Coverage for All

By: Patricia Barry; Source: AARP Bulletin Date Posted: 2006-07-05 13:42:00-04:00

By Patricia Barry

July-August 2006

After years of mounting evidence that the U.S. health care system has become dysfunctional—with nearly 46 million uninsured, costs escalating and some of America's largest employers cutting back on benefits—something unexpected happened this spring: two states enacted laws intended to create near-universal health coverage for their residents, starting next year.

What riveted the attention of health policy experts was that both these measures, though very different, had strong bipartisan support. In both Massachusetts and Vermont, they were passed by Democratic-controlled legislatures and signed into law by Republican governors. Only two lawmakers in Massachusetts voted against that state's bill, with its landmark—and highly controversial—requirements that all residents purchase health insurance and most employers contribute or face penalties.

Across the nation, the "first reaction to Massachusetts was marveling at the political accomplishments—how they were able to craft a compromise between a Republican governor and two Democratic leaders with very different ideas," says Paul Ginsburg, president of Washington's Center for Studying Health System Change. "And that's going to inspire other states to try."

For over a decade, since the Clinton health reform proposals tanked, Washington, riven by opposing ideologies, has remained in near-paralysis over the rising tide of uninsured and underinsured Americans. The right wing promotes more private insurance options, mainly high-deductible health savings accounts. The left wing favors a national "single-payer" system, run by the federal government.

Most Americans, however, want universal health coverage—whether private or public or mixed—that they can afford, according to recent opinion polls. The bipartisan Citizens' Health Care Working Group set up by Congress reported last month that of 23,000 people contacted, "over 90 percent … believed it should be public policy that all Americans have affordable coverage." The group has called on Congress to guarantee such coverage by 2012.

So, will the Massachusetts and Vermont initiatives point the way for other states or even the nation? And, for consumers, just how universal, affordable and dependable is the coverage they're planning?

Massachusetts

No state has ever attempted to require all residents to buy health coverage. Under the new law, people in Massachusetts who are uninsured must buy coverage by July 1, 2007, and all businesses with more than 10 employees that do not provide insurance must pay a "fair share" contribution of up to $295 per year to the state for each worker.

That concept of "shared responsibility" was a major political key to the law's passage, experts say. Companies that already provide health insurance welcomed the opportunity to level the competitive playing field with those that do not. Even so, Gov. Mitt Romney, in signing the law, vetoed the $295 assessment on employers—a veto the legislature overrode.

Individuals who do not comply will lose their personal tax exemption in 2007 and after that will face fines of 50 percent of the monthly cost of health insurance for each month without it. But there is a caveat. They will not be compelled to buy insurance if they can't find affordable coverage. The state has not yet defined what "affordable" will mean. And it does not intend to set levels of premiums, deductibles and copayments.

The state has become the first to adopt an idea promoted by the Heritage Foundation, a conservative Washington think tank. The law sets up a clearinghouse—called the Connector—intended to link uninsured individuals and companies having fewer than 50 employees to a choice of "affordable" health plans designed by private insurers and regulated by the state.

The Connector aims to offer these two groups the advantages that many people in large employer-sponsored groups now enjoy—deeper discounts, premiums paid out of pretax dollars and an opportunity to change plans every year.

And it offers them a further unique advantage. Their coverage will be portable. If they change full-time jobs, or are part-time or temporary employees working several jobs, their coverage remains in place.

This is a fundamentally different approach to solving the problem of the uninsured, says Edmund Haislmaier, a Heritage Foundation expert who helped formulate the Massachusetts law. "If you make the insurance stick to the people instead of to the job, you'd probably solve at least half this problem with no new money."

The law also offers subsidized coverage (no deductibles, premiums on a sliding scale) to residents with incomes up to 300 percent of the federal poverty level (about $29,000 for an individual, $40,000 for a couple, $60,000 for a family of four). And it aims to make health coverage more affordable for young adults.

The law has plenty of detractors from both ends of the political spectrum. AFL-CIO President John Sweeney called the mandate for people to have insurance an "unconscionable" step that will "bankrupt many middle-class families." Michael Tanner, director of health studies at the libertarian Cato Institute, said that it presages "a slow but steady spiral downward toward a government-run national health care system."

For Massachusetts residents, the devil will be in the details. Just how much people who are not eligible for subsidies will have to pay in premiums, deductibles and copays under the private plans provided through the Connector is not yet known, though early estimates place monthly premiums at about $300 for an individual and $600 for a couple.

Comprehensive employer-sponsored health policies for a family in Massachusetts currently run about $12,000 to $14,000 a year. How will insurers offer new options for less?

Some believe it can't be done. The choice could be between costly plans that offer good benefits and inexpensive plans that cut benefits or have very high deductibles, says David Himmelstein, M.D., associate professor of medicine at Harvard Medical School and co-founder of a physicians group that promotes a national single-payer health system. The law, he says, "will force you to purchase either something you can't afford or something you can afford but which will be nearly useless in the actual coverage it offers."

Supporters also acknowledge the challenges. "We're very aware of the issues around cost sharing," says John McDonough, executive director of MA HealthCare for All, a grassroots group that helped get the law passed. "It will take a huge amount of implementation by [all] stakeholders to make sure that this is done well and done right" over the next few months. But he adds: "They're fully committed to doing that."

Vermont

Unlike the "stick" of mandated coverage proposed by Massachusetts, Vermont's new law is more of a "carrot" that lawmakers hope will achieve the same goal—near-universal health care coverage in the state by 2010.

Vermont will provide a new voluntary, standardized plan—called Catamount Health—for uninsured residents. It will be offered by private insurers, and its benefits and charges will be similar to those in the average BlueCross BlueShield plan in Vermont. Unlike Massachusetts', the Vermont plan has defined costs. Enrollees will pay $10 for office visits; 20 percent coinsurance for medical services; tiered copays of $10, $30 or $50 for prescription drugs; and a $250 annual deductible for an individual or $500 for a family for in-network services (double those amounts for out-of-network). Another big benefit: Out-of-pocket expenses will be capped at $800 a year for an individual and $1,600 for a family using in-network services (almost double for out-of-network).

Premiums have yet to be determined but are likely to be around $340 a month for an individual. People with incomes below 300 percent of the federal poverty level would be eligible for premium subsidies.

Plan supporters are confident it will attract uninsured Vermonters without the need for a mandate because its benefits are more comprehensive than the only other plans that many can now afford. "Most folks tell us they do not want to be in a high-deductible health saving account where they're paying maybe $5,000 out of pocket before they reach some kind of catastrophic benefit," says Greg Marchildon, state director for AARP Vermont, which helped drive the new legislation. "They basically describe it as paying to be uninsured."

Employers are not required to provide health insurance, but those with more than eight employees must help fund Catamount Health by paying a dollar a day for every uninsured worker.

The other centerpiece of the Vermont law is a landmark program offering special care with financial incentives—such as waived deductibles and free services and testing—to people with chronic illness.

Vermont is the first state to formally recognize that about 80 percent of health care dollars are consumed by people with chronic conditions (such as diabetes, high blood pressure, heart disease and obesity) and that many cannot afford the screening and services that prevent expensive complications.

In terms of holding down costs as well as improving general health, "the last thing you want for those patients is high copays, deductibles or anything that will deter them from ongoing routine medical management," says Kenneth Thorpe, chairman of the health policy department at Emory University in Atlanta and the main architect of the Vermont legislation.

"If this is done well—and experts in Vermont believe it will become the gold standard for how you manage chronic disease," AARP's Marchildon adds, "we think that over time we're going to save tens of millions of dollars."

Will other states copy?

Other states will be closely watching Massachusetts and Vermont over the next year to see if they can implement their laws or if they'll run into roadblocks.

Analysts point to a number of reasons why other states may not rush to replicate those laws in their entirety. Both states, for example, have far smaller uninsured populations than the national average, tight regulations on health insurers already in place and, above all, sufficient financing (mainly from federal dollars) to fund the programs for at least a few years.

"But individual components of the reforms—yes, I think you will see states replicating them," says Laura Tobler, a health policy analyst at the National Conference of State Legislatures. She cites as examples Massachusetts' compulsory insurance and its Connector program and Vermont's chronic care program.

Yet experts on each law say the whole state system must be changed to achieve universal coverage. Haislmaier of the Heritage Foundation says the unique approach in Massachusetts is "to reform the market, not the products, to create a single unified mechanism that gets rid of these distinctions between [insurance for] individuals and small groups and large groups."

In Vermont's case, says Emory's Thorpe, reform "can't just be about costs or the uninsured. You've got to convince people who [already] have health insurance that they are going to get more affordable and better-quality health care with less administrative hassle than they have today."

Financing also relies on an integrated system. As more residents get coverage, the funds the two states now use to pay the hospital bills of the uninsured will be shifted to subsidies that help more low-income enrollees get coverage.

Many experts say Massachusetts and Vermont set aside ideologies to forge a compromise, and that this could well spur a renewed debate on national health coverage in the 2008 election.

"The whole history of national health [reform] has been of people overreaching and getting nothing," says Ginsburg of the Center for Studying Health System Change. "A lot of people have interpreted the term 'universal' as meaning single-payer, and that's a source of confusion. To me, universal just means that everybody's covered, no matter what the mechanism."

Additional Related Links

Message Board: Is the time to consider universal health care for the United States now?

Help for the Self-Employed (July-August 2006)

Help for Young Adults (July-August 2006)

Medical Nest Egg: Health Savings Accounts (April 2006)

Faceoff: How Good Are Health Savings Accounts? (April 2006)