Recent Changes in Health Policy for Low-Income People in Massachusetts
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Posted to Web: March 01, 2002
Permanent Link: http://www.urban.org/url.cfm?ID=310431
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Note: This report is available in its entirety in the Portable Document Format (PDF).
About the Series
This state update is a product of Assessing the New Federalism, a multiyear project to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.
Recent Changes in Health Policy for Low-Income People received special funding from the Robert Wood Johnson Foundation as part of the Urban Institute's Assessing the New Federalism project. The project received additional financial support from The Annie E. Casey Foundation, the W. K. Kellogg Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The David and Lucile Packard Foundation, The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the McKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, the Fund for New Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The Rockefeller Foundation.
This state update was prepared for the Assessing the New Federalism project. The views expressed are those of the authors and do not necessarily reflect those of the Urban Institute, its board, its sponsors, or other authors in the series.
Overview
Major expansions of public coverage for low-income people have dominated Massachusetts's health policy since the mid-1990s. The state in 1997 expanded Medicaid enrollment by almost a third. The expansions, along with high rates of employer-sponsored insurance, have dramatically reduced uninsurance. Only 6 percent of residents lacked coverage in 2000, under 3 percent for children. The state has also increased pharmaceutical coverage for seniors; continued to expand community services in mental health, developmental disabilities, and long-term care; dealt with the insolvency of the state's largest health maintenance organization (HMO) that also owns the largest Medicaid HMO; and convened a high-level, bipartisan task force to systematically reconsider state health policies.
Health care has always loomed large in Massachusetts—in the state economy, in its politics, even in culture. With only slight hyperbole the state public health commissioner has remarked, "This is the medical and public health capital of the world."1 There is strong bipartisan support for low-income health coverage and—very unusually —much popular support for universal, government-overseen health coverage for all. In general, late-1990s expansions occurred through public sector programs targeted at the low-income uninsured without workplace insurance coverage, as supported by the overwhelmingly Democratic legislature. There has been some new support for private coverage, often espoused by three successive Republican governors. Health policy has been driven not only by political desires to expand coverage but also by market developments as well as the financial condition of hospitals, insurers, and nursing homes.
The state's economic boom in the 1990s was especially strong, allowing repeated tax cuts, a strong gubernatorial priority, to accompany increases in spending. Now being implemented is the biggest income tax cut in state history, promoted by the governor and mandated by voter referendum in November 2000. In addition to health coverage expansions, education and public safety have been the top spending priorities since the mid-1990s.
Massachusetts's health care spending has long been high and until 1992 was addressed by thoroughgoing regulation. The state then abandoned hospital rate setting in favor of managed care, whose market penetration rose in the mid-1990s to among the country's highest rates and helped hold down growth in overall health spending. Medicaid also successfully constrained costs with managed care and administrative price setting, but costs rose faster after the large enrollment expansions of 1997.
The expansions came in three main parts, all under a Section 1115 federal waiver. First, Medicaid—called MassHealth—expanded to higher income levels for traditional categories of recipients, later adding more children and families after the passage of federal State Children's Health Insurance Program (SCHIP) legislation. This part added the most new enrollees.
The second part of the waiver was new support for those uninsured not directly reached by the coverage expansions. The vehicle was integrated hospital systems management of uninsured care by the state's two big safety net hospitals, in Boston and Cambridge.
The third part was some help for childless working adults, mainly in the form of modest premium support and employer incentive for some workplace health coverage. Targeted at employees in small firms, this aspect of expansion took effect by stages, fully implemented only in January 2000. As yet, it reaches few people relative to the other expansions but was growing steadily as of mid-2001.
Medicaid and other reform also helped shore up funding for the state's unusual free-care pool, which reimburses hospitals for care to uninsured people of low and moderate income and draws down federal Medicaid matching funds under the disproportionate share hospital (DSH) payments program. Deficits have since returned, however, and hospitals are seeking more relief from the assessments they pay to support the pool.
Managed care is required for most enrollees, mainly through primary care case management and separate management for behavioral health services, which appear to be satisfactory to state officials. In the mid-1990s, the state planned to move ever more beneficiaries into capitated managed care organizations (MCOs). That strategy has receded; MCOs have left MassHealth, capitated participation has declined, and enrollees have concentrated in Medicaid-oriented plans. Conflicts are emerging among the four remaining MCOs; two competitors complain about the higher rates paid to the two safety net hospital plans. Managed care is slowly being extended to the disabled population.
For senior and disabled beneficiaries, institutional care continues to dominate spending. Nursing home census has declined slightly since the mid-1990s, however, and spending on community services is growing much faster. Community services are a high state priority in MassHealth, as in mental health, but progress has lagged advocates' desires, and some Olmstead-like litigation has forced acceleration of state action.
Cost pressures in MassHealth are growing. Pharmaceutical increases are already a major concern, and state officials expect soon to have to increase payment rates for hospitals, nursing homes, physicians, and others. MassHealth has frequently needed mid-year supplemental appropriations in the past, partly owing to conscious under-budgeting, but also because of unexpected cost increases. The future could see more difficulties as economizing through managed care and price setting becomes more difficult.
Beyond MassHealth, the state has also expanded drug coverage, first in 1997 and twice more since. Starting in 2001, all elderly and younger disabled persons are eligible for a new "Prescription Advantage" program, evidently the nation's first to offer unlimited benefits for any senior, subject to cost sharing based on income.
Recent developments in insurance markets have drawn considerable high-level attention and heavy media coverage. The state has seen increased concentration among the HMOs that dominate health coverage, then the near-failure in January 2000 of the then-largest plan, Harvard Pilgrim Health Care. That crisis required major state intervention, which, along with provider-patient backlash against managed care, also generated more regulation of managed care.
Prominent issues as of mid-2001 included raising provider rates, implementing prescription drug expansions for aged and disabled persons, expanding long-term care alternatives, further strengthening the state's uncompensated care pool, and implementing intensified oversight of health plans and patient protections. Fiscal year 2002 began in July with further expansions still planned. By September, economic slowdown was threatening fiscal crisis, and major cuts were needed for the state's final 2002 budget, cuts which largely spared health spending. Health spending seems likely to face some cuts, if only because it is so large, but will probably fare relatively well in Massachusetts even in a cutback mode.
The foregoing are the main findings of this case study of recent health care policy affecting low-income people in Massachusetts, building on a 1997 baseline study.2 This report and others like it examine representative states' responses to the new opportunities and challenges of the last half decade.3 Information came from in-person interviews on site in early May 2001, supplemented by telephone and written responses, as well as documents, newspapers, and Web sites.4 Massachusetts is unusually rich in state data and documentation, and many private groups regularly generate information as well. Interviewees were given the opportunity to comment on a draft, and key issues were followed through final enactment of the 2002 budget in December 2001.
The following presentation tracks the five key issues studied: First, how have political and fiscal circumstances changed in Massachusetts? Second, how has the state changed its public or private health insurance coverage? Third, how have Medicaid managed care and other acute care issues changed? Fourth, how did Massachusetts policymakers respond to pressures to expand home- and community-based services for persons with disabilities? Fifth, what other issues were prominent?
Notes from this section of the report
1. The commissioner was quoted in Mishra, Raja. 2000. "Fewer in State Lack Health Insurance: Report Credits Booming Economy." Boston Globe. 25 August.
2. The previous site visits were in December 1996 and January 1997, and the report was broader. Holahan, John, Randall Bovbjerg, Alison Evans, Joshua Wiener, and Susan Flanagan. 1997. Health Policy for Low-Income People in Massachusetts. Washington, D.C.: The Urban Institute.
3. Twelve other states are also covered: Alabama, California, Colorado, Florida, Michigan, Minnesota, Mississippi, New Jersey, New York, Texas, Washington, and Wisconsin, selected to present a balanced view of state activity and its impact on low-income families. Kondratas, Anna, Alan Weil, and Naomi Goldstein. 1998. "Assessing the New Federalism: An Introduction." Health Affairs 17(3): 17–24.
4. This report drew on far more sources than there is space to credit, especially in news media and Web sites.
Note: This report is available in its entirety in the Portable Document Format (PDF).
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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.