State Passes Health Care Reform
Massachusetts lawmakers passed a first-in-the nation, comprehensive health care reform package this year that addresses insurance coverage, hospital reimbursements, cost management and quality care. Over the next few years, this reform package lays the foundation so that more than 90 percent of state residents who now are uninsured will have insurance.
The Massachusetts health care reform promises to have a dramatic effect on health insurance through market reform initiatives and public and private expansions of coverage. The plan anticipates more than 300,000 low-income residents currently uninsured will have health insurance coverage within the next few years through MassHealth or the private market with government support.
The legislation provides for about 90,000 residents to be newly enrolled into MassHealth programs over the next three years. Approximately 27,000 new children will be covered through an increase in income eligibility levels, and current enrollment caps on certain programs will be increased to allow approximately 18,000 additional members into the MassHealth Essential, CommonHealth and the HIV programs. About 40,000 residents currently eligible but unenrolled will do so with the help of a more aggressive outreach program. About 3,000 elderly and disabled legal immigrants will be eligible for MassHealth coverage. Dental coverage, which was cut in 2003 for most members, will be restored and added for MassHealth Essential members.
The legislation establishes a subsidized private health insurance in the new Commonwealth Care Health Insurance program. This program, which will begin on Oct. 1, is designed to offer affordable private health insurance plans and provide premium assistance to more than 215,000 state residents. Subsidy levels will be set based on need. No deductibles will be required and only modest co-payments will apply. Current Medicaid Managed Care Organizations will have exclusive rights to this market for the first three years, provided they meet certain enrollment targets.
Another provision of the law calls for the creation of the Commonwealth Care Health Insurance Connector and changes to insurance rules that will allow insurance companies to offer lower cost products to roughly 200,000 people who are currently uninsured. Connector will be a new independent public authority to link individuals and small businesses products beginning April 2007. Also, changes to HMO laws permit deductibles up to only $2,700 for an individual and $5,450 for a family with plans that require a Health Savings Account.
Uncompensated Care Funding
In fiscal year 2007, hospital funding will increase to $620 million, $14 million more than this year, and an additional $60 million will go to free standing community health centers. Uncompensated care has been either flat or declining this year at most hospitals, so the percentage of costs being reimbursed in FY07 should be higher than the current 55 percent at non-protected hospitals. Importantly, uncompensated care costs will decline as a result of MassHealth expansions and subsidized insurance, which will help all hospitals.
In FY08, health care reform eliminates the Uncompensated Care Pool and creates a new Health Safety Net Office within the Office of Medicaid to oversee the uncompensated care program. A fee-for-service reimbursement system will be required for acute hospitals based on actual claims for eligible hospital services based on the Medicare system, with modifications to account for the differences between the populations served, benefits covered, etc., and the factors involved in the calculation (e.g., grouper and DRG weights) are to reimburse hospitals at a rate no less than Medicare.
While the Health Safety Net Office eventually may change the scope of services eligible for uncompensated care reimbursement, the legislature pledged to not make changes until October 2007. The new Health Safety Net Office also will administer the Essential Community Provider Fund, established for improving the ability of hospitals and health centers to serve populations in need.
The continuation of $385 million in federal funding associated with the public Managed Care Organization supplemental payments required specific changes mandated by the federal government. The bill provides this change at the same time as it provides protection for these entities. The bill sets aside $90 million annually for the next three years to improve Medicaid reimbursement rates for acute hospitals and physicians, with 15% of this amount allocated to rate increases for physicians.
Starting October 2007, acute hospital rate increases will be contingent upon meeting certain quality standards and performance benchmarks, including the reduction of racial and ethnic disparities. These benchmarks will be developed by EOHHS in consultation with a new Massachusetts Health Care Cost and Quality Council and MassHealth Payment Policy Advisory Board. The MassHealth Payment Policy Advisory Board, which will be made up of providers, government, Medicaid payers and policy advisers, is established to review and evaluate rates and payment systems by the office of Medicaid and recommend Medicaid rates and rate methodologies.
Cost and Quality
Many of the changes in the private coverage expansion will allow insurance companies to provide more affordable products. New products designed with more flexibility and offered through the new Connector will achieve this result. The legislation also calls for a new Health Care Cost and Quality Council that will establish health care quality improvement and cost containment goals. The performance measurement benchmarks developed by the Council are to be developed in a way that advances a common national framework for quality measurement and reporting, including, but not limited to, measures that are approved by the National Quality Forum and adopted by the Hospital Quality Alliance and other national groups concerned with quality. A consumer health information Web site also will provide comparative quality information by facility, clinician or physician group.
Employer and Individual Responsibility
A central issue in the health reform debate has been shared responsibility in the health care system. The health reform bill places new requirements on businesses and individuals. A new “Fair Share Contribution” is created to ensure that the majority of employers participate in the financing of health care. In addition to the annual assessment on non-providing employers, a “Free Rider Surcharge” will be assessed on non-providing employers whose employees use state-funded services through the Uncompensated Care Pool with certain exceptions.
Among other requirements, small businesses that participate in the new insurance products offered through the Connector will be required to facilitate the administrative aspects for their employees, including payroll deductions. At a minimum, all businesses with 11 or more employees will be required to maintain a “cafeteria plan” that meets federal and state rules.
As of July 2007, all Massachusetts residents over the age of 18 will be required to have health insurance coverage. Under the presumption that affordable health coverage products will be available, along with subsidies for those who need financial assistance, the Legislature adopted the governor’s proposal to make this first-in-the-nation requirement. If affordable products are not available, this requirement will not take effect.