What The Politicians AREN'T Saying About The Massachusetts Connector: A Cautionary Tale

Throughout the Washington debate over health insurance reform, advocates lionized the experiment enacted in 2006 by the State of Massachusetts. The "Massachusetts Connector" is a key model for the Obama Administration's notion of "health insurance exchanges:" electronic marketplaces which would enable small businesspeople and individuals to shop on-line among a variety of health plans.

The Connector is credited with increasing access to health insurance coverage for Massachusetts residents; compared with 89.5 percent of the non-elderly population in 2006, over 95% of the population was covered by private insurance in 2009. That increase in coverage was largely due to generous subsidies provided to families whose income was less than three times the federal poverty level (about $66,000 for a family of four).

I've looked closely at the Connector from a user perspective, and it IS easy to use. That's partially due to Massachusetts' being a state which community rates both individual and small group coverage, and which guarantees that coverage will be available to anyone who applies, irrespective of health condition.

So far, so good, except...

Robert J. Samuelson, who writes on economics for both Newsweek and The Washington Post, recently published a column called "As Massachusetts 'Reform' Goes, So Should Obamacare" (http://www.washingtonpost.com/wp-dyn/content/article/2010/07/18/AR2010071802733.html), which highlights several issues political leaders in Massachusetts have ignored, at their increasing peril, and which should serve as cautionary tales for states moving forward with implementation of their own exchanges.

The article illustrates the inevitable outcome of a strategy which places a higher priority on access to coverage than on cost control. It also points out how difficult it is...and will be...for politicians to take concrete steps to curb runaway health insurance costs once a new entitlement has been enacted.

First, while The Connector is credited with an incremental increase in the number of people with insurance, the offsetting benefits have been slow to come by. "Emergency rooms are as crowded as ever; about a third of the non-elderly go at least once a year, and half those visits are for 'non-emergency' conditions."

The expected gains in health status trumpeted under the program are seen as mostly long-term, since the evidence suggests that the majority of the newly-insured are younger, and therefore healthier, than the general population. This should be good for participating insurance companies, since they're selling more plans to young people who won't use them, but the effect on public health has been negligible.

But not the effect on health costs; they're spiraling out of control. As recently as 2009, the Massachusetts legislature was investigating ways to limit benefits under the State's plan by denying coverage to certain groups, such as illegal aliens. But that didn't happen.

But health care costs have exploded. There is additional burden on small employers, who are required to pay at least 70% of premiums for their workers. But the burden on State finances has been even more drastic. "In 1990, health spending represented about 16 percent of expenditures," Samuelson writes. "By 2000, health's share of the budget was 22 percent. In 2010, it's 35 percent. And ninety percent of the State's health spending is on Medicaid."

How have political leaders responded? By beating up on insurance companies. Massachusetts' insurance commissioner began denying "unreasonable" premium increases. A State commission ruled those denials were illegal; negotiations with insurers continue.

A blue-ribbon commission concluded that the villain was fee-for-service medicine, and recommended the enactment of "global payment systems" to force providers to be more efficient. But the commission offered no clue as to how to implement such payment systems, and since hospitals, doctors, and other providers objected to the recommendation,the political process stalled.

Concludes Samuelson: "The lesson from Massachusetts is that genuine cost control will be avoided because it's so politically difficult. It requires limiting the incomes of hospitals, doctors, and other providers. They object. To encourage "
'accountable care organizations' would limit consumer choice of doctors and hospitals. That's unpopular."

"Obama dodged the tough issues in favor of grandstanding....What's occurring in Massachusetts is the plausible future"

Policymakers and groups working to implement federal insurance reforms can develop an exchange approach which combines administrative efficiencies, large-scale purchasing power, network management, and regulatory flexibility to effect real pro-consumer change in the health insurance marketplace. The tools are generally available, as is the knowledge of what works...and what doesn't...to achieve the laudable goal of expanding access to affordable health coverage for small businesses, their employees, and their families.

But where's the debate?...As long as it's confined to the halls of politics, the interests of those who pay will be overwhelmed by the interests of those who get paid.