Health Care: The Promise and Perils of "Compromise"

Posted by Joshua Holland, AlterNet at 1:16 PM on March 16, 2009.

The New York Times takes a look at Massachusetts' ground-breaking push towards universal health care, and what it found offers some interesting insight for national health policy.

Three years ago, Massachusetts enacted perhaps the boldest state health care experiment in American history, bringing near-universal coverage to the commonwealth with Paul Revere speed.

To make it happen, Democratic lawmakers and Gov. Mitt Romney, a Republican, made an expedient choice, deferring until another day any serious effort to control the state's runaway health costs.

The day of reckoning has arrived. Threatened first by rapid early enrollment in its new subsidized insurance program and now by a withering economy, the state's pioneering overhaul has entered a second, more challenging phase.

Thanks to new taxes and fees imposed last year, the health plan's jittery finances have stabilized for the moment. But government and industry officials agree that the plan will not be sustainable over the next 5 to 10 years if they do not take significant steps to arrest the growth of health spending.

By all means, read the whole thing. Here are a few points which I think stand out.

First, there are two ways of looking at this. You can see Massachusetts' experience with its "Commonwealth Care" program as evidence that bringing everyone to the table -- including a 'disease care' industry whose ultimate goal is profits rather than a healtheir society -- results in a muddled policy where the number of people with health coverage might expand, but lacking any serious effort to contain costs, the ultimate policy remains unsustainable.

This appears to be the direction Obama has promised in tackling health care reform. As the Washington Post reported a couple of weeks ago:

Obama's opening gambit to dramatically expand the health-care system has attracted surprising notes of support from insurers, hospitals and other players in the powerful medical lobby ... The lure for the industry is the prospect of tens of millions of new customers: If Obama succeeds in fulfilling his pledge to cover many more Americans, those newly insured people will get checkups, purchase medicine, undergo physical therapy and get surgeries they cannot afford today.

As long as our health care system remains one of the world's great rip-offs, insuring tens of millions of uninsured people, while the right thing to do, just isn't feasible over the long term. The incentives have to change.

The other way to look at it is that this kind of incrementalism offers the opportunity to do things that might not have been politically possible otherwise. The Times again:

Those who led the 2006 effort said it would not have been feasible to enact universal coverage if the legislation had required heavy cost controls. The very stakeholders who were coaxed into the tent -- doctors, hospitals, insurers and consumer groups -- would probably have been driven into opposition by efforts to reduce their revenues and constrain their medical practices, they said.

Now those stakeholders and the state government have a huge investment to protect.

Once established -- once everyone's on board with "a huge investment to protect" -- then these programs can be improved, as Massachusetts is now pushing to do with its policy:

With Washington watching, the state's leaders are again blazing new trails. Both Gov. Deval Patrick, Mr. Romney's Democratic successor, and a high-level state commission have set out to revamp the way public and private insurers reimburse physicians and hospitals.

They want a new payment method that rewards prevention and the effective control of chronic disease, instead of the current system, which pays according to the quantity of care provided. By late spring, the commission is expected to recommend such a system to the legislature.

If Massachusetts becomes the first state to make this conversion, health policy experts argue that it would be as audacious an achievement as universal coverage.

The commission is looking at various options, but all would do away with the fee-for-service system, which provides perverse incentives by paying physicians and hospitals for each patient visit. The changes under consideration include reimbursing for episodes of care rather than individual visits and bundling payments to groups of providers who would together take responsibility for a patient's health.

Blue Cross and Blue Shield of Massachusetts, the state's largest insurer, recently devised an innovative model that pays doctors a flat fee per patient, with adjustments for age, gender and health status, and then adds bonus payments for high standards of care.

The other point that stands out is that despite its obvious flaws, Massachusetts' program has had a major impact on the population of that state:

The state expects to spend $595 million more on its health insurance programs this year than in 2006, a 42 percent increase. But about 432,000 people have gained coverage, leaving only 2.6 percent of the population without insurance, according to a recent state survey. At only one-sixth the national average, that is by far the lowest rate in any state.

Massachusetts achieved its high coverage rates by mandating in its landmark law that almost every resident have health insurance, and that all but the smallest businesses make some contribution toward their employees' costs. Those who do not enroll but are deemed able to afford insurance can be fined up to $1,068 in the 2009 tax year.

To make the mandated insurance affordable, the state subsidizes premiums for those earning up to three times the federal poverty level, or $66,150 for a family of four. Massachusetts already had a law requiring insurers to accept all applicants regardless of their health status.

Although nearly 60 percent of the newly insured are covered by public programs, Massachusetts also seems to be a rare state where the percentage of employers offering health benefits is actually growing. And the state government has realized substantial savings, worth about $250 million last year, from lower payments to hospitals for uncompensated care for the uninsured and underinsured.

Finally, while the disease management industry claims that it can't possibly turn a profit with all this meddlesome government interference, Massachusetts' Governor Deval Patrick appears to have damaged that argument with a bit of tough talk.

Mr. Patrick has shown signs of playing tough with the state's hospitals and insurers. Responding in January to a series in The Boston Globe that exposed how the state's most influential hospitals negotiate high reimbursement rates, Mr. Patrick announced that he would explore whether the state could regulate insurance premiums.

"Frankly, it's very hard for the average consumer, or frankly the average governor, to understand how some of these companies can have the margins they do and the annual increases in premiums that they do," Mr. Patrick said in an interview. "At some level, you've just got to say, 'Look, that's just not acceptable, and more to the point, it's not sustainable.'"

The threat seems to have been heard. Insurers seeking to participate in the state's subsidized insurance program, Commonwealth Care, recently submitted bids so low that officials announced last week that they would keep premiums flat in the coming year. That may provide cover for the program as the state seeks ways to fill a nearly $4 billion gap in its 2010 budget.

Apparently, the mere threat of cost controls helps Big Health find ways to control costs.

Expect more out this week on Massachusetts' health care mandate, with at least one major reprot being released on its applicability to national policy.

Tagged as: obama, massachusetts, health care reform, patrick

Joshua Holland is an editor and senior writer at AlterNet.