
Commonwealth Care Sliding scale premium
assistance example
WeeklyPremium
of Income
Single PersonIncome
FPL
lt100
Free
NA
9,800
150
6.92
2.4
14,700
200
11.54
3.1
19,600
250
18.46
4.0
24,500
300
32.31
5.7
29,400
All numbers assume NO pre-tax treatment and NO
employer contribution
17
Healthcare reform redirects existing sources to
meet its goals
Safety Net Care Pool Sources and Uses FY07
1,344.5M
1,344.5M
100
DMH/DMR/CHA CPE
General Fund
80
Premium Assistance
BMC and CHA
60
1115 Demo
Free Care
40
Former DSH
20
General Fund
0
Sources
Uses
The new paradigm is financially sustainable
18
The Personal Responsibility Principle

• Given Medicaid, premium assistance and affordable
  insurance products will be available, all
  citizens will have access to health insurance
  they can afford
• In this new environment, people who remain
  uninsured would be unnecessarily and unfairly
  passing their healthcare costs to everyone else
• Personal responsibility means that everyone
  should be insured or have the means to pay for
  their own healthcare

19
Personal responsibility health insurance is the
law

• Statewide open-enrollment period in March 2007
• Both Commonwealth Care and whole insurance
  market
• Beginning on July 1, 2007 all Massachusetts
  residents will be required to have health
  insurance
• Enforcement mechanisms
• Indicate insurance policy number on state tax
  return
• Loss of personal tax exemption for tax year 2007
• Fine for each month without insurance equal to
  50 of affordable insurance product cost for tax
  year 2008

20
Employers will remain the cornerstone for the
provision of health insurance

• Existing IRS/ERISA provisions
• Existing and new state non-discrimination
  provisions
• Requires all companies with 11 or more FTEs to
  set up a section 125 cafeteria plan such that
  part-timers and contractors can purchase
  insurance with pre-tax dollars
• No contribution required
• A free rider surcharge applies to any company
  with 11 or more FTEs whose employees collectively
  use more than 50,000 of free care in one year
• Does not apply if company makes a section 125
  benefit plan available
• No contribution required

21
Organizing principles for a fully insured
population

• Stabilize the small group insurance market and
  keep small businesses from dropping insurance
• Introduce lower-priced, comprehensive health
  insurance products
• Bring younger, healthier people into the risk
  pool
• Create a Connector to permit pre-tax premium
  payments
• Facilitate the purchase of insurance by part-time
  employees and employees with multiple employers
• Promote a culture of insurance and personal
  responsibility

22
A fully insured population is the cornerstone
to controlling health care costs
Insure the uninsured
Premium Assistance
Affordable Product
Medicaid
HealthcareReform
Contain healthcare costs
Program Integrity
E-Health
Transparency
23
The bill contains strong cost-containment
provisions
Cost of Newborn Delivery - DRG 620
6K
5.3K
3.9K
4
3.6K
3.3K
3.2K
3.2K
2.3K
2.3K
2.1K
2.1K
1.8K
2
0
Mt.
Beth
Winchester
CHA
St.
Brigham
Northeast
BMC
North
Tufts
Mass
Auburn
Israel
Elizabeth
Shore
NEMC
General

• Cost and Quality Council with new power to
  collect price and quality data
• Hospital, physician, specialist, procedure,
  complications, volume, etc.
• Path to creating data necessary for real consumer
  engagement
• Mandates pay for performance for the Medicaid
  program based on newly collected data

24
E-Health initiatives hold great promise for
better, more efficient care

• Electronic Medical Records
• Massachusetts E-Health Collaborative implementing
  electronic medical record system pilot programs
  in three regions
• Integrate an entire community of care from
  primary care to acute hospitalization
• 50 million seed investment by Blue Cross/Blue
  Shield of MA Foundation
• Investment in Computerized Physician Order Entry
  systems (CPOE)
• Pay for performance mandated in the Medicaid
  program based on quality
• Utilization of electronic medical record as a
  proscribed variable
• Coordination with private payers to ensure
  rational approach