Five years after Gov. Mitt Romney signed Massachusetts’ groundbreaking health care legislation, it has met its chief goal of extending insurance coverage to most residents — but with costs rising faster than inflation, lawmakers face the challenge of how to pay for it all.
Although the law has extended coverage, it has done little to fundamentally change the way consumers shop for health care, which analysts say is the only lasting solution to ballooning costs.
Massachusetts’ uninsured rate plunged to the lowest in the nation, from 6.4 percent to 1.9 percent, after the law was enacted in 2006. The rest of the nation averages close to 17 percent. Nearly every child has coverage, and more businesses are offering insurance plans.
At the same time, health care premiums continued to outpace inflation by rising an average of 5 percent to 10 percent each year.
“It’s been very successful in getting people covered,” said Jon Kingsdale, whom Mr. Romney appointed to set up the law’s insurance exchanges, though he also said the trickier issue of bending the health care cost curve remains. “I think, politically, it would have been difficult to enact the law with cost containment - that really means taking money away from the people who save lives.”
Reforming health care in Massachusetts — and the challenges that came with it — foreshadowed President Obama’s health care initiative, which he signed into law last year. The Affordable Care Act closely mirrors Mr. Romney’s overhaul, leaving in place the employer-coverage model butexpanding subsidized coverage.
Both laws include mandates on individuals to purchase health insurance or pay a fine, and on businesses to offer insurance, though they exemptsmall firms. Both establish insurance exchanges that offer subsidized coverage to low-income individuals and families and ban insurance companies from rejecting individuals with pre-existing conditions.
Now, both plans face questions over how to pay for their reforms over the coming decades.
In Massachusetts, that problem is already acute.
MassHealth, which includes Medicaid and the State Children’s Health Insurance Program, has seen more residents come under its wings from the dual impacts of an economic recession and the new mandates under the law. An extra $5.6 billion in Medicaid funding through the federal stimulus bill helped to pay for the program over the past two-plus years.
As of this year, though, that assistance is gone. In response, the state trimmed $770 million from MassHealth in a 2012 spending plan that authorizes higher co-pays and reduces reimbursements to providers.
The cuts add to concerns about sustaining the program that costs $10.4 billion annually and insures one-fifth of state residents, represents 29 percent of all state spending and forms the backbone of the new health care law. Spending on the program has increased by an average of 6.2 percent each year since 2005, when MassHealth made up 27 percent of the state budget.
“Just having that many more people in public programs, it does create problems for sustainability,” said Amy Lischko, a professor at Tufts University who served as Mr. Romney’s health care policy director. “It’s done nothing to constrain health care costs.”
Spending lots of money on health care is nothing new for Massachusetts. In 2004, two years before the health care reform was enacted, spending per capita was $6,683 in the state, compared with $5,283 nationally, according to the Kaiser Family Foundation.
If insurance enrollment is used as a benchmark, the health care reform was widely successful. It expanded MassHealth, established an exchange where individuals could shop for fully, partially or nonsubsidized insurance, depending on their income level and enacted insurance mandates on individuals and midsize and large businesses.
A program called Commonwealth Care was established for those living below 300 percent of the federal poverty level. Those who earn up to 150 percent of the federal poverty level can obtain fully subsidized coverage through the exchange, called the Health Connector, while those at higher income levels are eligible for partially subsidized coverage.
Cost curve still rising
Mr. Kingsdale downplayed the presence of cost containment in original goals for the legislation — an area where some critics say the overhaul fell short. Health care inflation has long troubled consumers and providers, rising nearly twice as fast as the Consumer Price Index over the past decade.
“I have no argument with the contention we should contain health care costs,” he said. “It just wasn’t really the legislative objective behind our health reform.”
That is disputed by Ms. Lischko, who says those involved now try to deny that bending the cost curve was an aim. She saidthe law established aHealth Care Quality and Cost Council to recommend cost-cutting strategies for the public and private sectors, but itaccomplished little and was soon defunded as budgeting became strained.
“The panel was never a priority of the administration,” Ms. Lischko said. “The focus was on getting people access. The focus wasn’t on quality and cost.”
Of all the players in the health care industry, small businesses are the ones who complain that they got the short end of the stick. They say their premiums continued to rise disproportionately - partially as a result of a merging of the individual and small-group markets. Quoted rates for small groups rose sharply last year, by as much as 35 percent or more for 15 percent to 20 percent of members in the small-group market and by at least 20 percent for more than half of the members.
Jon Hurst, president of the Retailers Association of Massachusetts, said the law was a great success for low-income consumers, but he called it a failure on costs and for small businesses who don’t have the leverage of larger companies. He said the mandate on individuals to own insurance also puts additional pressure on businesses, even though companies with fewer than 10 full-time employees don’t have to offer coverage.
“Because your employees have to get covered, you pretty much have to offer it,” he said. “It’s a reality if you want to have good, loyal employees.”
The pressure, though, meansthe percentage of Massachusettsemployers offering insurance has risen from 70 percent to 76 percent over the past five years while the national rate stands at 60 percent.
Mr. Romney was an ardent backer of the individual mandate, which requires people to obtain insurance or pay a tax penalty, but opposed the employer mandate.
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