Special Report
Health Care Reform Stages a Comeback in Massachusetts
N Engl J Med 1997; 336:148-152January 9, 1997
- Article
Since the demise of efforts to reform the national health care system in the fall of 1994, there have been few new initiatives to address the problems faced by the more than 40 million Americans who lack health insurance. Even state governments that were at the forefront of efforts to deal with this problem in the early 1990s saw their initiatives stalled, scaled back, or repealed.1 As the focus of debates on health policy shifted to issues such as controlling Medicare and Medicaid costs and protecting the rights of already insured consumers enrolled in managed-care plans, the public turned its attention away from the needs of those without any insurance coverage at all. Recent developments on both the federal and state levels, however, suggest that a new and more realistic round of reform is beginning.
The federal Kennedy–Kassebaum legislation, the Health Insurance Portability and Accountability Act of 1996, is intended to enable currently insured consumers to retain employer-sponsored coverage if they leave their jobs — thus, it is hoped, slowing the increase in the number of uninsured citizens.2 This bipartisan victory demonstrates that gridlock over health care policy is not inevitable, even at the federal level. Although this legislation does not address the problem of the already uninsured, some state governments are once again seeking ways to extend coverage to their uninsured populations. Legislation recently approved in New York will increase the number of children covered by the state's Child Health Insurance Program from 104,000 to 251,000 by 1999; the program provides coverage for primary and preventive care as well as for short-term hospitalization.3 In November, voters in Oregon passed an initiative proposed by Governor John Kitzhaber to increase the cigarette tax by 30 cents per pack to fund the expansion of the Oregon Health Plan to cover an additional 130,000 uninsured citizens.4 Arizona's Proposition 203, also passed in November, will redirect revenues from a 1994 increase in the cigarette tax to expand Medicaid eligibility to cover an additional 180,000 people there.5 And a new Massachusetts statute, approved in July, represents an ambitious plan to expand access to health care services for children and to restructure Medicaid.6 Elements of that initiative could be used as a model for other states and for the federal government in charting the next stage in the process of improving access to health care.
The Massachusetts Experience, 1988–1996
In 1988, the Massachusetts legislature passed a controversial “universal health care” law containing a “pay or play” employer mandate; the law was scheduled to take effect, after several postponements, on August 1, 1996.7 Meanwhile, the number of Massachusetts residents without health insurance coverage had increased from 455,000 in 1989 to 683,000 in 1995.8 In 1995, the administration of Governor William Weld received initial federal approval for a Section 1115 waiver of federal Medicaid requirements — a vehicle used by a growing number of states to reform their Medicaid systems.9 The plan included a restructuring and expansion of the state's Medicaid program and the creation of an insurance-reimbursement program that would provide employee subsidies and employer tax credits to encourage employers to provide health coverage. The governor's plan was to be financed in part by more than $200 million from the state's $315 million Uncompensated Care Pool.10,11 The Uncompensated Care Pool reimburses hospitals for the costs of services provided to uninsured low-income patients. Hospitals fund the pool by making contributions proportionate to their revenue from private payers.
Because of growing shortfalls in the pool's funds and hospitals' increasing inability to pass the pool assessments on to their customers, as well as other policy disagreements, the state legislature altered Weld's plan. It approved, over the governor's veto, the Act Providing for Improved Access to Health Care, which postponed consideration of the insurance-reimbursement program and authorized an expanded version of the Medicaid plan.
The legislation, which became effective on July 24, 1996, has three parts. First, it extends Medicaid eligibility to families and adults unemployed for long periods in the state whose household incomes are less than 133 percent of the federal poverty level and to children 12 years of age and under in families whose annual incomes are less than 200 percent of the federal poverty level (about $30,000 for a family of four). These changes will provide coverage to 124,000 currently uninsured Massachusetts residents. The statute gives the state flexibility in designing eligibility standards and the package of benefits. For example, copayments and deductibles may be established, managed-care programs are authorized for qualified recipients, and coverage may be denied to applicants eligible for employer-sponsored insurance. No funds may be diverted from other state programs to finance the expansion.
Second, the law increases funding for the state-funded Children's Medical Security Plan and extends eligibility to children up to 18 years of age. Before the new law took effect, the plan provided primary and preventive health care for children up to the age of 12. Funding limitations led to a freeze on enrollment for most of 1995. Expanded funding will open this program to nearly all of the state's remaining uninsured children.
Third, the law establishes a new program to assist 65,000 elderly low-income residents who do not have prescription-drug coverage. Every other northeastern state except New Hampshire currently maintains similar programs for needy seniors and other groups.12
All three parts of the program are to be financed through several sources. Approximately $100 million will be redirected from money that the state currently spends on various health care programs that will be absorbed into the Medicaid expansion, such as the health care program for recipients of the state's general welfare assistance. Another $150 million will come from federal matching funds. About $105 million will be raised annually through an increase of 25 cents per pack in the state's cigarette excise tax. Similar increases will be imposed on cigars and smokeless tobacco. Finally, the law repeals the 1988 employer mandate.
Prioritizing Children's Health Care Needs
Estimates suggest that the number of uninsured children in the United States — 10 million, or 14.2 percent — was greater in 1994 than at any time since 1987 and that this number would be significantly higher but for the increasing enrollment of children in Medicaid. Beginning in 1989, Congress mandated expansions in the Medicaid program to ensure that by 2002, all poor children under 19 years of age will be eligible. In addition, states have the option of expanding eligibility for pregnant women, infants, and children.13 Between 1989 and 1995, the number of uninsured children in Massachusetts increased from 90,000 to 160,000.8 Although addressing the needs of employed people without insurance remains a difficult and divisive issue, there is widespread public support for giving priority to the health care needs of uninsured children.
The new Massachusetts statute will expand Medicaid coverage to include all children up to 12 years of age from families with household incomes less than 200 percent of the federal poverty level, as well as adolescents 13 to 18 years old from families with household incomes less than 133 percent of the federal poverty level. Coverage will be denied to children who are eligible for employer-sponsored insurance, and a waiting period will be required for children whose parents' employers have dropped coverage. These requirements are intended to forestall the possibility of employers dropping coverage because of the new program. Nonetheless, that possibility remains a matter of concern in Massachusetts and in other states that have moved to broaden state-sponsored coverage, including Tennessee, Oregon, and Minnesota.14
All other uninsured children will be able to enroll in the Children's Medical Security Plan. The expansion of this program to include adolescents and the increase in funding levels should ensure that virtually all uninsured children receive some form of coverage. The plan is expected to increase its current enrollment of 20,000 to cover as many as 60,000 Massachusetts children. As with Medicaid, the effects of employers' dropping their coverage of children because of this program will be monitored.
By making a firm and funded commitment to provide some coverage to every uninsured child in Massachusetts, we seek to set an example that will be emulated by other states and the federal government. Children are by far the least expensive population to cover, and providing appropriate services to them brings substantial benefits.15 Thus, directing new assistance to children makes the most efficient use of scarce health care dollars and also garners broad public support.
Reinventing Medicaid
The Massachusetts legislation seeks to redefine Medicaid by eliminating categorical eligibility requirements and replacing them with a basic income standard that would provide coverage for eligible residents with household incomes under 133 percent of the federal poverty level who are not covered by employer-sponsored insurance. This would end the anomaly whereby some poor people who are eligible for benefits through Aid to Families with Dependent Children (AFDC) or Supplemental Security Income (SSI) receive Medicaid, whereas other poor people who do not meet the complicated requirements for fitting into the allowable categories are ineligible. As the nation creates a new framework for AFDC and other welfare programs, we must take responsibility for providing dependable, flexible, and secure coverage for all low-income citizens, but especially for the people who will lose welfare benefits.
The increase in the number of uninsured citizens is concentrated in the working population. Lack of health insurance is strongly associated with lower income, since many low-wage employers do not provide health insurance for their workers.16 With the demise of employer mandates as a politically viable policy, it is important for the government to take responsibility for this vulnerable group according to a simple income standard.
Tobacco Taxes and Tobacco Politics
The most controversial financing element of the new Massachusetts plan is the 25-cent increase in the state's cigarette excise tax, which took effect in October 1996. This increase gives Massachusetts the second-highest cigarette tax in the nation, but numerous other states are considering increases in their own excise taxes. Arguments against using taxes on tobacco to fund health care are twofold. First, because levels of cigarette consumption are falling, some argue that cigarette taxes represent a declining and unstable source of revenue. Revenue losses due to overall declining consumption have been taken into account, however, as has the effect of a tax increase on consumption.17 In predicting available revenues, we assumed an initial 4 percent drop in consumption among adults and a 10 percent drop among adolescents. Even so, expected revenues over a period of five years would be adequate to fund the new health care programs. These revenue assumptions were conservative, because we assumed there would be no subsequent tax increases in any of the states bordering Massachusetts — which is unlikely, since three of those states increased their cigarette taxes after a 1992 Massachusetts increase. Therefore, our estimate of the number of smokers who would buy their cigarettes in neighboring states was most likely higher than the actual number.
Second, some argue that using funds generated from smoking to support health care sends a confusing, inappropriate message to smokers and makes the government complicit in the promotion of a deadly activity. However, on the basis of the estimate by the Tobacco Tax Policy Project of the American Cancer Society that 25 percent of those discouraged from smoking avoid dying prematurely (Porras J: personal communication), we believe the decrease in smoking associated with the tax increase will save more than 6700 lives. Indeed, that prediction may be conservative in the light of figures provided by the Centers for Disease Control and Prevention, which estimates the mortality rate to be closer to 50 percent.18 Also, the wisdom of raising the tax on cigarettes is buttressed by what we know about the price sensitivity of young people. Since most smokers begin the habit before the age of 20,19 and since people between the ages of 12 and 17 years are three times as likely as adults to quit or not start smoking because of the price of cigarettes,20 it is sound public health policy to increase the price. The Institute of Medicine endorses this view in its report on tobacco policy, which concludes: “Pricing policy is perhaps the single most important element of an overall comprehensive strategy to reduce tobacco use, and particularly to reduce use among children.”21
This legislation does not compromise a strong commitment on the part of the government to educate the public about the dangers of smoking and to help smokers quit. Despite a number of highly successful antismoking efforts in the state since 1993, there are still 1 million smokers in Massachusetts. Using a cigarette tax to fund health care for underserved populations serves the dual purpose of reducing consumption among current and prospective smokers and establishing a revenue base to support health care programs. Estimates of the amount of funding that will be required more than five years from now are difficult to make without a knowledge of long-term trends in tobacco consumption, possible changes in federal policy with respect to the coverage of indigent populations, and employers' decisions about health care coverage. Although what the funding package for these initiatives will be after five years is uncertain, the statutory commitment to continue them will remain in place.
Raising taxes on tobacco products and using the revenues to fund programs that provide health care to those in need was termed a “win–win” strategy during debates on the issue in the Massachusetts legislature. Seventy-seven percent of Massachusetts voters polled supported raising the cigarette tax by 25 cents to fund health insurance for uninsured children and prescription drugs for needy seniors.22 Although the tobacco industry was very successful in 1996 in thwarting most states' efforts to raise cigarette taxes, it failed in Massachusetts, largely because the new funds were targeted for use in popular programs.
Lessons from the Massachusetts Experience
A new round in the struggle for health care reform will begin when policy makers, key constituency groups, and the public articulate a demand and fashion a program and strategy to meet it. In the hope that the Kennedy–Kassebaum act and the initiatives in New York, Oregon, Arizona, and Massachusetts are only the first of many such efforts, we offer the following lessons from the success of the Massachusetts campaign.
First, gridlock over health care reform is not inevitable. A successful strategy requires matching proposed programs and solutions to the scope of the problem and to the public's appetite for reform. Some previous reform attempts, including the 1993–1994 federal effort and the 1988 Massachusetts legislation, overestimated the magnitude of the political opportunity and pushed for reforms that failed to be enacted or implemented. Kingdon suggests that reform agendas will be successful when the problem, the proposed policy, and the politics all match the open window of opportunity. His model can be useful to those seeking to design successful strategies for health care reform.23
Second, major reform efforts require coalitions that isolate and minimize potential opposition. The Massachusetts campaign to increase the tax on cigarettes brought together insurers, providers, payers, consumers, and business organizations to overcome substantial opposition from the tobacco industry, convenience stores that market tobacco products, and no-new-tax ideologues. Other reform efforts must be similarly disciplined to build broad support and minimize opposition.
Third, the idea of meeting children's health care needs through taxes on tobacco can generate substantial public support and overcome legislative turmoil. Those who suggest that Massachusetts is a liberal anomaly must recognize that supporters of the bill had to surpass a two-thirds vote threshold in each chamber to override a gubernatorial veto, an obstacle that may not be faced in most other states or at the federal level. Expanded health insurance for uninsured children, combined with taxes on tobacco as a source of financing, is a promising strategy and should be considered by those interested in advancing health care reform in the next several years.
Fourth, employer mandates to provide health insurance are even less viable now than several years ago. When the Massachusetts universal health insurance law was passed in 1988, major business organizations stood on the stage with then-Governor Michael Dukakis to celebrate its signing. In 1996 those same organizations joined with other business groups to create a solid wall of opposition to any form of employer mandate. The controversy surrounding the mandate threatened to cause overall legislative gridlock and stood in the way of achieving the reforms incorporated in the new law. The 1994 failure of national health care reform led to a significant hardening of opposition to mandates, even among groups that had previously been supportive or neutral.
This final point suggests that we are still far from finding a broad-based solution to the problems of the working uninsured. As we continue to experiment and grapple with possible solutions, we should work to achieve the reforms that are attainable and can be implemented now. We hope that the new Massachusetts law will help to move the process of health care reform forward.
Source Information
From the Massachusetts House of Representatives (J.E.M.) and the Joint Committee on Health Care (C.L.H., B.R.), Boston.
Address reprint requests to Rep. John McDonough, chairman, Joint Committee on Health Care, Rm. 130, State House, Massachusetts House of Representatives, Boston, MA 02133.
- References
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- Citing Articles (5)
Citing Articles
1
Steinbrook, Robert, . (2006) Health Care Reform in Massachusetts — A Work in Progress. New England Journal of Medicine 354:20, 2095-2098
Full Text2
Charles E Begley, Lu Ann Aday, David R Lairson, Carl H Slater. (2002) Expanding the scope of health reform: application in the United States. Social Science & Medicine 55:7, 1213-1229
CrossRef3
Winnie Yip, Peter Berman. (2001) Targeted health insurance in a low income country and its impact on access and equity in access: Egypt's school health insurance. Health Economics 10:3, 207-220
CrossRef4
Jack Nicholl. (1998) Tobacco tax initiatives to prevent tobacco use. Cancer 83:S12A, 2666-2679
CrossRef5
Michael J. O'sullivan. (1998) Caring for the Uninsured in Massachusetts. Hospital Topics 76:1, 20-24
CrossRef
