sick around america

Judy Ann Bigby, M.D.

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As Massachusetts' secretary of health and human services, she's had a key role in its health reform program that requires insurance companies to cover everyone and mandates that everyone have health insurance. This is the edited transcript of an interview conducted on Feb. 24, 2009.

“For those who say the market will solve the problem if you just make sure that there's competition, I don't think that works.”

In 2006, Massachusetts started on this interesting experiment seeking to cover everybody in the commonwealth. Tell me how's it going so far.

It's going really well. We now estimate that we cover about 97.4 percent of people in Massachusetts, so we clearly have the lowest rate of uninsureds in the United States. And since health care reform, [we] estimate that about 400,000-plus people are newly insured.

How many people, in terms of a fraction or a percentage, are insured now that weren't insured two years ago?

Well, that's a little bit unclear, because the estimate of the number of uninsured we think was an underestimate. So when we started counting and trying to keep track of this, it was a little bit unclear. Some estimate that the percentage of uninsured in Massachusetts before implementation [of] health care reform was anywhere between 5 and 8 percent. So you can see why it's a little bit hard to know. We estimate that right now there are about 167,000 uninsured people in the state of Massachusetts.

... The basic idea that you'd followed is to combine the idea of requiring the insurance companies to cover everybody with a mandate that everybody participate. Can you talk about ... the double-mandate idea?

The first mandate is that individuals must have insurance if it's affordable to them. ... The second mandate is that insurers cannot deny somebody based on pre-existing condition, so that helps to spread the risk around and to address some of the problems that we find so often in the system that we had previously, that people could be denied insurance.

So the insurance companies have to cover everybody, but everyone has to participate. How do you enforce compliance in this? How do you get everyone to play ball?

Well, the insurance industry is regulated, so if people are denied coverage, the insurance commissioner would hear about that. For the individuals, the way that we enforce the mandate is, every April, when people file their state income tax, they actually have to submit a form that comes from their health insurance company that documents that they actually do have insurance. If they don't have insurance, they are penalized. When people file in April, the penalty for 2008 will be up to $900, if you're not insured and you have access to affordable insurance. ...

What about the employers if they don't offer it to their employees?

There is what we call a fair-share contribution, so if employers don't offer insurance or if they offer it but a certain percentage don't take up the offer, and if they don't contribute a certain amount of the employee's premium, they are assessed a fee of $295 for every full-time-equivalent worker that they have.

This is very similar to the system in Switzerland. ... What do you do if somebody needs subsidy, because that was the third element [of the law], wasn't it? You had the guaranteed issue, you had the individual mandate, but you accepted that some people would never be rich enough to pay.

Right. So we have a new program as part of health care reform in Massachusetts called Commonwealth Care. And for individuals who don't have access to employer-sponsored insurance and they don't qualify for our state Medicaid program, and they have an income between zero and 300 percent of our federal poverty level, they are eligible for this new, state-subsidized program.

And people's contribution to that program is dependent on what their income is. So people up to 150 percent -- so the poorest people of poverty level -- don't have to pay a premium for that coverage, and between 150 and 300 percent of federal poverty level they pay a small amount toward the premium. But the state subsidizes most of it.

So that gets us up to about $60,000 or so, does it? Three hundred percent.

It's a little bit lower than that -- about $54,000.

OK. Now, we met a family the other day who earned $63,000, and they didn't qualify for the subsidy, but they were self-employed, and they had to buy insurance themselves, and they found it very difficult to afford. Did you suspect you'd have those kinds of people?

I think we did suspect that we'd have those kind of people. I want to say something else that we did, or that the health reform bill does, and that is that it merged the individual and small-group insurance market.

Prior to health care reform, an individual going out to purchase a policy would have to pay an extraordinary amount. The insurers justified this by saying, well, the risk is very large, and it's not spread around. So by merging these two groups of people, for people who earn over 300 percent of [the] federal poverty level, the premiums did go down for those individuals, some by as much as 40 percent. So while some individuals still say that they cannot afford an individual premium that they could purchase through the [Health] Connector, we do know that the prices have gone down significantly.

For people who miss that subsidy level, there is another program that they can participate in. It doesn't give them full insurance, but it's called the Health Safety Net, and for individuals who earn up to 400 percent of the federal poverty level, they can have care that they receive in a hospital or in a community health center covered through that program.

Now, if I earn $63,000 and I try to buy a family policy and it costs me $9,000 or $10,000 a year and I choose not to buy it, would I get fined?

Again, there are affordability standards that the Connector established. I would say, though, for a couple that you just described that earned $63,000 a year, there are products through the Connector that they could get for about half of what you just quoted.

What about a family of four?

So a family policy would also be certainly less than $10,000 a year. And we actually have a separate program for children, so --

But would I get fined if I didn't buy it? I'm trying to sense at what stage would a person -- you ruled that the mandate would be enforced because it was affordable. Is that [a] complicated question?

It is complicated. ... Somebody earning over $63,000 a year as a couple, as I said, would be deemed to have enough income to afford the lowest priced product that is available through the Connector if they have to buy it on their own, and that, as I said, is much less than $10,000 [a] year. It's closer to $5,000 or $6,000. ...

This family found it very difficult to get affordable insurance. It seems to me that you have to deem it -- if it's affordable and I don't buy it, I get a fine; if it's not affordable, I don't get a fine. That's what I'm trying to understand.

That's correct. People are not fined, and we would do whatever we could to help them find something that was more affordable.

... There were minimum standards for the plans, [but] there's no cut-rate plans, right? ...

That's correct. One of the things that we were very conscious of is if you require people to have insurance but you don't define what that insurance needs to cover, people could buy something and say, "Well, I'm covered," but then when they actually show up for care find out that they're not covered for that care. So there are standards for what we call Minimum Creditable Coverage [MCC]. It dictates that prevention and primary care has to be covered; prescriptions have to be covered to a certain degree. There are requirements about the maximal deductibles that people could be asked to pay up front so that, again, you're not paying for something and then find that you have to pay $20,000 out of pocket before it kicks in.

But there's not one basic package for everybody. There's still differences in the packages.

What the Connector does is basically give a seal of approval for any insurance product that's on the market. There is not one basic package, but any type of insurance product that's offered in Massachusetts, in order for it to count somebody being covered, has to meet the seal of approval. ...

... Has the state had to back off a bit on the fine issue because of the cost of policies?

There is a process for people to appeal the definition of affordability. But the process itself in terms of having a standard, having people have to meet the designation when they file their taxes, the state has not backed off on.

Now, could you say that prices are still going up, despite everything, that premiums are going up close to 10 percent a year? Is that something that was surprising to you ...?

It's not surprising, and it's not new. Health care costs in Massachusetts are among the highest in the country; that's been true for 20 years. There's nothing that happened in health care reform that would have addressed that issue. It's something that we're focusing on now. And I would say that for the most part, for most employers, premiums are going up ... in the high single digits rather than in the double digits. ...

I don't think health care reform has contributed to that problem or done much to decrease it, although on the flip side, one of the things we know that individuals have experienced since health care reform has been implemented is that they say that financial barriers to getting care have decreased significantly, that they're paying less out of pocket, that they're having less problems paying their medical bills and that they're less likely to not get care because they're afraid that they can't afford it. We've seen significant declines in the percentage of people who report financial barriers.

So you think changing the financing of health care in Massachusetts hasn't really made a huge difference one way or another on the cost of the problem?

Well, remember, what health care reform primarily is, is the way that we get to insure people. We did it through expansion of our Medicaid program; we created a new state-subsidized program. Because of the individual mandate, more people who had access to employer-sponsored insurance took it up instead of saying, no, I don't need it; I'm not going to take it. So it's primarily about how do we get people insured? And how do we pay for, especially, the state-subsidized part of it? But it was not about containing the costs of the overall health care system, which is quite a different animal, I think.

But it's an issue you have to address, obviously.

Absolutely. And whether we had reform or not, we need to address it.

Let's talk about the costs then. ... Some critics might argue that using the current private insurance system is part of the [problem] because they've got high administration costs and so forth, and this cost shifting within our patchwork system. Could you address that as an element of cost drivers?

I think that the cost drivers are not going to be surprising to anyone. It's not that different from what drives costs nationally. We do have more teaching hospitals in Massachusetts, so our hospital care is a little bit more expensive than it is in other states. ... The cost of living in Massachusetts is one of the highest in the country, so everything is a little bit more expensive.

But if we look at what drives up health care costs, it's both the consumption of health care ... I think that there's a lot of information to show that we consume more in this region, in Massachusetts especially, than some other states do. ... The second thing is that we use a lot of expensive health care, so there's a lot of use of high technology, of hospital beds, of ICU beds, of imaging, those sorts of things. We have higher rates of nursing home use than other states, too.

So I think that there's a lot of room for us to examine what drives the use of those types of things, how we can get down to a more average use of some of those expensive things, because what we know is that people in Massachusetts are not any healthier for using those things. In fact, we're the same as the rest of the country.

We also know that administrative costs, both within the provider system and the insurance system, are areas where we could see savings and use that money to continue to fund coverage and services to people who need them. So we're looking at things like simplifying the way that we bill and code and have institutions report to different regulatory agencies. We're looking at the reserves of hospitals and nonprofit insurance companies and what should we expect in terms of what they actually need, given the services that they provide in their nonprofit status. So we're looking at a lot of things.

We also are fundamentally looking at the way we pay for health care. And we all know that we are right now in a system where the more a provider does, and every time a provider delivers a particular service or sees an individual, they get paid a fee for that, so the way that they generate more revenue is by doing more and seeing more people. And that in and of itself can drive up health care costs, because there's no way to really curtail the usage of health care when you have a system that says, "We'll pay you more the more you do."

Now, you saw in our [previous] program [Sick Around the World] that some of the systems used by countries around the world have ways of dealing with this.

Yes, absolutely. And we're looking at whether any of those things might work in Massachusetts. You know, in Japan they do rate setting, for example, and everybody now has a fee book, and you get paid a certain amount for a particular procedure, and that's the same whether you're in city A or city B. And I was very impressed with the fact that the way they guard against providers just doing more to generate more revenue is that they penalize them in the subsequent year if they do too many things. ...

There are also some countries [that] use various global budgeting strategies, where you give doctors so much per patient and leave it to them, or you deal with chronic diseases in a particular way -- Germany, Britain. ...

We are looking at those types of ideas. We are looking at whether or not bundling payments -- so that you're paying for the range of care and individual needs for chronic diseases, for example, or a surgery in a hospital where they need a surgeon, an anesthesiologist, a physical therapist -- bundling all those to make sure that care is better coordinated and everybody knows what their role is.

We're also looking at whether or not it's possible, even though we have multiple payers in the state, to move toward an all-payer system where, again, all payers would pay the same thing for the services provided, regardless of whether it was a public payer or a private payer. ... They would pay the same rate, so if you had a public insurance or a private insurance and you had a heart attack, it wouldn't matter who was paying the bill. A hospital would get the same payment whether it was from payer A, B or C. ... Eventually you could say, well, just have one entity kind of oversee the transaction from the provider to the payer to, again, increase efficiency and decrease administrative waste. So there's a whole spectrum of things that we could look at. ...

When we went around the world, we tried to [piece] together what countries that had universal health care had in common, and there were three kinds of things. ... The first one was that you had to have guaranteed issue in some kind of individual mandate with a subsidy. Would you say that's an essential part of any kind of universal health care system?

I actually do think that that is essential. If people can opt out of the system, then, first of all, when those people need care, you still have to provide it, so you have to have a mechanism for doing that. But it also encourages people to think about prevention and wellness, not just about illness. But if you don't mandate that everybody have insurance, I think it's very hard to build a foundation for universal access.

Now, the second one is a bit more controversial. The second one says that health care insurance for basic care has to be offered by nonprofit entities, not for-profit. ...

I don't know that I agree that that's essential. I think once you define what a basic package is, it seems to me that many different types of entities could compete to offer that. I'm not sure I buy that one.

The third one was that they all had some mechanism for price control, and usually it involved some kind of price schedule. ... That sounds very un-American, but is that something we have to get to?

I do think that that is a fundamental question that we have to answer if we really want to provide coverage to every American, and I do believe that everybody has a right to health care. We have a lot of money in the health care system. We spend 16 percent of GDP [gross domestic product]. No other country spends anywhere near that.

So when we start to ask the question, why is it, then, we have so many uninsured people and so many people who can't afford -- sometimes even with insurance -- to get the health care that they need, I think we have to go back to, well, it's the cost of the care that's preventing this. And I think we've had an attempt for a very long time in this country to get prices down. But the system we have right now is not working, so I don't know if we can do that on a national level.

... [Y]ou're saying the markets fail to get the prices down.

Yes.

We're talking about some kind of more directed process. Could you just be specific here?

I think the processes that have been attempted have not worked, and for those who say the market will solve the problem if you just make sure that there's competition, I don't think that works. There's a couple of reasons. Number one, we don't want everybody competing with everybody because we also know that a lot of what drives costs up is that we have an inefficient system and care is not coordinated, so people come back into the hospital when they shouldn't have to, because when they left the hospital the hospital doctor didn't talk to the community physician.

If we have people competing on a market level, I think it makes it very hard to create integrated systems of care where people shouldn't have to be their own advocates for trying to get the care that they need. Plus, as I said, it hasn't worked to drive down costs. So what I think we do need to examine is how do we say what's a reasonable cost for services that should be delivered, and how do we get people to work within that cost structure?

So this would involve some kind of imposed cost structure.

Perhaps. As I said, it's something that we're certainly looking at in Massachusetts.

In Massachusetts. Can the rest of the country learn a lot from Massachusetts, in your view? What can they learn?

I think there are a few things that they can learn. I'm going to start, though, by saying Massachusetts is unique in some ways compared to other states. Number one, we started off with a relatively low rate of uninsured. If you compare Massachusetts to California, the difference between the percent of people who are uninsured is massive.

Number two, we had a very high rate of employer-sponsored insurance that was offered. Where it's going down in the rest of the country, in Massachusetts it's actually been increasing a little bit.

Number three, we had a pool of money that the state has used for over 20 years to pay hospitals and community health centers for people who were uninsured but needed services and presented to those hospitals. Part of that money was used to fund the state-subsidized program. So we started off with a good foundation, and I think that's part of what has made Massachusetts successful. What I think ... the rest of the country can learn is that the individual mandate is important.

And that you can get people to buy into that politically?

Well, it worked here. ... The coalition of business leaders, government official[s], elected officials, consumers, payers and providers who came together and stayed together to construct health care reform I think was also a very important part of why it's successful, and that is a lesson for the rest of the country to learn. ...

Some states have tried guaranteed issue before, not with the individual mandate, and many states tried it and gave it up. ... [It seems that to make the program sustainable] you have to deal with costs; otherwise your commitment has to be continually in the state of tension to this.

I think that's correct, but I think, again, health care costs impact our ability to dedicate other resources to other issues like education, and that's always been true. The funding that has been made available for this particular effort, I think it's very hard to say that we derive a huge benefit from that over time.

And as I said, we already know that individual consumers are seeing decreases for themselves in terms of out-of-pocket medical expenses. ... I think we have to be able to measure those things and take them into account before we make statements like, "Well, this is not sustainable unless we get costs under control."

Just one thing about the cost-shifting problem. Private insurers complain a lot [that] the costs are higher because they're taking patients from other federal programs. Is that something you've managed to eradicate in Mass[achusetts]?

No. Absolutely we have not eradicated it. Part of health care reform tried to [get] the state public payer, the Medicaid program, to increase payments to providers, hospitals, health centers, physicians, to try to decrease the gap between what we pay and what people's costs are. We were on the road to improving that before the national economic crisis had its impact in Massachusetts.

I will say, though, that while I agree that there is some cost shifting, part of the question we have to ask is, are we paying too little, or are private providers paying too much? And is that gap really as large as providers and the private insurers would have us believe, or is it somewhere in between? I just think this is, again, a cost issue. If a provider's costs are too high, public payers will never be able to pay them enough money.

It comes back to this notion of a standardized cost. Some critics say because we have a patchwork system with different prices in different places, it makes it difficult to really judge and control the price of medicine, because some prices are being cross-subsidized by someone else, right?

I think that that's true, and we also have different providers that have different missions where those added missions increase the cost, and, you know, that works both for what we call our safety-net providers and also what we call our tertiary, quaternary [care], academic medical centers. So I think even as we think about having a uniform cost structure, we have to take into account the unique features of providers.

[If we implemented a Massachusetts-like plan nationally, which continued to use private health insurance companies, do you support having some sort of public alternative in place as a safety net?] ... The Obama plans talked about this having a Medicare-for-all sort of idea. Do you think that's really essential just to keep everybody honest?

I think it could be a very important part. I think that as you pointed out, there are people who can fall through the cracks, and we already have a Medicare system that has low administrative costs. It has an infrastructure that in some ways sets a cost structure for providers. I think it's something that we should seriously examine.

But you wouldn't go as far [as] to say a Medicare-for-all [system] would be a better solution than carrying on with a private insurance system?

I would not say that. I do think, though, that if we continue with this system that we have, this "patchwork quilt," as you call it, in order to really have a coordinated health care system and to be able to afford it because we have better control over rising costs, Medicare has to be in the picture. It's a significant payer in all states, including Massachusetts, and if we go off and develop a payment reform here in Massachusetts and it doesn't include Medicare, we'll miss an opportunity to really change things significantly.

So you see Medicare as offering some kind of opportunity as a model?

I do, absolutely, and I think part of the success of our health care reform in Massachusetts is the partnership between the state and the federal government to allow us to expand the Medicaid program to cover more low-income people, and the next partnership that we hope to establish is one in which we have a policy about how Medicare funds come to Massachusetts and how we can use that as a driver as well to address the cost issue.

... Do you think we're going to get there to universal health care in this country?

I do, actually. I think that people are beginning to understand that it's paramount to making the United States as well off as it can be in terms of the global picture. I do think that with some of the experiments that have gone on, not only in Massachusetts but in other parts of the United States, and the attention that has come to the issue, that there is a likelihood that we could achieve it. I also think that we have the resources to make it happen, but we have to drive the change that will take a lot of people coming together and agreeing on basic principles.

Now the cost of medicine is so high. If we had done reform in 1966 when we did Medicare and Medicaid, it would have been relatively easy, wouldn't it? Can we leave it forever?

Can we leave it forever? No. You know, it's very interesting. When you think about the struggles that President Johnson had getting Medicare passed and then Medicaid kind of added on and the types of conversations that people had at that time, I think it's quite remarkable that we've come as far as we have, and people understand how essential those programs are for guaranteeing health access in the United States. So I think that's a great example of, well, we can make progress. And so that's why I'm hopeful about universal access.

But you are totally confident we can get medical costs under control?

Am I totally confident? No. I think I would be a little naive to say that. If we knew exactly the right way to do it and knew how to implement a structure that got health care costs under control in the United States, we wouldn't be in the situation we are now. Far smarter people than I have tried to do this, and we haven't. It hasn't worked yet.

But you believe we can do --

I believe we can, and I believe we must. ...

Now tell me about MRIs, because that's one of the things we found in Japan, that how they control utilization was through price.

MRIs are one of the technological advances, one of the things that drives the cost of health care up. If you think about MRIs, when they were first introduced, they were incredibly expensive per procedure, and now, in a state like Massachusetts, where I think we have [more] MRIs than all of Canada has, we're still paying an incredible price per procedure, even though it's a technology that is no longer new, and there should be economy of scale because they've sold a lot of machines. ...

So when we had a struggle with our Medicaid and were looking for areas where we could cut without cutting people off of services, trying to regulate who gets an MRI was one of the ideas that we discussed. And I suggested that we simply just pay less for the procedure, because from my mind, the cost should have gone down, because it's something that's now been used for many, many years, and we shouldn't have to be paying for the innovation or research and development anymore. ... We just implemented this a couple of months ago, so we haven't seen the impact of it yet. ...

But that's very similar to what they do in Japan with utilization.

I think it sounds similar, yes. Ask the question, "What are one of the ways that you can prevent overuse of something?," and, as I said, not paying for every single procedure at the very highest rate is one of the ways that you can begin to modulate that.

You think you could control utilization by changing the unit price of any procedure in principle?

I think that's probably true. On the other hand, we don't want to create an access barrier by not paying providers the true cost. ... So we have to balance the two.

Just on the innovation argument, finally, in Japan, they found the device manufacturers stepped [up] and responded to this lower price by making cheaper machines. Do you think our inventors could do the same?

Absolutely. I think we're a very smart country, and we've got lots of innovative thinkers. ... If what we need are cheaper ways of doing things, I think people will find ways to do that.

posted march 31, 2009

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