Massachusetts Health Care Reform

1
Massachusetts Health Care Reform
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Why healthcare reform in Massachusetts?

• Double-digit, annual increases in insurance
  premiums and the highest per capita healthcare
  spending in the nation
• 500,000 uninsured in latest state survey
• Small businesses and individuals facing
  significant barriers to entry for coverage
• Limited availability of information to consumers
  and businesses precludes informed health
  insurance purchase decisions
• Potential loss of at least 385 million in
  federal government Medicaid funding
• Two universal healthcare ballot initiatives
• 1 billion and growing of free-care forcing all
  stakeholders to deal with costs for uninsured and
  under-insured

3
Broad consensus that healthcare reform must be a
system, not a product approach
Efficiencies/Cost Containment
A Culture of Insurance
Eliminate Cost Shifting
Subsidies for Low Income
Ease of Offer, Ease of Purchase
Affordable Products
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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
Low Income

• gt300 FPL

204,000
Middle Income
Note Based on August 2004 Division of Health
Care Finance and Policy statewide survey
August 2006 Division of Health Care Finance and
Policy stateside survey shows 372,000 uninsured
residents
5
Through outreach and technology, MA has enrolled
82K Medicaid eligible uninsured
90,000
81,197
Disabled
Essential
60,000
Non-Qualified Immigrants
(MassHealth Limited)
30,000
Families and Children
0
New Medicaid enrollees last 18 months
Note Based on total MassHealth enrollment
snapshot data through July 31, 2006.
6
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
Enroll in Medicaid
-100-300 FPL Low Income
150,000
-gt300 FPL Middle Income
204,000

• gt300 FPL

204,000
Middle Income
Note Based on August 2004 Division of Health
Care Finance and Policy statewide survey
August 2006 Division of Health Care Finance and
Policy stateside survey shows 372,000 uninsured
residents
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Insurance market reforms A good start
Reformed Market
Existing Market
Individual/small market merger
Dysfunctional individual market
More products with HSAs
Limited take-up of HSAs
Value-driven networks
Any willing provider
19-26 year-old market
Bad value for younger adults
Tobacco usage is a rating factor
No consequence for lifestyle choices
More flexible up to 25 years-old
Hard cut-offs for dependent status
Two year moratorium
Growing list of mandatory benefits
Mandatory, larger risk pools
Optional, smaller risk pools
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Insurance reforms will provide better value for
consumers
Existing Market
Reformed Market
Primary care
Yes
Yes
Hospitalization
Yes
Yes
Mental Health
Yes
Yes
Prescription Drugs
Yes
Yes
Provider network
Open Access
Value-Driven
Annual deductible
First Dollar Coverage
250-1,000
Co-pays
Low (0,10,20)
Moderate (0,20,40)
Monthly Premium
350
154 - 280
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The Connector is a breakthrough concept
Insurance Connector
MMCOs
Blue CrossBlue Shield
Tufts
NHP
Harvard Pilgrim
New Entrants
Fallon
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The Connector makes it work

• Increasing adoption of pre-tax premium payment
  options for small businesses (e.g. Section 125
  plans)
• Providing small businesses, sole-proprietors, and
  individuals with more affordable product choices
• Shifting the employer/employee health insurance
  relationship from design, benefits, product
  offering, and contribution to just a discussion
  regarding financial contribution
• Posting good value products to facilitate the
  purchase of this complex product
• Reaching non-traditional workers through
  innovative means
• Allowing portability for the consumer

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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
Enroll in Medicaid
-100-300 FPL Low Income
150,000

• 100-300 FPL

150,000
Low Income
Middle Income
-gt300 FPL
204,000
Note Based on August 2004 Division of Health
Care Finance and Policy statewide survey
August 2006 Division of Health Care Finance and
Policy stateside survey shows 372,000 uninsured
residents
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Commonwealth Care makes private insurance
affordable for eligible 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
• No deductibles permitted for low-income
  individuals
• Private insurance plans offered exclusively
  through Medicaid Managed Care Organizations
  (MMCOs) for first three years
• The Connector will serve as the exclusive
  administrator of Commonwealth Care premium
  assistance program
• Works closely with Medicaid program to determine
  eligibility
• SCHIP and Insurance Partnership programs expand
  to achieve the same objective

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Commonwealth Care Premium assistance schedule
MonthlyPremium
of Income
Single PersonIncome
FPL
lt100
Free
NA
9,800
150
18
1.8-2.1
14,700
200
40
2.8-3.8
19,600
250
70
3.8-5.4
24,500
300
106
4.7-6.3
29,400
Rates for single individuals Range as a
percent of mid-point income for individuals and
two adults with one child
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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 (approximately 1,200/person)

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Employers will remain the cornerstone for the
provision of health insurance

• Existing and new state non-discrimination
  provisions
• Fully insured companies are prohibited from
  varying financial contribution to employees
  enrolled in group health plans
• Fair Share Assessment
• For employers who do not offer a fair and
  reasonable contribution, a maximum assessment of
  295/employee/year based on free care usage
• Free Rider
• Surcharges any employer with 11 or more FTEs that
  do not pay or arrange for the purchase of their
  employees health insurance, based on an employee
  and their dependents use of the free care
  health services

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Fair Share test

• Two-step test
• Primary Test Take-up rate must be equal to or
  greater than 25
• If the business passes this test, then no
  assessment
• If the business fails this test, then move to
  secondary test
• Secondary Test The business must contribute 33
  or more for the purchase of health insurance
• The two-step test accomplishes the following
  objectives
• The primary test ensures that the employer is
  covering not just offering insurance to its
  employees (thus paying into the UCP)
• It respects free market principles by allowing
  the employer and employee to determine a fair
  and reasonable employer contribution
• Employees vote with their feet by enrolling in
  the employers health plan
• The Commonwealth is just measuring the result of
  the employer and employees wage and benefit
  negotiations
• The secondary test provides employers with a
  safe harbor from employees who turn down health
  insurance for reasons that the employer has no
  control over

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The law contributes to market stability by
addressing cost shifting

• Medicaid rate increases
• 270 million rate increases for hospitals and
  physicians over a three years
• 90 million/year
• 85 for hospitals and 15 for physicians
• Increase rates for community health centers
• Beginning in year two all rate increases must be
  tied to pay-for-performance measures
• Enroll eligible individuals in the Medicaid
  program
• On-line, streamlined application process
• 77K in the last twelve month period
• Lifting of enrollment caps for certain programs
• Restoration of certain Medicaid benefits (adult
  dental, eyeglasses)
• Reforms the Uncompensated Care Pool reimbursement
  mechanisms

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Encouraging efficiency and cost containment
strategies

• Program integrity efforts
• Provider re-credentialing
• Non-custodial parent responsibility
• Increased funding for Medicaid Fraud Control Unit
  and State Auditor
• Cost, Quality and Patient Safety initiatives
• Improving the Commonwealths purchaser and
  consumer website
• Funding for Betsy Lehman Center for Patient
  Safety
• Statewide infection and prevention control
  program
• Health Care Quality and Cost Council
• Funding for certain public health programs to
  help raise public awareness
• Diabetes
• Renal disease
• Cancer screening
• Pay-for-Performance measures
• Mandated for the Medicaid program
• MassHealth Payment Policy Board
• Working with other payers and providers to ensure
  consistency

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Similar quality, but very different costs
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
St.
North
Tufts
Mass
Winchester
CHA
Brigham
Northeast
BMC
Auburn
Israel
Elizabeth
Shore
NEMC
General
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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
• Control costs for system sustainability

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The law provides the guidelines, but success will
be measured by its implementation

• CMS approval of Medicaid waiver
• Well-functioning Connector that addresses the
  needs of small businesses and consumers
• Premium assistance program that is financially
  sustainable and not rife with adverse selection
• True transparency in the cost and quality of
  healthcare services
• Creation of affordable, quality health insurance
  products
• Businesses and government must be active
  participants
• Acceptance of personal responsibility principle