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Part 4: The Bill
What is the cost of the bill?
The Blue Cross Roadmap project estimates the incremental cost of covering all the uninsured at between $374 and $539 million. Not all of this cost will be borne by taxpayers. A substantial portion of this cost will come from federal funds and employers who do not now cover their workers. We expect this proposal to cover most, but not all, of the uninsured. Covering the uninsured will benefit the economy by some $1.2 – $1.7 billion, increasing prosperity and tax receipts. Other provisions, such as reinsurance and rate reform, will cost additional funds. There are substantial savings to Massachusetts businesses and the health care system.
Because of these and other factors, we will not be able to project a total cost for the legislation until the spring of 2005. For example, the state’s uninsurance statistics for 2004 have not yet been released. Estimating the cost requires a detailed analysis of the interplay of the various inter-related components of the proposal. The Blue Cross Foundation’s Roadmap is performing this level of analysis that will provide the necessary information. Their analysis will be ready by the spring of 2005.
The coalition is committed to paying fully for the initiatives in the legislation with new and identifiable revenues. We do not support expanding health care in ways that crowd out spending for education and other programs.
Provisions of the Bill
Who administers the programs in the bill?
A new Assistant Secretary for Health Access will be responsible for overseeing all of the various access programs set up by this legislation. Additionally, he or she will supervise the Office of Medicaid, the Division of Health Care Finance and Policy (DHCFP).
How does MassHealth expand?
MassHealth will expand to cover all low income adults (19-64) under 200% of the federal poverty line (less than $38,000 for a family of four). Currently MassHealth covers only parents up to 133% of poverty (up to 200% if employer coverage is available).
MassHealth will also cover all children under 19 years old in households making less than 300% of the federal poverty level ($56,000 for a family of four).
The Commonwealth will seek federal matching funds for the newly covered people under MassHealth. A worker with access to employer coverage will be required to enroll in his or her firm’s plan. MassHealth will pay part of the employee’s premium. This is current law.
MassHealth will also cover services cut in 2002, such as dental care and eyeglasses. MassHealth will also cover smoking cessation programs. Additionally, it will also cover legal immigrants who were cut in 2003.
What is the cost of the MassHealth expansion?
Governor Romney estimates that 106,000 people of the 460,000 uninsured are currently eligible but not enrolled in MassHealth (the DHCFP previously said the number was 70,000). The cost for covering these people is already accounted for in the budget, according to the Governor.
The 2002 DHCFP survey found that 30% of the uninsured were below 200% of the poverty line. Applying this percentage to the 2004 total number of uninsured leads to 138,000 uninsured below 200% fpl. Subtracting the 105,000 already eligible leads to an additional 33,000 people covered by the MassHealth expansion for adults.
Assuming no other changes in coverage, the cost of fully covering this population would be about $104 million per year. Half of the cost would be reimbursed by the federal government. However, a substantial percentage would be newly eligible for employer-provided coverage, because of the employer responsibility provisions. Additionally, many already-insured people below 200% would join MassHealth. Under the bill, these people would be required to remain in their employers’ plan. MassHealth would subsidize only part of the employee’s share of the premium, again with 50% federal reimbursement.
Because of the complex interaction of the employer responsibility provisions and the MassHealth expansion, we are not yet able to estimate the total cost to the state of this expansion. We expect the Roadmap analysis to provide much of the cost data.
What support is provided for middle income families and small businesses?
Middle income
subsidy: Middle income families ($25,000 - $50,000 for a family of 2) will receive subsidies from the state to help them pay for health insurance. The subsidies will be on a sliding scale, phasing out at the top end of the scale.
This prevents assistance from ending abruptly as income rises above the Medicaid level. The cost of this provision depends on the amount of the subsidies, and the number of eligible people. We do not have the data that allows us to estimate a cost for this provision.
Reinsurance: Under the reinsurance program, the Commonwealth will pay part of the catastrophic claims for small businesses and individuals. This program is modeled on the Healthy New York program that has lowered premiums by about 30% in New York. In that program, the state pays 90% of claims between $5,000 and 75,000. In 2003, New York spent about $12 million for the reinsurance program that covered around 60,000 people. Enrollment has continued to grow and now exceeds 100,000 people.
By absorbing the expense of high-cost cases, health plans can lower premiums and pass on the savings to small employers and individuals. The bill gives authority to the Assistant Secretary to set the reinsurance levels. The cost will depend on how the reinsurance program is set up.
Automatic assignment: Companies that do not cover their workers are required to provide demographic information to the state, which then facilitates the enrollment of these workers into a coverage plan. The program is voluntary for the worker, but would make it easier for uninsured workers to get into coverage.
How does the employer responsibility provision work?
Large employers who do not provide health insurance need to be held responsible for their employees’ health care. Under the bill, all employers will pay an assessment, set as a percentage of their payroll. There will be a “standard deduction,” (in the bill, called the low-wage worker deduction) exempting from the assessment a set amount of payroll for the first few employees. Companies will also be able to take a credit against the assessment for their health care costs. Below is a model for illustrative purposes. However, we must stress that the level of the tax and the exemption is not yet set. The bill allows the administrators to set the levels. The directive in the bill is as follows:
“The assistant secretary shall set the assessment rate and low-wage worker deduction so that small, low-wage firms will not face a substantial burden in paying the assessment, as determined by the assistant secretary. The assessment rate shall be set so that firms providing reasonably substantial health benefits to their employees will not pay any net assessment.”
Here’s the example, based on round numbers for illustration purposes
The Jones Company has 25 employees. The wage levels vary, but the total payroll is $750,000 a year (based on an average wage of $30,000).
For illustration purposes, suppose the “standard deduction” allows employers to deduct the first $15,000 of payroll for their first 10 workers from the amount subject to assessment. This would let Jones Company deduct $150,000 (10 x 15,000) from their payroll. Thus their assessment would be based on only $600,000 of their payroll (750,000 – 150,000).
For illustration purposes, if the assessment rate is set at 5% of payroll, the company would owe 5% of $600,000, or $30,000.
But if the company provided health care benefits to 15 of their employees, and spent on average $3000 per worker, they would receive a credit of $45,000 (15 x 3000). They would owe nothing, since the credit of $45,000 is larger than the assessment owed of $30,000. If they did not cover their workers, they would owe the $30,000.
Why this
model? Unlike the 1988 Universal Coverage bill, which required a set per-worker assessment from most employers, this percent-of-payroll assessment increases as ability to pay increases. Large firms with highly-paid workers would face a substantial incentive to provide coverage, while small, low-wage firms would be exempt.
What changes are made to the Insurance Partnership program?
The Insurance Partnership program provides subsidies to low-income workers with employer-based coverage, and helps their employers afford the coverage. The bill simplifies enrollment procedures, and expands the eligibility and benefits. Small businesses with as many as 75 employees (up from 50) can get reimbursed as much as $1,500 (up from $1,000) per eligible employee. Eligibility for employees is increased from 200% of poverty to 250% of poverty.
What are the bill’s provisions for provider reimbursement reforms?
Currently, MassHealth routinely pays providers far below the cost of care. Depending on the service, payments range from 60% to 80% of cost, or less. This underpayment discourages physicians and other providers from accepting MassHealth patients, and leads to cost-shifting, where providers are forced to raise rates charged to private patients to make up for underpayments from MassHealth.
The bill proposes moving to a system where MassHealth pays providers using the federal government’s Medicare fee schedule. In addition to more closely approximating cost (Medicare is still somewhat below cost for many services), using Medicare will reduce the administrative burden on physicians, hospitals and other providers who will not have to use unique codes and billing forms for MassHealth. Instead they will use the Medicare methods which are standard among health care providers.
What is the role of the Quality and Cost Council in the bill?
Under the bill, an independent, 5-person board, chaired by the Governor, will set quality improvement standards as well as the cost reduction goals. Appointments will be made by the Gov, AG, Auditor, Senate President, and Speaker. Persons appointed must be independent of health industry and be chosen for their expertise.
With input from an advisory panel and the public, the board will set annual quality improvement targets. Recommendations for improvements will be issued annually to key stakeholders, the Legislative and Executive Branches, and various state agencies for action and/or enactment. In addition, the board will issue an annual report on how well prior year targets are being met.
What is the Community Health Worker Program in the bill?
The community health worker outreach program will create an outreach plan that identifies barriers to health care, particularly in minority and underserved communities, and develop strategies to reduce these barriers and improve public health.
What changes does the bill make to the Public Health Council?
The Public Health Council exercises oversight authority over DPH. The bill makes the council more independent, by providing for representation of provider and public health interests. Currently, Public Health Council members are all appointees of the governor. The intent is to allow the council to be more independent in its actions related to public health.
How is the bill funded?
A new Health Access and Affordability Fund will be established, which will support all of the programs established by this legislation. Funds would come from existing funds going to the uninsured, federal matching funds, assessments and premiums, and new state revenues. The bill enacts a tobacco tax increase; however, additional funding may be needed. We are committed to paying for the full cost of the final legislation. The bill will not require cutbacks in education or other programs.
Why increase the cigarette tax?
The cigarette tax is increased by $0.50 per pack. Our current tax is $1.51/pack. This puts us 6th highest in the country, behind Rhode Island ($2.46), New Jersey ($2.40), Michigan ($2.00) Montana ($1.70), Alaska ($1.60), and tied with Connecticut and a penny ahead of New York ($1.50). A $1.50 New York City tax puts the combined tax there at $3.00/pack; while in Chicago the combined rate is $2.14 per pack.
Our tax was last raised in 2002, and experts agree it should be increased periodically to keep up with inflation. A 50-cent tax increase would raise over $100 million (which could be matched by federal Medicaid funds), would lead to 23,000 fewer teen smokers, saving 7,300 kids from premature death. The long-term health savings would be $400 million.
Polling in Massachusetts and other states has demonstrated that the public strongly supports cigarette tax increases. |
