Massachusetts Fails to Control Costs

As Oregon looks to borrow parts of the Massachusetts reform plan, the message is to control costs or universal coverage doesn't matter
Originally at The Boston Globe
April 7, 2009 -- On the third anniversary of Massachusetts' landmark health insurance overhaul, a new report shows that employers, consumers, and state government paid the same, proportionately, for health coverage after 2006 as they did the year before the initiative started.

The study, released yesterday from the Center for Health Law and Economics at the University of Massachusetts Medical School, found that employers contributed about half (48 percent) of the overall spending on coverage in Massachusetts in 2007. Individuals accounted for about a quarter of the total, and government - divided between the state and federal level - contributed about 27 percent.

"With all the criticism from the left and the right before health reform started - that individuals will have to pay more or that government will have to pay too much - this says both of the concerns are unfounded," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded public policy group. The foundation played a key role in creating the 2006 law.

The report, commissioned by the Blue Cross Blue Shield of Massachusetts Foundation, found that overall spending on healthcare coverage increased $4.7 billion, or 23 percent. Nearly $21 billion was spent on coverage in 2005, while $25.5 billion was spent in 2007.

But the majority of the increase, the report found, was not from the new law. Sixty percent of the rise was due to healthcare inflation unrelated to the law. Another 31 percent was linked to new enrollment in already-existing programs, such as employer-paid healthcare or Medicaid, according to the report.

More consumers have coverage, the study found, but they are paying more than previously.

The 2006 law requires nearly everyone to have coverage or face a tax penalty. It also requires most employers - those with more than 10 full-time equivalent employees - to provide coverage or pay a penalty for uncovered workers. The study found consumers were paying a lot more in penalties for failing to have coverage - approximately $16 million - than employers, who paid $7.7 million.

A state report released last week noted that 72 percent of Massachusetts employers offer health insurance to employees, whereas nationwide, that figure is only 60 percent. Still, the report noted that many large retailers continue to rely on state subsidy programs to provide health benefits to their workers.

Leaders at Health Care for All, a large consumer group that helped shape the state's 2006 law, are backing legislation that would require employers to contribute more to coverage.

"Our challenge moving forward is to ensure health reform's continued affordability for the state, employers, and individuals," said Lindsey Tucker, a policy manager at Health Care for All.

Kay Lazar can be reached at [email protected].

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