Healthcare cost increases dominate Mass. budget debate
Controlling them said key to keeping universal coverage
When Massachusetts launched its landmark universal health insurance initiative nearly two years ago, the state put off addressing rising costs so it could expand coverage immediately. Now those costs are dominating the discussion as the state faces a recession and pivotal funding decisions that could make or break health reform.
A short-term funding problem - closing a budget gap of about $100 million by July 1 - may be solved quickly if the state approves an increase in the cigarette tax and devotes the money to healthcare reform, as is widely expected.
A larger issue will also come to a head by July 1: the need to secure a new three-year commitment from the federal government to pay for half the soaring cost of insurance subsidies. Massachusetts is seeking up to $1.5 billion, but the Bush administration has been cutting back federal payments to the states.
Even if the state garners enough money from those two sources, the plan's future rests on slowing the growth of healthcare costs in general, a task many analysts say is far more challenging than shaping the complex health reform law in the first place.
"If we don't grapple seriously with the cost of healthcare, the support for reform will erode and the perception will become broader that it is unaffordable," said Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector, which oversees much of the reform effort.
The state's political leadership and the broad coalition of insurers, hospitals, businesses, and consumer advocates that worked to pass the first-in-the-nation initiative remains committed to ensuring its success.
So far, more than 342,000 people are newly covered since the initiative began, probably about half of the state's uninsured, although the exact number is unknown. Of the total, 176,000 are getting government-subsidized insurance - far more than expected by the second year, which is driving up the cost. Another 55,000 are newly enrolled in Medicaid.
"We have done a remarkable job signing up people for insurance," said Senate President Therese Murray, a Plymouth Democrat. "I don't think anyone wants to go backward on that."
"Everyone understands that the eyes of the nation remain on us," added Andrew Dreyfus, executive vice president at Blue Cross and Blue Shield of Massachusetts.
Yet the financial pressures provide new ammunition for those who have opposed the initiative from the start.
"We've said from the beginning that the basic problem with the reform is that if you don't restructure the system, it becomes rapidly unaffordable and the commitment to cover people begins to fade," said Dr. David Himmelstein, an associate professor at Harvard Medical School and a founder of Physicians for a National Health Program, which advocates for a government-run health system like Canada's. "We're seeing that begin to happen."
Among those who have supported the law, there is as yet no move to change the fundamental provisions of the plan: requiring nearly everyone to obtain insurance, providing free or subsidized coverage for those with low and moderate incomes, and changing the insurance market to make private coverage more affordable.
But the state's top budget official, Leslie Kirwan, last week suggested that the financial pinch might require increases in the contributions from coalition partners as well as "revisiting some of the original assumptions of healthcare reform." Through a spokesman this week, she declined to elaborate, saying only that "the administration remains fully committed to healthcare reform."
Murray also suggested the state should review the health law's provisions as part of a "look at everything." But House Speaker Salvatore F. DiMasi said he believed it was too soon to significantly modify the blueprint.
The Patrick administration has asked coalition members for suggestions on how to raise money and cut costs, and dozens of proposals have been submitted.
Advocates are pressing the administration to expand the number of companies subject to a penalty for not insuring their workers, a step the administration could take without legislative approval but which would probably draw strong opposition from businesses. The penalty raised only about $6 million this year, far less than originally expected. DiMasi said he thinks the administration should consider this option.
DiMasi has also proposed another alternative - a $1-per-pack increase in the cigarette tax earmarked for healthcare reform - that could raise $152 million a year. Murray supports the increase.
Kirwan said the state expects to spend substantially more for insurance subsidies than the $869 million Governor Deval Patrick proposed in his 2009 budget just two months ago, because of increasing enrollment and higher payments to insurers. In private briefings, she has told coalition members that the cost could be $100 million more, according to several who were present. The administration declined to confirm that number.
The gap is part of an estimated $1.3 billion shortfall in the $28 billion state budget. A recession could also bring layoffs at private companies that increase the ranks of the uninsured.
The subsidized program, called Commonwealth Care, accounts this year for about one-third of the $1.9 billion price tag for healthcare reform. About half of that total is picked up by the federal government.
Over the next three years, the Patrick administration has projected, Commonwealth Care will double in size and cost. Some analysts suggest that the cost projections, produced last fall, may have been inflated in an attempt to get more funding.
Spending on other components of healthcare reform are expected to decline over the next few years, but probably not enough to pay all the bills.
Meanwhile, healthcare costs statewide are rising by about 10 percent a year. A council established by the health reform law has developed some proposals to reduce cost growth, and several bills are pending in the Legislature. But the task is daunting.
"Expanding coverage is easy compared to controlling healthcare costs," said Nancy Turnbull, a Commonwealth Health Insurance Connector board member and associate dean at the Harvard School of Public Health. "Nobody has to give much up to expand coverage, but in controlling cost there will always be losers."
Alice Dembner can be reached at dembner@globe.com. 