UNIVERSAL COVERAGE AND HEALTH CARE EXCHANGE – AN OVERVIEW OF MASSACHUSETTS, VERMONT AND CALIFORNIA
ANA CLELIA DE FREITAS, MD
TABLE OF CONTENTS
Introduction
1. Massachusetts and the Commonwealth Care
2. Vermont and the Single-Payer Plan
3. California Health Reform
Conclusion
References
INTRODUCTION
Universal coverage means a health care system providing coverage to all individuals. It can be implemented through a single payer system or a mixed system involving private insurance companies and the government. Some health care systems rely in the individual mandate, a legal requirement that every individual should obtain health insurance coverage.
Health care exchange is the creation of a more competitive market for health insurance offering a choice of plans and establishing common rules for health plans. Insurance companies will need to offer a comprehensive benefits package with no exclusions for preexisting conditions, spreading the risk and making health insurance plans more affordable to a greater parcel of the population. Through a Federal law, the Patient Protection and Affordable Care Act (ACA), all States must create an exchange where individuals and small business can purchase health care plans. If a State does not create its own exchange, it will be run by the federal government.
The need for changes in the American health care system derives from its higher costs and lower quality and affordability. The United States spends more on health care per capita than any other country, however more than 46 million Americans have no health insurance (Waldman 1). Despite an increasing health care spending, the United States ranks poorly in levels of quality and access to health care, such as life expectancy, infant mortality and preventive medicine.
In 2014, California started implementing a health insurance exchange. 7 million Californians had no health insurance, corresponding to more than the population of Massachusetts, a State that has already implemented a comprehensive health care reform. Also an estimated number of 3 million people comprise the individual health insurance market in California, buying insurance as self-employed or a small business employee.
With the health care exchange, an opportunity arised to expand coverage and improve the quality of health care delivery. The challenge of the program resides in the necessary authority to control excessive rate hikes, since the price of health insurance is not regulated in California. A bill to give negotiators power over health insurance rates has been proposed in the California legislature.
The goal of this study is to analyze health care reform in Massachusetts and Vermont, comparing their challenges and results on what can be applied to perfect California health care system.
1. MASSACHUSETTS AND THE COMMONWEALTH CARE
Massachusetts was the first State to promote a health care reform bill, aimed to providing universal coverage and health care access to all its residents. It also enacted the individual mandate, demanding health care coverage for all individuals and employers. The 2006 health care law expanded Medicare coverage for low-earners, provided subsidized policies for the middle class, restricted the range of premiums and displayed a long list of basic benefits the insurers should provide (from in-vitro fertilization to chiropractic services).
Massachusetts had one of the most expensive health care delivery system in the United States. The health care sector is the largest employer in the state. Even before the 2006 health care law, Massachusetts had one of the lowest rates of uninsured people. The state provided a large safety net allowing individuals who needed assistance to obtain health care coverage, being the MassHealth one of the more generous public health care systems, including also legal immigrants who did not qualify for Medicaid benefits. A report from Public Citizen Health Research Group ranked Massachusetts Medicaid the best in the country (Waldman 3).
The state also created a health insurance exchange, the Connector (the Commonwealth Health Insurance Connector Authority), to provide consumers with information about health care plans and to help them purchase affordable health care insurance through the Commonwealth Choice. The Commonwealth Care provides private health care in a way similar to Israel’s kupat cholim health care system. It is administered through contracts with five managed health care private organizations, in order to provide lower premium rates for Commonwealth Care plans.
Currently, Massachusetts continues to work to decrease health care costs and to expand coverage to the uninsured 2% of its population. It also deals with the challenges of the Commonwealth Care: spiraling costs that make coverage unaffordable for both patients and businesses and price controls that reduce the market competition.
Some arguments against the Massachusetts system is that the community rating (obliging health care plans to charge all consumers similar premiums), and the guaranteed issue (health insurers must accept all enrollees regardless of their previous diseases and present medical conditions) would leave employers to drop health insurance. However, after the health reform, the number of workers covered by employers actually increased: today more than 100,000 employees are covered by health plans. About 77 percent of private companies are providing health insurance to their employees, compared to 70 percent before the State plan.
The biggest success of the Massachusetts health reform is the number of people insured. Today more than 98% of Massachusetts residents are insured, including 99.8% of all children, giving the State the lowest rate of uninsured people in the United States. The State fully provides health insurance for adults earning up to 150 percent of the federal poverty level and children of parents earning up to 300 percent of that level.
Against Massachusetts plan are the higher costs of its health system. A poll conducted by the Harvard School of Public Health for the Blue Cross Blue Shield of Massachusetts Foundation found that 78 percent viewed the high cost of healthcare as either a crisis or a major problem and 88 percent of the 1,000 Massachusetts residents questioned in the poll said the State government should take "major action" to address rising costs (Robin 2008). The reasons blamed for the increasing costs are drug companies, hospitals and insurance companies charging high prices; waste and fraud in the healthcare system; and lack of preventive medicine.
Despite some criticism that the health law did not control the costs, and the rate of bankruptcy filings due to medical costs increased 1/3 after the plan, the same survey showed that 2 out of 3 Massachusetts residents support the law, and 88% of the doctors say it improved, or maintained in the same level, the quality of care (SteelFisher 2009). Also healthcare premiums of private plans purchased through the State's insurance Connector increased by only 5 percent, a smaller raise than in previous years, due to the fact that more healthy people entered the risk pool, making it possible for companies to keep the prices low.
2. VERMONT AND THE SINGLE-PAYER PLAN
The State that makes the best maple-syrup now works on creating the best health care plan in the United States. Governor Peter Shumlin signed the Act 48, on May 2011, implementing a three-stage process of a publicly-financed universal health care system, designed to meet federal requirements of the Affordable Care Act. Vermont, recognized for leading the nation in law reform, is on the way to become the first State to establish a single-payer universal health care for all. The first stage of the law will provide coverage to all 620,000 residents through the possibility to participate in the Green Mountain Care, the State health benefits exchange. This system will establish reimbursement rates for health care providers and unify the administration of the health care system, also providing tax credits to make coverage affordable for low-income residents. Drawing inspiration on Kant’s ethics, Governor Shumlin stated, “We have a moral imperative to fix this problem.” (…) “To do in Vermont what has taken too long: have a health care system, the best in the world, that treats health care as a right, and not a privilege."
In the same way Massachusetts Connector can be compared to Israel kupat cholim, Vermont based most of its health plan in Canada’s single payer health system. The State wants to lead the country in this unified health reform, like Saskatchewan’s health plan opened the way for health reform in Canada. According to Harvard economist William Hsiao, a single payer system could save 24.3% of total health costs in 10 years, turning to be about 25 percent cheaper for consumers, businesses, and the government than the current system of private health insurance and saving about $500 million in just the first year (Hsiao 1).
Today Vermont has about 47,000 residents without health insurance, another 150,000 underinsured, and a major problem of increasing health care expenditure. The goals of Vermont’s health plans are: universal health insurance coverage; provision to every resident of an adequate standard benefits package and equal access to health care; control of the increasing health care costs; and establishment of a system that prioritizes community-based preventive and primary care and integrated health care delivery (Hsiao 2).
The theory of a single-payer system is that it controls costs by reducing the administrative costs. Presently, healthcare insurers spend almost two thirds of their expenditures to non-medical expenses. Also, a public centralized health care system would hold more control over an inconvenient side-effect of health care exchange based on private insurers, the raising of health care costs.
Vermont’s plan creates a public-private single-payer and unified health system, establishing a board to ensure cost-containment; creating a “health benefit exchange”, as required by federal law; forming a “consumer and health-care professional advisory board and creating a drug-control system. It also requires the Green Mountain plan to pay enough to attract and retain high-quality health care professionals.
Despite its name, presently the bill does not provide a strict single-payer plan, in which the government is the only payer for health care. The government says it is as close as it can get at the State level. The measure would allow private health plans to continue in the State indefinitely, an approach which is criticized by the Chicago-based organization Physicians for a National Health Program, which advocates for a single-payer health system. However Vermont became a pioneer on health care reform, as the first State to apply a complete new design to its health care system.
According to Vermont’s government, the plan will promote costs savings coming from lower administrative expenses, lower fraud and abuse, greater delivery system integration and malpractice reform. It establishes pilot projects to start controlling costs by changing how health care is paid for and delivered. It will require integration on physicians work in order to apply preventive medicine, paid on a per-person/per-month basis instead of the current fee for service method; and it will also make better use of technology and electronic data to further cut costs. These changes would create about 3,800 new jobs and increase the State's economy by more than $100 million.
3. CALIFORNIA HEALTH CARE REFORM
According to a study by George Halvorson, from the Kaiser Foundation Health Plan, the challenges to universal coverage in California are greater than the ones faced by Massachusetts and Vermont at the beginning of their health care plans. California contains 10 percent of all uninsured Americans, the higher percentage of uninsured people and fewer insured employees. Halvorson proposed a universal coverage plan which would draw funds from a combination of new tax revenues, federal funds, safety-net savings and insurance premiums (Halvorson 87). His plan intends to bring health coverage to more than 98 percent of Californians, covering all tax filers and low-income residents, emphasizing preventive medicine and primary health care.
In 2010, California became the first State to establish a health insurance exchange after the federal health reform. The Exchange is controlled by a State board comprised of five members. This year, the board is hiring people, studying coordination of health care programs, creating the rules for the small business exchange and improving information technology system. Some health care insurers are also working on how to apply the healthcare exchange and meet federal requirements.
What are the lessons from Massachusetts health plan? California Healthcare Foundation already studied how to apply the Massachusetts universal coverage model in California, concluding that the cost would be much higher, according to its study. The reasons are the differences between both populations. The uninsured rate among non-elderly people is 21% in CA versus 13% in Massachusetts. Here 56% of the employers provide health insurance, compared to 69% in Massachusetts. In California there is a higher percentage of low income residents, 43%, compared to 39% there. Among the population making less than 250% of the Federal Poverty Level, 22% of Massachusetts residents were uninsured; in California the rate is 32%.
An important lesson from Massachusetts plan is that a health care reform needs to address financial costs. With respect to health insurers, the individual mandate is a very important tool to keep health insurance premiums low. In order to support elimination of medical underwriting and risk selection, more healthy people need to join the insurance pool to spread the risk.
Another area of concern is the employers’ mandate. In Massachusetts, the employers had the right to choose the health insurance for the employees, tying them to the employer’s selection. The result was that a single young employee could be tied to the same premium and coverage of a married middle-aged employee with children. The health insurance exchange needs to have a choice model that allows employers to use a defined contribution, offering employee choice across all products, and opening the program to all small employers. This is a way to provide greater choice for employees and to help reducing cost trends through greater consumer engagement.
CONCLUSION
We can study the effects of individual mandate and universal coverage on health care costs in some specific areas: the individual health insurance, the government expenditure, and the business health plans.
A government study says that American families pay a tax of about $1000 for the cost of health care delivery to people without insurance. The health care reform expects that with the universal coverage and health care exchange this tax will decrease, for at the moment that a higher number of healthy people become insured the pool risk will spread, therefore decreasing the costs for the individual health plans. Also health care insurance will not rely only in the employer and full-time jobs. If people lose their jobs, they will be able to get affordable health care by themselves.
With respect to public health plans and government costs, if more people get private coverage the burden upon the State will be released, leaving public health care with more space to add the ones who will not be able to get health care insurance, even with lower costs. The emphasis on quality related to Medicare and Medicaid payment will lead public health care to cost less and deliver more excellence in services. It will also prevent fraud, abuse and waste within the public health care system.
For employers, especially the small business owners, the lower costs will decrease employees' costs, due to more power of bargain and more options of health care plans. Today they pay less to employees and more to health care insurance companies. With a variety of options and the freedom of choice, employees will also benefit of the unified health care exchange.
Our understanding is that the best cost control health care system is the one Vermont is trying to implement, the single-payer plan, because it gives more power to the government to oversee costs and implement quality in health care delivery. It also reduces administrative costs and controls health insurance premiums, spreading health care access to all employees and individuals. The challenge to this system is how to fairly reward health care deliverers in order to avoid a shortage of health care professionals, with its side effects, the delay to get access to specialized care and elective surgeries.
BIBLIOGRAPHY
1. Waldman, Beth. “Massachusetts Health Care Reform.” Health and Human Rights Journal. 11 (2010): 1-10. Print.
2. The Henry Kaiser Foundation. “What Are Health Insurance Exchanges?” The Kaiser Family Foundation. Web. May 2009.
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EXECUTIVE SUMMARY
Universal coverage means a health care system providing coverage to all individuals. It can be implemented through a single payer system or a mixed system involving private insurance and the government. Some health care systems rely in the individual mandate, a legal requirement that every individual should obtain health insurance coverage.
Health care exchange is the creation of a more competitive market for health insurance, offering a choice of plans and establishing common rules for health plans. Insurance companies will need to hold a comprehensive benefits package with no exclusions for preexisting conditions, consequently making health insurance plans more affordable to the population.
The need for changes in the American health care system derives from its higher costs and lower quality and affordability. The United States spends more on health care per capita than any other country, however more than 46 million Americans have no health insurance. The United States ranks poorly in levels of quality and access to health care, such as life expectancy, infant mortality and preventive medicine.
After studying Massachusetts and Vermont Healthcare systems, we understand that the best cost control health care system is the single-payer plan, where more power is given to the government to oversee costs and implement quality in health care delivery. It reduces administrative costs and controls health insurance premiums, spreading health care access to all employees and individuals. The challenge is how to fairly reward health care deliverers in order to avoid a shortage of health care professionals in this system.