Amid rising costs, Missouri analyzes Massachusetts model

In April 2006, Massachusetts passed legislation that would provide nearly universal health care coverage to state residents. With the federal government producing precious little that has passed for health insurance reform in the past dozen years, the Massachusetts move sent bells pealing coast to coast.

Many media outlets, including The New York Times, greeted the development warmly. Massachusetts Gov. Mitt Romney used the achievement in April to immediately gain traction for the 2008 Republican presidential nomination.
The AFL-CIO and numerous conservative organizations spat fire. Business organizations — desperate for relief from a dizzying series of annual rate increases for employee coverage — began studying how or whether to adapt parts of the Massachusetts model to their own states.

The Missouri Foundation for Health, which received most of the funds from conversion of Blue Cross/Blue Shield of Missouri to a publicly held company, flew in leaders behind the plan for a seminar in St. Louis last month and asked the question: “Massachusetts Health Care Reform: A Model for Missouri?”

Marc Smith, president of the Missouri Hospital Association, which now has adopted universal insurance coverage as a primary goal, provided the succinct response: “The simple answer is ‘no,’ at least not now,” he said.
More than 100 academicians, health-care professionals and civic, business and government leaders — including Gov. Matt Blunt’s health care chief, Jodi Stefanick — continued to ruminate about the significance of the Massachusetts developments and Missouri’s quandary.

Dan Mehan, president of the Missouri Chamber of Commerce and Industry, said he had been meeting with Smith, the governor’s staff and interest groups to find a fix. But he had an equally dour message: “There are no easy answers,” he told the crowd.

That day, Families USA produced more grim news when it released portions of a new study on the rise in health insurance costs versus the increase in median earnings.

In Missouri, the cost of family coverage in the typical workplace rose from $6,731 in 2000 to $10,864 in 2006, an increase of $4,133. The employer’s share increased 50 percent while the worker’s premium doubled, as companies shifted costs. The median wages for Missouri workers, however, rose only 18.9 percent during that period. Out-of-pocket costs for co-pays continued to climb, and employers reduced the benefits provided.

Massachusetts’s dilemma

Massachusetts was drawn into a full-scale re-examination of its health-care financing system because it faced rejection of its Medicaid plan by federal authorities.

An earlier federal waiver had allowed the state to route $385 million in federal matching funds to its “safety net” hospitals and clinics to pay for uncompensated care of the uninsured, and the loss of those funds promised severe hardship for providers and uninsured Massachusetts residents as well as higher private premiums for most residents.

Romney and Democratic legislative leaders all committed to finding an overall solution to Massachusetts’s health-care funding needs. An active citizens’ coalition placed an initiative petition on the ballot that included a payroll tax on employers and got the attention of business leaders.

The Blue Cross Blue Shield Foundation of Massachusetts hired the Urban Institute to plan a redesign that would lead to universal coverage in the state.

By April, the Massachusetts plan had taken shape. Romney vetoed penalties on businesses that do not insure workers, but the legislature overrode the veto.

The plan provides for:

· An “individual mandate.” Every resident of Massachusetts must make arrangements to secure health insurance by next July 1 through an employer, Medicaid, Medicare or direct purchase. Romney likes to compare this new obligation to state laws that require auto owners to buy liability coverage. Massachusetts residents will lose their personal income tax exemption next year if they fail to obtain coverage, and the penalty increases thereafter to about half the cost to buy insurance.

· An expansion of the Medicaid program. Massachusetts residents who make up to 300 percent of the federal poverty level — or about $60,000 for a family of four — can obtain subsidies to buy coverage.

· A penalty of $295 a year per worker for companies with 11 or more employees that do not sponsor group coverage.

· An escape valve from the penalties for companies that use cafeteria plans to let employees buy coverage tax free.

· Creation of an as-yet untested state “connector” agency that is designed to increase the choices of Massachusetts workers for health coverage, allow them to tap multiple employers for support, take the coverage to new jobs and rate the quality of insurance products.

· Merging the individual and small-employer insurance markets in Massachusetts. The move should reduce the cost of individual policies by 25 to 40 percent and allow the sale of more policies that rely on “health savings accounts” to reduce costs.

Missouri’s governor attracts flak from hospitals

Missouri Gov. Matt Blunt took office in 2005 and immediately targeted state spending on Medicaid and children’s health care for cutbacks, which eliminated eligibility for 100,000 Missourians and reduced services for more than 300,000.

The cuts drew sharp criticism and are among the reasons cited for Blunt’s low public approval ranking by Survey USA. In October, 36 percent of Missourians approved of his performance; only three governors ranked lower.
Marc Smith, the Missouri Hospital Association president who gave the keynote response to the Massachusetts model, immediately took on Blunt and the Republican legislative majority for their attitudes on Medicaid, although not by name.

After state efforts to overhaul health insurance failed in 1994, the hospital trade group was among the leading players in the effort to expand the state Medicaid program and, later, the new children’s health insurance program. Hospitals cooperated with the state by agreeing to a “tax” that cost $636 million a year but generated $1.6 billion in health-care spending because of the federal government’s match under the Medicaid program.

With that windfall and aggressive enrollment of children in government-subsidized programs, “Missouri went from No. 47 to No. 4 in its insured rate” before Blunt took office, but its uninsured population is now increasing steadily, Smith said.

Smith particularly objected to rhetoric last year that reduced Medicaid recipients to “welfare queens and their Cadillacs,” since the elderly and disabled account for only 23 percent of Medicaid clients but 67 percent of total costs. The 2005 Missouri cutbacks, focusing mostly on children and their parents, “did not even begin to address the problems that are going to break the bank,” Smith said.

While the hospital association has adopted universal coverage as its mantra, “the political climate here is not conducive to (enacting) the Massachusetts law,” Smith said, specifically citing “the leadership in the executive branch,” or Blunt.

Among the other obstacles, Smith said:

· Employer or individual mandates are “anathema” in the legislature.

· The need to fix the damage done to the Medicaid program before tackling broader issues of health-care financing.

As a top priority for Missouri and the business community, Smith urged targeting small employers as a key to increasing the insured rate, short of mandates. Of more than 600,000 uninsured Missourians, at least 198,000 work for businesses with 25 or fewer workers.

Many of Smith’s comments were echoed by panelist Bill Schoenhard, the chief operating officer of SSM Healthcare, the hospital chain that includes St. Mary’s of Jefferson City among its members.

“I think health care ought to be a basic human right,” Schoenhard said. “But we need to flat-out agree that the current (financing) system is unsustainable… Unfortunately I agree with Marc that change is only politically possible if it is incremental.”

Health insurance price increases have far outstripped both general inflation and worker earning growth for the past decade.

Medicaid also poses challenge for business solutions
Mehan, the chamber president, noted that he had tried to work with Smith on insurance subsidies to increase small-business offerings of health coverage. Arkansas and Oklahoma, for example, have gained federal approval to allow financially strapped small companies to buy into Medicaid at discount rates.

“But if you’re in the legislature and you want to take sacred Medicaid dollars and turn them into a subsidy, you better have a safe district,” Mehan said of the current political climate and public reaction.

He, too, was leery of the Massachusetts model. “Mandates really scare our members,” Mehan said.

As incremental steps, Mehan suggested small business group health reforms and greater “transparency,” which is a key concept underlying so-called “consumer-driven health plans” that again places the business community and hospitals at odds.

Consumer-driven plans, which now enroll 2.7 million Americans, combine a high-deductible health insurance plan with a smaller employer-provided fund that the worker can spend as he or she chooses on health care. Originators of the plans emphasize the ability of consumers to control costs by shopping around for care.

But beyond the cost of a simple doctor visit, patients often have difficulty retrieving any meaningful cost information, particularly from hospitals. The size of the deductible and personal funds often means that workers or family members with chronic health conditions would need to spend more for out-of-pocket costs, which they cannot ease without access to reliable data on hospital charges.

Workers have been reluctant to embrace the consumer-driven plans, even though many business advocates have supported their growth in the workplace. For the past two years, only 4 percent of workers have opted for the plans nationwide.