Massachusetts health system reform feeling the pinch

Leaders are trying to limit premium increases in light of high enrollment in state-subsidized plans. Physician pay cuts could be on the table.

By Doug Trapp — Posted Feb. 11, 2008

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There's a four-letter word on the lips of the people in charge of Massachusetts' health system reform: cost.

Unexpectedly large health plan enrollment numbers, an influx of high-cost beneficiaries and high health care costs in general are leading the Connector Authority, manager of the reform program, to search for ways to cut back. Possibilities include prodding health insurers to limit premium increases and reducing physician pay under certain health plans.

Overall participation was higher than expected because even though enrollment in one part of the program fell below expectations, enrollment in another part far exceeded predictions. The state-subsidized, sliding-scale Commonwealth Care health plans enrolled 169,000 people as of Jan. 1. That figure is 33,000 more than anticipated for all of fiscal 2008, which ends June 30. The program is open to residents earning less than 300% of the federal poverty level who don't have access to work-based insurance.

Unsubsidized Commonwealth Choice plans, for those earning more than 300% of poverty, attracted 15,900 people, which is 19,100 fewer than expected for fiscal 2008.

Commonwealth Care also has been more costly than expected because of a higher-than-expected number of older enrollees with significant health needs, said Deborah Gordon, spokeswoman for Network Health, which has about 40% of Care members. About 10% of the company's enrollees have had medical costs that exceeded premium payments by 50%, she said.

The cost pressures mean physician reimbursement rates from Commonwealth Care plans, which are about 110% of Medicaid pay, could face scrutiny by the Connector board as it examines fiscal 2009 health plan bids.

Physicians are in the second of three years of Medicaid pay boosts that will bring Medicaid reimbursement to 90% of Medicare pay, according to Frank Fortin, spokesman for the Massachusetts Medical Society.

Jon Kingsdale, PhD, executive director of the Connector Authority, said he doesn't want Commonwealth Care plans' physician pay to increase as quickly as Medicaid reimbursement. He suggested that Commonwealth Care plans cut doctor pay 3% to 5% to control costs. Pay rates, however, are subject to negotiations between the insurers and physicians.

MMS president Dale Magee, MD, said it's unclear how interested the Connector board is in pay cuts. "They're just hinting at it to gauge the response right now," he said. The medical society hasn't taken an official position on the issue.

Dr. Magee said physicians will be involved in cost-control efforts. "The question is whether we're going to be making the decisions or whether we're going to be having the decisions made and handed to us."

The Connector Authority also is turning its attention to limiting the anticipated increases in health plans' premiums, said Dr. Kingsdale. "The affordability of this program is going to be a major concern."

The Connector board asked Commonwealth Choice plans to hold premium hikes to 5% in fiscal 2009, which starts July 1, without reducing benefits or services. If that's not possible, the board wants insurers to revise their plans so that premium increases will not exceed 5%, Dr. Kingsdale said. The board also hopes to limit Care plan increases to single digits. These are not small requests. In recent years, rates in Massachusetts have increased between 8% and 12%, but before that they had risen as much as 15% annually, he said.

In coming weeks the board is scheduled to revise its standards for Connector plan affordability, or the maximum percentage of income that enrollees will have to pay under the state's insurance mandate. The board also is expected to discuss co-pay increases for fiscal 2009 to bring Care plans closer to private insurance.

Although budget forecasts call for a drop in state revenues in fiscal 2009, Dr. Kingsdale is optimistic lawmakers will financially support the Commonwealth Connector through any shortfalls. "As long as we're prudent managers of the program, there's tremendous support in the Legislature and the administration and broadly in the public for what we're doing," he said.

Massachusetts Gov. Deval Patrick went to bat for the Connector board. Patrick on Jan. 23 proposed increasing state spending on Commonwealth Care plans to $869 million in fiscal 2009, up from $471 million in fiscal 2008.

More uninsured than thought?

Part of the unexpectedly high Care enrollment may be because, in setting the Connector reform's budget, Massachusetts lawmakers used a low estimate of the number of uninsured residents. "That's possible. That's one of the key questions," Dr. Kingsdale said.

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said: "Most of us are coming to the preliminary conclusion, although we don't have proof yet, that we had underestimated the number of uninsured." Widmer has informally advised reform leaders.

The Census Bureau estimates an average of 653,000 Massachusetts residents were uninsured between 2004 and 2006. However, the Massachusetts Legislature used an Urban Institute estimate of 532,000 for the Connector's budget, according to Connector board spokesman Dick Powers.

Anecdotal information at one health center indicates that the reform program has shown results, but worries persist. "About 20% of our patients are still uninsured," said Bill Walczak, CEO of Codman Square Health Center in Boston. "It's down from 35%, but it's not down to zero."

Walczak worries about the future of health reform in the state, particularly the affordability of unsubsidized Commonwealth Choice health plans. Residents in their 50s earning more than $32,000, which is just over 300% of the poverty level, could spend more than $6,000 on premiums and deductibles for certain Choice plans before their insurance would cover any costs.

"Some people would say it's not affordable now," he said. Walczak said cost-control efforts should have been dealt with earlier in the Connector reform implementation. "The horses are out of the barn."

In addition to the nearly 200,000 uninsured people who have gained coverage through Commonwealth Care and Commonwealth Choice, about 90,000 low-income people have enrolled in the state's Medicaid program, said a spokeswoman for the Massachusetts Executive Office of Health and Human Services.

Massachusetts' individual insurance mandate also has led an undetermined number of the state's 400,000 to 650,000 uninsured to enroll in private insurance directly through health plans. Those who can't provide documentation on their tax returns that they had health insurance in 2007 must pay a tax penalty of $219 this year. Draft regulations call for a fine of up to $912 in 2009 for being uninsured in 2008.

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Enrollment picture

Massachusetts is having more success than anticipated enrolling residents in state-subsidized Commonwealth Care health plans. But participation in Commonwealth Choice plans, which aren't subsidized, is lower than expected.

Commonwealth Care Commonwealth Choice
Anticipated fiscal 2008 enrollment 136,000 35,000
Enrollment as of Jan. 1 169,000 15,900

Note: Fiscal year 2008 runs from July 1, 2007, until June 30, 2008.

Source: Commonwealth Connector Authority, January

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External links

Massachusetts Commonwealth Connector (link)

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