Yesterday we talked about how the Massachusetts health care system works. Since the rest of the country will soon be following Massachusetts’ lead, what lessons can we take from their experience?
Lesson #1: Affordability is Key
As we mentioned yesterday, Massachusetts residents are mostly happy with the Connector (that’s their version of the exchange with subsidies), and they’re even okay with the individual mandate, as long as there are subsidies to help people pay for insurance. But when voters were asked how they felt about a mandate that would make people buy insurance they found too expensive, pollsters saw the boiling rage of only 19% approval.
Now, looking at Congress- in the House and Senate bills, families and individuals making less than 300% of the poverty line will be paying much more for their insurance than residents of Massachusetts. Check out this graph, comparing the monthly premiums for families of four at different income levels:
Both the House bill and the Massachusetts reform bill are a good deal for people who make less than 150% of the poverty line– they’re covered under Medicaid and pay no premiums. But check out the Senate bill- a family of four making $31,250 (that’s 143% of the federal poverty line) will have to pay over $100 per month in insurance.
Meanwhile, a little higher on the income scale, a family making $60,600 (275% of the poverty level) will be paying almost twice as much as they currently do for the cheapest plan in Massachusetts. Also, with Massachusetts Commonwealth Care you pay per adult in the family. The graph above assumes two adults in each family. But say that the family of four is a single mother or father raising three children– in Massachusetts premiums would be half of what you see above.
Massachusetts also has penalty waivers for those who make too much for the subsidy but too little to afford insurance. The waivers are granted based on an affordability chart, which you can see here. If you can’t find insurance for less than a certain monthly premium based on your income, then you don’t have to pay the tax penalty for not having insurance.
Affordability is what has kept the Massachusetts plan popular, and even so there are still some complaints about the individual mandate. As it stands now, insurance under the House and Senate bills will be much less affordable than Massachusetts- something that Congress needs to improve when the two bills are merged.
Lesson 2: Reform might be more expensive than we think
Reform in Massachusetts came in $150 million over budget. Opponents of the plan have painted it as typical case of inefficient government, but the truth is that the cost per enrollee was actually $2 per month less than expected. The problem was that there were many more uninsured people than experts originally thought.
According to Jon Gruber, an MIT economist heavily involved in the plan’s creation:
“[Opponents] make it sound like the Big Dig. It’s not. We’re covering the uninsured and it turns out there’s a lot of the uninsured. If you were doing the Big Dig and it turned out the tunnel was six times as long, you wouldn’t be surprised it cost six times as much.”
Remember that the price tag of national health care reform isn’t set in stone– it’s based on CBO estimates. They tend to guess conservatively, and hopefully they learned from Massachusetts while making their estimates, but they have also been wrong before.
Lesson 3: Some individuals will experience sticker shock
For those who qualify for subsidies, the price of premiums will be set- you’ll only have to pay a set amount, no matter how much the actual price of the insurance is. But some people who buy their insurance now will see their premiums go up. To give an idea of how much- one estimate puts the current average monthly premium for a family of four at $383. In Massachusetts, the average monthly premium is about $1,000 a month.
As we’ve said before, a large part of the difference in premiums is that in Massachusetts, insurance is required to actually cover certain essential benefits:
- preventative and primary care, emergency services, hospital stays, outpatient services, prescription drugs, and mental health services.
- In addition, there’s a limit on high how deductibles can be, there’s a limit on how much insurance companies can make you pay out of pocket every year, and insurance companies can’t put a limit on how much they’ll pay out if you get sick You even get 3 free doctors visits per year (6 for a family).
In the rest of the country, many people buy insurance that covers very little, often without even knowing how bad it is. National health care reform would require that insurance meets minimum coverage standards like the Massachusetts plan does. But still, given all the confusion about health care reform, some people will be surprised to see the price they pay in premiums every month go up substantially.
Lesson Four: Tackle Costs
The number one criticism about the Massachusetts health care reform is that health care costs are still rising. As we mentioned yesterday, the original plan was never designed to deal with health care costs– at the time it just wasn’t politically possible. But expanding access to health care has created pressure that has forced the legislature to face the cost problem- and they’ve responded with more aggressive cost control measures than any state is currently considering.
It’s still too early to tell whether or not these policies will work. But ultimately the success of the entire Massachusetts plan will depend upon their ability to control costs.
In other words, one of two things can happen: Either Massachusetts can figure out how to control costs, or it can let the program become unaffordable and repeal the legislation.
This is where the national health care reform bills in Congress mark a real improvement over Massachusetts- they begin to tackle the cost issue right away, and they try a lot of stuff. An article in the Atlantic magazine, which has reportedly become mandatory reading for members of the Obama administration, calls the bills a “milestone” in the journey to reduce costs.
Unfortunately, unlike the health insurance exchanges, subsidies, and individual mandate, we can’t look to Massachusetts (or really any other state) to get an idea of how well these cost control proposals will work. Many of them have never been tried, or are just getting off the ground in states like Massachusetts.
So, if the bills do get passed- we have a pretty good idea of how well they’ll work at expanding coverage, based on what’s happened in Massachusetts. But will the bills reduce costs and create a sustainable health care system?