By Jack Healy, Director, Manufacturing Advancement Center, [email protected]
Sometimes change does not come slowly. This will certainly be the case for the healthcare industry in Massachusetts. In April 2006, Governor Romney went to Boston’s famed Faneuil Hall, along with Senator Edward Kennedy, to announce Massachusetts’ newly legislated Healthcare Plan. The passage of this plan with its mainstay legislation of universal coverage could not find a more appropriate "revolutionary" setting for such an announcement. This legislation is, in reality, both a general admission as well as an acceptance that the "free market" can not correct the cost issues of today’s healthcare market.
Timothy R. Murphy, the state Secretary of Health and Human Services, was quoted in the Worcester Telegram and Gazette saying that the state "wanted to boost access for the uninsured, but we also wanted provisions that would help contain health care costs." Murphy went on to state that "the rate of (healthcare) inflation can and must be curbed if the state’s economy is to prosper." Mr. Murphy detailed the state’s goal, that healthcare inflation, currently running between 8 percent and 12 percent, can be eased back to a rate that doesn’t exceed the state’s annual rate of growth of between 3 percent and 5 percent. Hopefully this prediction will come true and we will not be faced with another example of "Murphy’s Law."
Revolutionary Cost Containment If the change in costs predicted by Mr. Murphy becomes reality, then this legislation will have launched a truly revolutionary cost containment model. Such a model could have national implications. Other states are also seeking a solution to this national cost problem, a problem which has crippled business investment and profitability in a number of industries across the country.
Indeed, an article in Fortune Magazine describing this legislation stated, "Romney’s new insurance clearinghouse could become a model that one day makes it safe to shift responsibility for managing and funding portable benefits away from employers." If that is not revolutionary, what is?
However, there is still a ways to go with this legislation as described in the following letter from the Massachusetts Taxpayers Foundation:
Date: March 8, 2023
To: MTF Members
From: Michael J. Widmer
Re: Healthcare Reform
You may have read about the important role the Taxpayers Foundation played in forging a compromise between the [Massachusetts] House and Senate over the responsibilities of employers as part of the healthcare reform legislation. I believe that the proposal we put forth, which was agreed upon by the Senate President and House Speaker in a meeting last Friday, is equitable and would have virtually no impact on the state’s economy. Of paramount importance, the agreement does not include the House’s proposed payroll tax – a tax the Foundation successfully discredited over the last several months.
The essence of our proposal, developed in concert with other business organizations, is to equalize the employer burden of paying for free healthcare in the Commonwealth. Currently, employers who provide health coverage bear the full burden of the costs of free care; under our compromise, employers with more than 10 employees who do not provide any health coverage would pay their share of free care costs through a per employee assessment. The assessment would be based on the total costs of all employers who do not provide health coverage, not on the experience of an individual employer. In the most recent year, for example, free care for employees of non-providing employers amounted to about $48 million, which would translate into an annual assessment of $295 per employee for those employers.
One of the keys to the compromise is that the proposed assessment is designed to decline over time, because it is specifically tied to the use of free care. The goal of healthcare reform, including the individual mandate and more affordable pre-tax products, is to insure those who are currently uninsured. As more of the uninsured obtain coverage, the costs of free care – and the proposed assessment – would drop.
As the Foundation’s 2005 report on healthcare concluded, successful reform will require several key and complementary components that focus on improving access and increasing affordability:
An individual mandate which requires all Commonwealth residents to obtain and maintain health coverage;
A range of new, lower-cost insurance products that achieve their economies largely through market reforms;
An income-scaled system of subsidies that enables lower-income individuals to purchase these insurance products;
An extension of the favorable tax treatment presently available only to those individuals whose employers financially contribute to a health plan;
A reduction or elimination of the barriers to participation in health insurance plans that are currently faced by small businesses and individuals; and
An increase in Medicaid provider reimbursement rates to correct the systematic under-payment of provider costs.
As the details of the final reform bill are now being ironed out, it bears underscoring how critical this compromise is in preserving existing federal funding as well as heading off a very damaging payroll tax. Unless the Commonwealth meets a July 1 deadline for implementing healthcare reform, the federal government will disallow close to $800 million of Medicaid matching funds over the next two years. This would severely undercut any substantive health reform effort and weaken the state’s overall fiscal health.
In addition, should the Legislature fail to enact a credible health reform law, proponents of a sweeping and undesirable reform alternative have vowed to gather sufficient signatures to place their proposal before the voters in a binding ballot question in November. Their initiative petition includes the divisive and now discredited payroll tax initially put forth by the House.
It will be critical for all parties to work together over the coming weeks to ensure lawmakers produce a final compromise that achieves the goals of reform in a fair and equitable fashion.
Fortunately, the Massachusetts’s Legislature, through some marathon negotiations, did respond with the bi-partisan legislation that was just enacted.
