Future of Nation’s Health Care May Take Its Cue From Massachusetts

If there’s a model for how President-elect Barack Obama’s health care policy could play out in the real world and the political challenges it faces, look no further than Massachusetts.

While Obama has been vague about the details of his health plan, the next administration’s health care designs reflect what has been put in place in Massachusetts since then-Gov. Mitt Romney signed a universal health care law in 2006. Both plans leave the employer-based health care system alone while providing individuals access to cheaper insurance rates in the group market and penalizing employers that do not offer health insurance.

There is, however, one key exception: Unlike Massachusetts, Obama has not supported a law requiring individuals to purchase insurance—a politically fraught policy that is nonetheless seen as crucial to the success of Massachusetts’ effort.

“We have internally described [Obama’s plan] as ‘Massachusetts light,’ ” said Michael Thompson, principal in the human resource services group of PricewaterhouseCoopers.

By ditching the mandate for individuals to purchase insurance, Obama may have removed a political stumbling block. But in its absence he would have to contend with the consequences.

“I’m sure politically, the incoming administration would like to stay away from an individual mandate,” said Jon Gabel, a senior fellow at the National Opinion Research Center in Washington. “But I have a hard time figuring out how it will work without an individual mandate, and I think others think that too.”

Researchers say initial evidence shows the Massachusetts plan has achieved its primary goal of reducing the number of uninsured. And contrary to employer concerns, workers have not fled employer health plans for government-sponsored ones.

Also confounding expectations, few employers have opted to pay the penalty of $295 per employee, choosing instead to invest in the more expensive option of providing health insurance for employees.

Researchers believe the use of mandates—both for individuals and employers—played a key role.

Employer and individual mandates gave companies an incentive to offer health benefits. Rather than pay a fine to the government—and since employees must find insurance anyway—employers that invested in health care could comply with the law and look good in the eyes of their employees.

Also, because of laws prohibiting health insurance companies from excluding people with prior health conditions, the individual mandate kept people—especially the so-called “young invincibles” who are healthy and don’t use health care regularly—from purchasing health insurance only once they get sick. That would have left employers and the government to insure only the perennially unhealthy who are the most costly to insure.

The success of these mandates came only because major constituents stayed focused on making concessions in order to reach consensus, said Jim Klocke, executive vice president of the Greater Boston Chamber of Commerce.

“There was a guiding principle all the way through that a lot of the biggest strategic players had, which was to keep everybody at the table,” Klocke said at a recent roundtable on the lessons of Massachusetts health care reform sponsored by the Commonwealth Fund and the Alliance for Health Reform.

Exporting the Massachusetts plan to the rest of the country is a significant political challenge, especially in areas where libertarian views among individuals and employers run high.

The challenges don’t end there, either.

“We’ll have a problem if we don’t address the underlying cost of health care as we address access,” Thompson said.

On that point, the Obama plan also resembles the Massachusetts model.

“It’s worth noting that Massachusetts made the decision to go forward and expand health insurance coverage knowing they were not addressing the cost issue,” said Sharon Long, principal research associate at the Urban Institute, during the roundtable.

Having postponed discussions around cost, the state now must grapple with paying for the health care program at a time of severe budget deficits. In its first year, the Massachusetts plan cost $153.1 million more than the $472 million appropriated.

And enrollment is growing faster than expected. Annual state spending could top $1 billion by 2009 if participation in the state-financed health insurance system reaches 255,000 residents. As of May, enrollment stood at 175,000.