Public Policy

Massachusetts Update

Massachusetts Update

With the ongoing debate about healthcare reform, I’m curious to know how it worked out in Massachusetts. Didn’t they give everyone health insurance several years ago?

R. McCoy, MD

Birmingham, Ala.

Dr. Hospitalist responds: In 2006, Massachusetts legislators took the same approach to healthcare insurance as they do to auto insurance: require everyone to purchase a plan. If you can’t afford to purchase health insurance, the state provides you insurance through a state-subsidized plan. The state covers individuals earning up to 100% of the federal poverty level (FPL) and partially subsidizes coverage for those earning up to 300% of the FPL.

So how did Massachusetts come up with the money to pay for healthcare insurance for all of its residents? The state traditionally utilized money from a “free-care pool” to partially reimburse hospitals and community health centers for the care provided to indigents. The money in the free-care pool was generated from state and federal taxes, and from assessments on hospitals and healthcare insurance providers. With expanded insurance coverage, Massachusetts estimated that the cost of healthcare delivered to the uninsured would decrease, and the free-care pool could offset the remaining costs of insuring those below the FPL.

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Starting in 2007, residents of Massachusetts were required to demonstrate proof of health insurance on their state income tax returns. The state levied penalties on those who failed to obtain coverage. The legislation also required insurers’ family plans to cover young adults up to age 25 or at least two years after they were no longer dependent on their parents. Additionally, businesses with 10 or more employees had to contribute a reasonable amount to their employees’ health insurance premiums or risk a financial penalty.

The Massachusetts health plan has produced both intended and unintended consequences. The plan was successful in its primary goal of insuring its citizens. By the end of 2008, 97% of Massachusetts’ residents were covered. But the system has not increased access to providers because of a shortage of primary-care physicians (PCPs). (Critics also point out that the plan has done nothing to increase the numbers of PCPs in the state.)

Another unexpected outcome is that healthcare costs have increased. The initial expectation was that increasing the percentage of insured individuals would lower overall costs. However, this has not been realized. In fact, the reallocation of funds from the free-care pool has birthed other problems. The state’s “safety net” hospitals—which traditionally have served urban, low-income populations—have experienced financial hardships.

These unexpected findings have not deterred Massachusetts from further efforts to address healthcare reform. In 2008, a special commission was charged with recommendations for a “common payment methodology” that would apply to both public and private payors. The goal is to slow the growth of healthcare costs without adversely affecting the quality of care.

The commission issued its recommendations in July 2009 ( It suggested “Massachusetts has among the highest healthcare costs in the U.S. … and based on recent history, are projected to grow faster than for the U.S. as a whole.” In its report, the commission was critical of the present fee-for-service reimbursement model and stated that the model was the primary reason for escalating healthcare costs.

The commission noted the fee-for-service model rewards providers for providing more, but not better, care and also encourages providers to provide more-costly services without regard to evidence-based guidelines or a patient’s need. The commission recommended that “global payments with adjustments to reward provision of accessible and high-quality care become the predominant form of payment to providers in Massachusetts.” For the record, the legislature has not acted on the commission recommendations. TH

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