Transcript from Health Care Reform: The Massachusetts Model

 Keynote Address by the Governor  |  Q&A with the Governor | Panel Discussion 

Now we're going to have, dare I say, a hell of a good panel if I may use that language.  We have several really first rate experts in the world of health policy.  We have the governor of Massachusetts, Mitt Romney.  I happen to be a political animal and I happen to think that what's fun about Washington is that if you think about the highest stakes game in town takes place in this city and there is no issue that is bigger or greater than health, number one; no domestic issue, let's put it that way.  Secondly, we're all fascinated by politics and presidential campaigns.  And then thirdly, a lot of us are all fascinated by talent if you will that is to say you look at a senior politician or an elected official and it seems to me you tend to think of them in terms of what kind of politician are they; that is to say, can they run a good campaign, are they attractive, are they natural with people, are they comfortable as people?  That's one dimension.  And you find that in a lot of politicians. 

A second dimension is, do they actually know and care about policy?  Are they actually interested in an issue and knowledgeable about it?  In my experience you don't find very many politicians, if you will, in the best sense of the word, who are good at both of those - who are naturally good with people, people connect with them; and who actually know something bout a subject, are smart about a subject, and actually accomplish something. 

So I guess you can figure out by now I'm talking about our lead speaker, Governor Romney.  Quick background, which I think many of you know, he has experience in the business world with Bain and Bain Capital, which always helps where you can make a little money if I may say so, sir.  Secondly, he ran the Salt Lake City Olympics - did an extraordinary job there; elected governor, 2002; passed the bill that we're all focused on.  And I'm going to throw in one thing that isn't on his résumé too often and that is that he lost to Senator Kennedy running for Senate in 1994 I think.  I think there's something great about a politician who's actually lost a race because then when they're running again they've learned they've got something out of it.  It's probably a good experience, although he probably didn't think so at the time. 

National Journal and our Hotline publication both do what we call insider polls of the inside political crowd and we've done a number recently on who is likely to be the Democratic candidate for president in 2008 nominee and who is most likely to be the Republican.  And in our Hotline insider's poll, Governor Romney comes in second and in our National Journal poll he comes in third, right behind George Allen, so I'm interested to see what happens when we do our next insider's poll.  So anyway I've combined a little bit of politics, a little bit of issue, I hope a warm welcome and, Governor, thank you for joining us.  (Applause.)

We learned a lot from each other and there are aspects that I'm sure each party would change and my experience in legislation of this scope is that a year from now it will need to get addressed again and a year after that and the year after that.  It's going to take some adjustment as we find our way through this process to do something which I think has some pretty dramatic ramifications. 

Now, let me start off with a very brief description of the challenges as we saw them as we began our administration about three, three and a half years ago.  The first was a very common perception in our state that there was a number as high as 700,000 people in Massachusetts - that would be a little over 10 percent of our population - that didn't have insurance and a recognition that those people go to the emergency room for their care, which is expensive to provide and not very efficient healthcare either.  In addition, these people who are going to receive care at the emergency room aren't getting the kind of preventative care and the primary care that would be the standard of quality treatment you'd hope for. 

Secondly, we were talking to small employers and large employers both who were seeing every year double digit insurance rate hikes, which was a real problem.  And they suggested that it was going to get harder and harder to stay and grow in Massachusetts if that continued.  We saw businesses dropping benefits for many of their employees; people were being dumped out of health insurance because it was deemed to be too expensive. 

We recognized in our conversations with individual sole proprietors in particular, as well as very small businesses, that it's real hard to get insurance - that as an individual calling up Blue Cross/Blue Shield saying, I'd like to buy a policy - they're really not designed to deal with a one by one kind of buyer.  And if it's a - let's say I met a jeweler, for instance, in the southern part of our state.  He has his own shop.  He makes his own jewelry.  He buys some and he sells it on his own and he said, look, he was making about $55,000 - $60,000 a year.  He said, look, I'd like to buy health insurance but no one's interested in selling it to me. 

Finally, there were a lot of free riders in our system - people who were making enough money to buy insurance, but had concluded that there was no reason to do it because if they got really sick they could just go to the hospital and they knew they'd be treated and they'd be treated for free.  The cost of all this to the state was about $1.3 billion a year.  We as a state were spending about $1.3 billion a year giving or paying for free care to people who didn't have insurance.  That's my bogey by the way: $1.3 billion. 

Where does that money come from?  Well, we assess hospitals and insurance companies every year a fee, then we match that with state and federal dollars.  And so we put this pot together in total about $1.3 billion to compensate providers who give out free care in our state, so we're spending $1.3 billion.  I'll come back to that. 

We worked together across the aisle and developed something which I'm going to call our healthcare reform plan.  It encompasses many parts.  I'm only going to focus on one, but I want you to be aware of all four parts.  The first was - and this we began early in the administration - was to rein in excessive growth in Medicaid cost inflation.  In order to do that, we expanded managed care, we brought more of our Medicaid lives under managed care treatment, we changed our incentive system in the purchase of prescription drugs to encourage recipients to use generic drugs, and we required a greater degree of prior authorizations both for prescriptions as well as for other treatments.  And that was able to pull back pretty significantly our rate of inflation in the cost of our Medicaid. 

Second area was we've aggressively pursued electronic medical records.  Our largest single hospital chain partners, which is a teaching hospital system as you know, has invested substantially over time - this wasn't the state driving this, but they did this on their own - in electronic medical records.  And they have realized what they say is a very high rate of return on their investment in this effort.  We have taken their plan and through a generous gift from Blue Cross/Blue Shield of roughly $50 million have taken multiple beta-site cities across the common wealth of Massachusetts to install this kind of electronic medical record technology.  We'll see what the results are.  But people are talking about doing it nationally, we're actually doing it at a state level, experiencing the beta test results, and we'll see what that yields. 

The third area is what we referred to as a transparency initiative.  You're familiar with this concept.  We began with our own state employees.  By looking at the records, the success rates, the achievement rates of various providers and the cost of different providers, we're able to direct state employees to providers that have low cost and high quality.  We've also began a web-based cost and quality data system such that if you now go on our website in Massachusetts, you see our hospital providers, various procedures, triple bypass surgery, colososectomy, and so forth where you look at the success rate of the hospital and we judge that within broad ranges with zero to four stars and then the cost of that procedure at that hospital. 

And finally and perhaps most critical is a part of a transparency initiative, you don't only have to have information, you have to have consumers that have a stake in what the cost of a procedure might be in different settings.  And so we have authorized through this legislation for the first time co-insurance in Massachusetts.  Co-insurance means that the beneficiary of insurance or the owner of the insurance policy can be responsible for picking up a share of the cost; let's say, 10 percent of the cost up to some stop point most likely, and this will be decided by each of the insurance companies as they offer these products to the marketplace. 

So if an individual is now responsible for let's say 10 percent of their healthcare bill, they no longer say, okay, "I've hit my deductible of $500; from now on it's all free."  Instead, they know they're responsible for 10 percent all the way along the line.  And when they come in to the doctor's office with a headache and he says, "gosh, why don't you get an MRI just to make sure; I happen to own an MRI center down the road and I'll set up an appointment for you."  They say, "you know, given the fact I'm going to be paying 10 percent of the bill I think I'll wait another week perhaps because it's really not that serious, before I get an MRI for a headache."

The fourth area is the area that most people have concentrated on as they've looked at our healthcare reform effort, and that's the effort to get everybody in the system.  What we've recognized was at least from our perspective it's very difficult to mange healthcare and healthcare costs if you have a large proportion of the population they're outside the health insurance system, the cost of which is going to get borne by everybody else through some kind of cost-shifting mechanism where you're taxing people who are buying insurance to pay for people who aren't buying insurance.  We wanted to make sure that we ended the practice of what we call free riders and we substituted the practice of personal responsibility.  Everybody has responsibility for the purchase and the management of their health insurance system.  We want to eliminate cost sharing and of course we want to see better and less expensive healthcare. 

Let me step back for a second and tell you how we got going on that last piece.  It came as a conversation with a former -- or the founder actually of Staples Corporation came into my office after I was elected and said, Mitt, why did you run for office?  And I said - you remember my pitch - I want to help people.  He said, great, if you want to help people find a way to get everybody health insurance.  And I said, frankly, that's not possible: I'm not going to go out and raise billions of dollars of taxes, I'm not going to put in place a government takeover of health insurance.  I can't do that.  And he reiterated his initial request and after giving it some thought and working on it for a while I decided to assembly a team of people to look at the topic and see if we could come up with something. 

There were a couple of guys I'd worked with in the past, one in the consulting firm I'd worked in, one in the venture capital firm I worked in; both partners there who had left or agreed to take a leave of absence to come work with us.  An investment banker from Morgan Stanley, who's now my secretary of health and human services, an individual who'd work for a long time in Washington, D.C., on a wide range of policy, Cindy Gillespie who's also here, some actuaries from the insurance industry, a professor from MIT who builds economic models.  We began looking at this. 

First year we made no progress; second year we began making progress.  It sort of came with one of those "aha" moments where we said you know we talk about all the people that don't have insurance; nationally we say 40 million people without insurance,.  How can a nation as rich as America have 40 million people that don't have health insurance?  And then it hit us: they don't have health insurance, but they have health coverage.  Everybody in America is covered for healthcare.  If they get sick - if you have a heart attack, you get picked up by an ambulance.  You get taken to the hospital.  Perhaps they're going to do triple bypass surgery, perhaps put in a stent, but you're going to get treated.  Who's paying for that?  Well, someone is.  Everybody is getting healthcare, not ideal, not with preventative and primary care, but you're getting healthcare throughout this country.  People don't have health insurance and the thought was this: if it's more expensive to provide coverage in emergency room and in an acute care setting than it is to give people preventative and primary care and if we're already doing the more expensive thing, can't we find a way to take the money we're spending and direct it to help people buy insurance?  Get everybody inside the system: that was the "aha" moment. 

The other thing we had to do was figure out how many people didn't have insurance because if the number was 700,000, it would take a lot more money than we already had in our pockets.  So we went out and interviewed people in the Commonwealth of Massachusetts, carried out surveys and found about our population.  Here's what we found: the population is about six and a half million, 93 percent currently insured, uninsured about 7 percent.  This was at the time we were doing the work by the way.  The number of uninsured has come down quite significantly while this has been going on, so the numbers are down by probably 25, 30 percent since the time this was done.  We found three very different groups for purposes of our work.  The first and perhaps easiest to deal with were the fact that of the uninsured about 100,000 of them were Medicaid eligible, but just hadn't enrolled.  These are people who would show up at the hospital when they had an acute event, but they weren't taking advantage of prescription drugs, primary care, going to the clinic for annual evaluations and so forth. 

So the first part of our task was to say, let's get those people enrolled so we can do a better job at providing primary and preventative care.  And in the first 18 months since we began this project we have enrolled some 81,000 out of that 106,000 so we've been able to do a good job signing those people up.  How did we do it?  We put in place a computer system - we call it a portal - in our providers offices and hospital centers so that when somebody comes and says I've got the problem but I'm poor and I can't pay for coverage, we ask them for their Social Security number and some other information, we input it in to our computer, we then determine on the spot whether they're eligible for Medicaid.  If they are, we sign them up.  And by doing that plus having an outreach effort, a marketing effort by the advocates in our state for the poor, we've been able to sign up about 81,000 people. 

Second group, the next easiest - I'm going to the bottom instead of the next one in line there because this was a little easier to deal with than the middle group.  This is people of middle income which we defined here as people who were earning three times federal poverty level or more.  This is a group of people where if a family of four, for instance, a family of four earns about $54,000 in Massachusetts if they are three times federal poverty.  About 200,000 people earning three times FPL or more, 100,000 earning $75,000 a year or more without insurance.  The question was, why are these people not insured?  Why aren't they buying health insurance?  And so we talked to them to understand why they weren't buying heal insurance and the answer primarily came back saying because it's way too expensive.  In some cases we heard people say I'm healthy, I'm young, why would I go out and spend $400 a month for the personal policy?  I'm making $50 - $60,000; that's too much money.  It was very, very expensive. 

So we said how do we give them more flexibility?  Well let's allow the insurers - let's take out the requirements that we've had, let's allow insurers to have higher deductibles consistent with health savings accounts so people could have, let's say, $2,000 deductibles if they've got a health savings account that could match that figure.  Let's allow defined provider networks indicating for instance the insurance company can say when you buy this policy these are the hospitals in our system, these are the clinics, these are the physicians.  We want to allow co-insurance.  We want to limit mandated coverages. 

Now, that's one where I was singularly unsuccessful.  The bill I filed said we want to get rid of all mandated coverages, although there were a few that we would keep but modest in cost.  We want to by and large get rid of the mandated coverages.  And the lobby here was overwhelming.  I have to tell you one of those.  For instance, in our state you can't buy a policy unless it includes unlimited in vitro fertilization treatments.  One of my friends who's a doctor came in to see me along with ten or 20 other doctors all in vitro fertilization specialists telling me that it had to be in the program and I said, nope, in my bill it's not in the program.  It's going to be voluntary or it's going to be an optional choice that people who want to get insured can either buy or not buy.  And I resisted it, but my other legislative friends came to a different conclusion.  And so the mandated coverages for the adults by and large are all still there.  That's something if I were writing an ideal bill I'd probably take them out, let the insurance companies make their own choices there, and then let the consumer make an informed decision. 

There were, however, some openings that the legislature did agree to for those people age 19 to 26, a little bit more flexibility we believe in removing some of the mandated coverages for that age cohort.  The other thing we were able to do was to combine the risk pools to get lower rates for individuals and for small businesses.  And this was the idea, which is if one individual goes to get health insurance in Massachusetts today - this is before insurance reform - the insurance company says you know this person came in here and wanted to buy a policy for $400 a month; they must be sick, they must know something that suggests that adverse selection is going on and therefore we better charge them an arm and a leg to give them the policy.  We said instead by putting everybody in the pool - saying everybody is going to be in, the insurance companies didn't have to worry about adverse selection.  They recognized instead that they were going to see the entire population pool. 

And now we had - we started to establish something called the connector for two reasons.  One was the insurance companies are set up to deal with employers, with lost of employees, sales force, calls on them, gives them plans, puts their name on the cards and so forth.  When an individual shows up it's an inconvenience, it's a problem.  When a gas station that has three employees wants a program, it's just not convenient for them.  So we said, okay, look, we'll set up a connector which is a conduit.  These people who are paying in for insurance from, let's say, Blue Cross/Blue Shield, they'll write their check if it's a gas station or an individual - they'll write their check to this connector we set up, this agent if you will, and it will send the money on though to the insurance company.  And therefore we'll collect all these for you and then send them on to you; we'll also be an interface if you want to the customer.  You can either contact them directly or you can have us through the connector contact them and have interactions with them. 

The other thing the connector did was this: if your employer buys insurance for you and let's say you pay for half and she pays for half, so the employer's buying it for you, you're splitting it 50-50.  It's all paid for in pre-tax dollars, taxes are in effect deducted, there's no taxable event.  It's paid for in pre-tax dollars.  But if instead your employer doesn't provide insurance and you go home and buy it yourself, you have to pay in after-tax dollars.  Why is there that disparity?  It didn't make sense to us and we found thorough the work of the Heritage Foundation - they worked on this a long time - we found a provision in the Department of Labor regulations known as a 125 plan which basically allows us by collecting the money in a central location at the state location, the connector, we're able to allow individuals even when they're buying they're insurance 100 percent themselves they're able to get pre-tax treatment.  So we established that connector. 

Now, let me tell you what the products look like.  The standard small group plan we have today includes primary care, hospitalization, mental health, and prescription drugs and so do these affordable products.  The affordable products, the insurance industry is offering or planning to offer in Massachusetts includes all those coverages.  They are not stripped down insurance by any shape of the imagination.  Under the standard small group plan, the policies are open access - any provider.  Under the affordable products there will be defined access pools or defined provider pools.  You're told which hospitals and which clinics and so forth you go to. 

Under the standard plan, first dollar coverage; under affordable products, we expect to see deductibles in the range of $250 to $1,000.  The co-pays are higher under the affordable products.  Co-insurance is not allowed under the standard small groups; co-insurance is allowed under the affordable products and the premium's roughly $350, as high as $400 for an individual and the premiums that we're shooting for are roughly $200 under the affordable products. 

Again, the affordable products are not offered by the state.  These are offered by insurance companies that are there.  We worked with their actuaries to say, "okay what do we have to do to get the product down to $200?"  And they've gone through it and said, "these are the things."  By the way, we could get it down I don't know how many more dollars if we dropped all the mandated coverages, but that's something which as you know was not in the final bill. 

The insurance connector I described - it's basically a conduit.  Money flows through this insurance connector, we set up this quasi-independent agency and the money from individuals, small businesses, and so forth if they want it to can go through the connector and then on to the insurance companies.  They could also just go directly - there's no requirement that they go through the connector; it's a service, but the service it provides is making these payments pre-tax for individuals who are buying their own insurance. 

I think I've made most of these points so I'll - oh, I didn't make the last point and that is that the insurance through this connector is entirely portable.  As you move from job to job to job or if you have part-time work, because your employer is just ending the money in to this connector you own the policy.  It's not owned by your employer and therefore the insurance is entirely portable. 

That's one group.  Let me stop there for a minute.  That was our model for dealing with one large of people who were uninsured - roughly 200,000 in my state, people who could afford insurance if it was reasonably priced and the answer was deregulate.  The answer was try and strip down the regulations on the insurance companies so they can offer products people can afford.  Now, when I put down there, by the way, a $200 target for the premium, I should note that if somebody is let's say 21 years old, healthy, let's say a student and they say they want to pay a $2,000 deductible linked to a house savings account, my guess is their premium will be more like $50 or $60 dollars a month, so $200 is not a fixed number.  This is going to be offered by different insurance companies in the marketplace and the actual rates will depend upon the coverages and the health and the age and so forth of the people involved. 

The third group and the toughest group were those people who we determined even at a policy of let's say $200 a month that people wouldn't be able to afford buying it entirely on their own.  This number was about 150,000 people, these are people earning one to three times federal poverty who didn't qualify for Medicaid - could be a working male for instance that didn't qualify for Medicaid earning equal to or less than one times federal poverty.  How can you deal with this group? 

First of all, we wanted to find out who they were.  Common perception was that these were poor, single moms often in inner-cities and that they were not insurable and that the private insurance and that the private insurance companies didn't want to touch them.  Wrong.  We found out they were substantially younger than the average population, they were predominantly male and single - not single moms - they were entirely representative of the statewide mix of race and ethnicity, 82 percent were high school graduates, 15 percent had college degrees, 78 percent were working, and most were working full time. 

As the insurance companies looked at this population they said, wow, we'd like to insure this population.  This is not some group of people who are all sick and uninsurable these are eminently insurable people.  How to get them in the system became the question.  And the answer was - I'll come to that in a second - the answer was find a way to help them buy an insurance policy they can afford, not a state policy.  You see, at the federal government level right now with a population like this the only thing we come up with is give them Medicaid, expand our Medicaid pool, put more eligibles in the Medicaid population.  The problem with Medicaid - a lot of problems with Medicaid; one is no deductibles, no co-pays, and if you earn above a certain level you get cut off.  So one day you're getting free insurance, but if you get a raise you get nothing.  So the incentives are entirely backwards.

Medicaid was not designed as an insurance product, it was a product designed to help the very poor, and so continuing to expand populations and say put more people on Medicaid is making a real mistake.  Our sense was, no, don't put people on Medicaid, don't put people under government management.  Instead, give these people access to the private market, to private policies, and help them buy those policies with their own money by providing a subsidy from the state. 

Now, the question was, would there be enough money to cover all those people?  Did we have enough money or will we have to go with some big tax increase?  You probably know the answer.

Let me describe how that system works.  We look at the income - we use here an example of a single person - the income shown there.  One times federal poverty level in our state is roughly $9,800 and then it goes up to three times FPL.  The monthly premium that the individual pays is in the light blue box.  Hopefully, you can see that well enough, but if you can't let's say one and a half times FPL the person pays $18 a month for their premium and up to 29 thousand are going to pay $105 or $106 a month for their premium. 

Incidentally when I put the bill forward my thought was that everybody should pay something.  My legislature said, no, if they're earning only one times federal policy they should pay nothing, they should get it entirely free.  Well we disagreed on that and so I rounded up all my Republicans - that's 13 percent of my legislature - and we lost that battle.  (Laughter.) 

But the idea still held, which is the lower the income, the smaller amount you pay; the higher the income, the greater the amount you pay, and you can see the percentage of income that you pay.  Incidentally, the reason you're seeing a range on percentage of income is because the difference between one person or two people in a family or multiple children depends on what the percentage of income is.

So everybody other than those earning one times federal poverty pays something and the state picks up a subsidy to help you buy the rest of the policy.  Is it a state policy?  No.  Is it a government policy of some kind?  No.  No, they buy these policies from our regular insurance companies, from Fallon and Harvard and Tufts and Blue Cross/Blue Shield.  Those are the policies they buy, they own them, take them with them throughout their life.  By the way, they pay for it through the connector - the same connector, so the same group that's going to deal with them when their income gets above three times poverty is going to keep on working with them.  The policy will stay with them as long as they want it - their whole life if they want to. 

Now, can we afford it?  We began by thinking we had 700,000 people uninsured and at the prior cost of roughly $400 a month that would have cost us $4,800 a year per person or $3.4 billion to insure everybody.  And you recall we only had $1.3 billion, so that would have been impossible.  What we actually found was we had 106,000 that qualified for Medicaid that hadn't signed up.  Signing them up costs us about $380 million.  That's our share of Medicaid.  It's a 50/50 split in Massachusetts.  So there was a cost to getting people on Medicaid. 

Number two, those who needed subsidy, the cost of that subsidy for all that population is $600 million.  Of course, for the people who are getting affordable products - they pay for entirely themselves - the 200,000 - that costs us nothing as a state.  So the total cost to the state is roughly $1 billion, or we save about $300 million.  Now, do we really think we're going to save $300 million?  No.  We've put $300 million aside to care for those people who never participate in the program one way or the other who still show up - people who are, let's say, tourists or students who didn't get a policy.  They're supposed to.  The school is supposed to require them to have health policy, but if they don't or if there's an alien who hasn't got a policy we'll still treat those people of course, as required by federal law.  But the overwhelming majority of people will take advantage of the plan that we have.

And then we have something called the personal responsibility principle.  And that is given the fact we put in place a program that has Medicaid for the very poor, premium assistance for the working poor, and now for the first time affordable insurance products for those with middle incomes, everybody has access to health insurance they can afford.  In that environment and only in that environment people who remain uninsured would be unnecessarily and unfairly passing their healthcare costs on to everybody else.  And so we adopted the personal responsibility principle that means that everybody should have insurance or have the means to pay for their own healthcare.  One or the other: you've either got enough money to pay for your own healthcare cost or you buy insurance.

How do we enforce that?  Well, pretty simple: we give people through July of next year, in July when they file their taxes or the next time they file their taxes they put on their tax form what their health insurance company is and the policy number.  That's checked against our database.  If they indeed have insurance, that's great.  If they don't, we charge them $100 a month.  So we're basically putting in place a pretty significant carrot and stick.  Get insurance or we in effect will be charging you $100 a month for not having it.  We want to get everybody inside the system to buy a policy they can afford.

What are some principles?  One was to stabilize the small group insurance market and keep small businesses from dropping insurance, getting everybody inside the state wide pool.  Everybody's insured now.  The insurance companies don't have to worry about adverse selection because everybody's in the pool - the entire population.  We also introduced lower priced comprehensive health insurance products.  That was key.  I wish we had even greater flexibility than we got, but it's a step forward.  We're able to bring in younger, healthier people in to the risk pool.  That's one of the reasons we're able to get premiums down.  We get everybody in including the young and healthy.  We created the connector to permit pretax premium payments.  We facilitate the purchase of insurance by part-time employees and by employees with multiple employers.  And finally, we're trying to promote a culture of insurance and personal responsibility.

There were some alternatives we considered.  One was just to keep on doing what we're doing, that's of course the easiest.  It's increasingly expensive as more and more people drop their employees from coverage.  The quality of care is poor, but it's the easiest - just to say, hey, it's not working, but just complain about it. 

Number two was a government takeover.  Say, "the government is going to manage this, we're going to expand government healthcare to everybody."  In P.J. O'Rourke's words, "if you think healthcare is expensive now, wait until it's free."  And this by the way is what we are facing: there was a ballot initiative going on the ballot this November requiring the state constitutionally to provide health insurance to everybody in the state.  That was a ballot initiative which was seen as being overwhelmingly popular.  And neither my Democratic legislator friends nor my Republican friends wanted to see that, but it was overwhelmingly popular in the polls.  Facing that - a state requirement to provide health insurance to everybody - we worked pretty aggressively to come up with an alternative that would be acceptable.  And the people who were behind that ballot initiative after our program was passed withdrew it saying that what we had done satisfied their desire to see everybody get health insurance.

Number three was actually a very attractive alternative, which is a libertarian approach, which is to say look don't require treatment in the hospitals: if people show up at the hospital and they're not insured, turn them away.  And in that case people will either buy insurance or they'll take their chances with getting charity.  That's really not an option for the state by the way.  The federal government can consider that if they want to but the state level, I can't change federal law and therefore we recognize that in order to take a step forward - we believe a step forward - we had to do something on a bipartisan basis that was realistic at the state level, and so we put in place our Massachusetts plan. 

I've described what we have.  If I could make it better, at least in my own view, I would eliminate a number of the mandates because I think we have too many mandated coverages in our policies as I've indicated already.  I'd also eliminate what was a token fee put on employers.  I think basically to put a different stamp on it than the one that Secretary Murphy and Cindy Gillespie and others had created, they added a fee which is if employers have employees that don't have insurance, they charge the employer a maximum - it's a sliding scale but up to $295 per employee a year.  What is that?  $22 a month, it's not a very big number, but it raises an insignificant amount of money but it was a statement.  And of course it could be a camel's nose under the tent.  I wish it weren't there.  I don't think there's any reason to have that employer fee there.

And then finally of course I made the point which I'll continue to make which is we're going to have some corrections with experience.  We're going to find problems, I know that.  There are going to be unintended consequences but this is something which in my view advances the ball.  We've got 50 states out there, we've got a lot of people without health insurance that are very expensive, and they're also not getting ideal care.  And regardless of which problem you consider is the largest problem we had to find a solution.  We did our best to come up with something we think advances the discussion.  Other states can improve on what we came up with.  You'll see our experience, you'll learn from it, and perhaps you'll come up with something better.  Would I adopt this at the national level?  No.  Let's experiment with different ideas.  Let's see what works, let's see what the problems are, but let's recognize that when there's a problem bright people in both parties can come together and make it work. 

One of the things that I was most pleased with, by the way, is that everybody came together on this - the legislature, the delegation here in Washington, the Heritage Foundation.  At the signing, I have to tell you, the best line of the entire experience was from Senator Kennedy whose health guru is here today, but at the signing we had the Heritage Foundation, who was celebrating what they thought was a major step forward and was partially responsible for the bill, and Senator Kennedy, and myself. 

Senator Kennedy and I ran against each other in 1994 and so he stood up and he said, "you know, when you come to a celebration of a signing and Mitt Romney and Ted Kennedy and the Heritage Foundation are all together, it's clear one of us didn't read the bill."  (Laughter.)  But actually we all did.  The funniest thing is there was really no opposition.  The associated industries of Massachusetts, the Chamber of Commerce - they were supportive, they encouraged the legislator to pass the bill.  The labor movement likewise supported.  The hospitals - both teaching hospitals, community hospitals and hospitals that care for the poor were all in favor.  Really, everybody said this is a great idea let's move it forward. 

Can it possibly be that good?  Probably not.  We'll find something wrong in there as time goes on but the support was overwhelming.  The only people I'm finding now who are not happy, and I do radio talk shows and I now know who's not happy.  People who are earning $30, $40, $50,000 a year do not want to have to pay $100 a month for health insurance.  They're getting it free now.  They're going to the hospital if they need it and they don't want to pay the $100 a month.  And when I have those interviews I say do you have a cell phone?  Yes.  Do you have cable at home?  Yes.  Do you get HBO, Showtime?  Yes.  You can afford $100 a month then because health insurance is that important and it's simply not fair and not right to insist that everybody else in society pay for your healthcare when you can help pay for it yourself.

Well, I'm going to stop here and take your questions.  I appreciate the chance to be with you and I appreciate the chance to be part of something which I think is significant in moving the ball forward, thank you so much.  (Applause.)

Thank you.  I'm going to take any questions that you may have.  You can shoot arrows or actually throw flowers and laurels.  Perfect.

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GOV. ROMNEY:  Well what I would do is, I wouldn't look to me to make that decision.  What I created at the time we created the connector was an unpaid board of people who were appointed to look at our health insurance plans and give a stamp of approval to plans and say this is a plan which we think is a bit like consumer reports, it's not a regulated body, but it's a stamp of approval.  And let them decide, this is a policy that approves the appropriate connections or, excuse me, mandated coverages or coverages.  I don't think in vitro fertilization unlimited should be part necessarily of insurance coverage.  On the other hand, I do think that coverage for prosthetic devices should be.  The likelihood that somebody is going to get a prosthetic device is pretty small; the cost is pennies per month on your policy.  And for somebody who does, for instance, lose a limb to be told you're going to have to save for a couple of years to get an artificial limb doesn't make a lot of sense to me, so it's a judgment call.  I'd have my view as to which treatments and which coverages should be there, but as a consumer I'd like to have the choice myself rather than have a government bureaucrat say this must be in every policy you can buy, and you can't buy any policy unless it includes those things. 

You see, there are no mandated coverages for our bigger employers because our big employers can do their own programs outside of state regulation under ERISA regulations.  So they don't have any mandated coverages.  They chose what they think what their employers want or the employees get to choose.  I'd like to offer the same degree of flexibility to our very small employers and to our individual consumers, so I'd leave it up to the consumer.  Thank you.

GOV. ROMNEY:  We had a couple of things going for us.  I'll say three big things, four - I'm thinking as I'm going here.  Number one, we're a leading healthcare state with extraordinary hospitals and also teaching hospitals and public health systems that had the brain power to help develop this and when we encountered difficulties to meet it.

Number two, we had a low percentage of uninsured.  It turned out we're 6, 7 depending on who you believe, 6, 7, 8 percent uninsured.  Some states are more than double that.

Number three, and perhaps most important, we were collecting money for this uncompensated care pool already.  We've been - I was saying playing this game, I should strike that - we were creatively working with Health and Human Services in Washington by taxing our hospitals and taxing our insurance companies.  They put money in the pool.  We then matched that with the federal government and they gave us money back and the state put money in, too.  So when we did that, we got this $1.3 billion.  That money is what we're using to be able to pay for the subsidized care.  Some states aren't doing that.  They don't have the $1.3 billion, so how will they get it?  That's a question and that would be a difficult implementation question for others.  They're paying for it now; they don't know they're paying it, but they are paying it.  Everybody who has got insurance is paying a cost for the uninsured; they just don't know it.  In our case we knew it and we were collecting it.

And the fourth area that was really critical for us is the political will to get this done.  And that came by virtue of having strong leadership on both sides.  I have to tip my hat to Senator Kennedy: he was very anxious to see this proceed.  My Democratic legislator friends were, the Republicans were.  This thing passed our legislature - combined two houses - 198 to two.  And part of that positive will came from the fact the federal government sent us a letter and said that they were going to stop paying us $385 million a year.  They'd been paying us that, or a similar figure, over time and that was over - our demonstration project was over.  And Senator Kennedy and I came down and sought Secretary Thompson and said, if we implement this plan and get everybody insured, will you give us that money for three more years?  And he signed an agreement that said yes. 

So suddenly we had the great cash bag - a billion dollars plus if we get healthcare reform.  That was one of the things.  Of course, political will is sometimes hard to generate and that was one of the key things.  Secretary Thompson, and then following him Secretary Leavitt, both signed on to give us on a discretionary basis three more years of this program and putting money in to this uncompensated care pool to get everybody insured.  That was a key and those are the challenges we'd face but ultimately, let me tell you, you're in the hospital world - I used to do work in the hospital industry.  The idea that you have an enormous number of patients walking in the door that don't have insurance means that you have to find a way to pay for that by charging other people.  And that just throws off the entire system and because they came into the hospital for their primary care treatment.  It's an unnecessary burden, an inefficient and expensive burden, and it's not the ideal care. 

So I think it's a big effort but ultimately we're going to get the job done nationally.  It's going to take a while, but I think the model here is a new paradigm.  Guess what?  The market works.  Everybody can get insurance.  The more you deregulate it and make it available to the public on their own, the more likely we are to get the government out of the system and get people covered.  Thank you.

Question:  Thank you.  Thanks for your talk.  I really appreciate it.  As I was saying, there is this wild probably irresponsible rumor that you might want to have an impact on national policy.  And I want to pick up on a question that's an offshoot of Larry's.  At the end of your comment you said - Larry was talking about possibly taking this to other states but if I heard you correctly I think you said that some of the things that you felt were appropriate for Massachusetts might not be appropriate for national policy.  So I guess I'd like you to reflect a little bit about of the things that you are proposing or that have been adopted in Massachusetts.  How would you modify this in terms of national policy?

GOV. ROMNEY:  Well first of all I do not believe that one would impose this nationally but if I were talking to another state - if I sat down state by state, the first thing I'd say is if your insurance mandates and coverage requirements preventing co-insurance, preventing defined networks and so forth, is so labyrinthine that your insurance is way too expensive, deregulate it - get that stuff off so more people can afford to buy insurance plans.  That would be number one.

Number two, I'd tell them you've got to put in place something like a connector, which is just a conduit.  And by the way, if the insurance industry wants to set it up fine too, but have somebody set up this vehicle that the Heritage Foundation brought to us which allows people to pay for their insurance in pretax dollars.  That's a no-brainer, so do that one.

The third area that's the toughest is how about helping people buy insurance that are very low income.  And that's one where you have to question do you have the resources as a state?  Do you already have an uncompensated care pool or something like that?  Because if you do, our experience is it's cheaper by a wide margin to help people buy insurance - buy healthcare insurance than it is to pay for free care for the same people. 

Now, you may ask, why is that?  But let me tell you an example, we have a hospital chain in our city called Boston Medical Center.  They insure a lot of lives.  Excuse me, they don't insure a lot of lives they care for a lot of uninsured - 100,000 plus lives a year.  A couple of years ago they said, let's take 20,000 of our uninsured people and give them what looks like an insurance card and see how they behave differently.  So they get this card and it gives them a number to call if they get sick.  They call the number and it directs them to a clinic, not to the emergency room.  They're assigned a primary care physician.  So now they have a primary care doctor, they have a clinic they go to.  Then they track the performance of the people who receive this card.  What they found was they use more preventative care and primary care.  Secondly, they use more prescription drugs.  They're getting prescriptions to deal with chronic conditions.  And finally, their hospital bills are one-third as large as the people who don't have the card.  Net, their cost is dramatically less if they just think they're insured.

So as a state and as a society at least our belief is we're wiser to help people buy insurance, get preventative and primary care than we are to just give out free care which is what we're doing now.  That concept I think can be adopted in every state based on different shapes and different formats, but the option we're pursuing now, which is every time we learn we have more uninsured in our state expanding Medicaid, is a very bad option.  And the other alternative of just having larger and larger numbers of people who drop - who don't have coverage and just show up at the hospital for free care, that's a bad option.  So of the options I've seen we've come up with a pretty good one. 

Question:  The Cato Institute and a friendly critic, especially since I was born and raised in Massachusetts, so have a great deal of sympathy for what you're trying to do.  But it seems to me there's a problem in the fact that Mitt Romney is not going to be governor forever.  (Laughter.)  We're already seeing you have a list of insurance premiums and the subsidies in what you expected people to pay.  Already we're seeing Democrats and the Massachusetts legislator saying those premiums are far too high.  No one should have to pay more than 1 percent of their income for premiums.  We're going to have to raise the subsidies.  Haven't you established essentially a number of mechanisms that as soon as the state takes a move to the left we're going to see more regulation, more subsidies, and be heading very much down a slippery slope to a government takeover of the healthcare system.

GOV. ROMNEY:  Well, we were saying in November a government takeover of the healthcare system under a bill that said the constitution was going to require free care provided by the government for everybody, so that's what we were looking at.  And what we put in place is progress in my view.  Properly implemented it will be terrific for the state.  There's no question that if the government says, you know what?  Why make people pay anything?  Why not just give everybody free care?  They can do that.  They could do it before, they can do it now, and there's no question that this can be tinkered with and can be made something it was not designed to be. 

But I'm not going to refuse to take action to make a step forward and to set of new paradigm because down the road somebody else can mess it up.  But you're absolutely right.  And for instance we had higher co-pays - excuse me, higher insurance premiums for people with lower incomes.  But the good news is everybody came together.  Ours were a little higher, but everybody came together and said, no, we're going to have pretty significant premiums, $100 a month for people earning $29,000 a year. 

So we believe it's a step forward but there's no question it could be turned into a step backwards but I'm unwilling not to move at all just because somebody can take a positive step and make it negative.  And if Massachusetts were to do that, if Massachusetts were to turn this in to a government plan, we're going to raise taxes and so forth, then amen to Massachusetts.  It's going to be goodbye because people won't want to be there, employers won't want to be there.  Other states can take the same idea and make it work positively and say here's how it should work, but the option of doing nothing - that was one I just wasn't willing to take.  Thank you.

Question:  Hi.  I was wondering, in reference to the part of the plan that you resisted where small businesses with over ten employees would be fined $295 a year if they didn't provide health insurance or provide the co-payment, I was wondering what you would recommend to other states if they were trying to strive for more of a universal healthcare system, but they didn't want to have this detrimental affect on the small business owners.

GOV. ROMNEY:  Very simply which is the $295 is completely unnecessary.  We have more money left over, as you saw.  We've saved roughly $300 million a year through this plan.  The total receipts from this $295 fee are estimated now to be how much?  $29 million.  So this is a billion-dollar program and the fee is to collect $29 million.  It's clearly just a token to say, okay, we hit business.  And I understand, you've got two parties and when this program came out and it says it's personal responsibility, which in other words is an individual mandate, some people said we have to make business pay.  So they put the $295 fee, I vetoed it.  It was overridden.  That happens regularly.  (Laughter.)

So is it something I'd like to get rid of?  Absolutely.  Is it a mistake?  Yes, I think it's a mistake to put it there because it communicates that somehow this is business' responsibility.  And the businesses in our state - 93 percent of people are insured today.  Businesses provide insurance not because it's required by the law, but because they want to hire people.  They're trying to get good people.  People say, won't businesses drop coverages and everybody is going to drop and go in your plan?  No, businesses provide insurance because they want the employees.  Generally when people are asked why did you take the job, one of the first things they say is good benefits.  That's why employers provide benefits.  So I thought the $295 was cross purpose. 

I'm afraid, and this is Secretary Murphy's point, and I argued with him forever but I think he's right.  He said by having that $295 fee there are going to be some employers who are now providing insurance that will say, oh, I don't have to provide insurance anymore; I'll just pay the $295 fee and it will have the exact opposite effect of what the legislator intended - that instead of it encouraging people to provide insurance, it will give some employers the excuse not to.  And they'll say I'm paying $295 and my responsibility is over.  That is not what it was designed to do.  I'm not sure what it was designed to do, but that's one thing I would vehemently argue against - the $295 fee - if I could, and I did.  And by the way it slides up to $295, it's less for some employers and it's, as I indicated, a pretty token amount.  Thank you. 

Looks like I can only take one more question.  I apologize.  They're telling me I have to go do important things.  Yes?

Question:  One of the ways that you mentioned making the affordable products plan affordable is by increasing co-pays and deductibles and I was wondering whether since they both go through the connector, the premium subsidy plan, the low-income group would also be facing those higher co-pays and deductibles. 

GOV. ROMNEY:  That's a good question.  We have two very different populations and programs.  One is for, as you know, as I described the middle income folks, and there the answer was real simple, try and take out all the mandates, all the extra regulation and make it easy for people to buy their own insurance.  Establish a connector so they can get pre-tax treatment and if you want somebody to talk to on the phone when they're an individual or small business.  That was the idea with that group. 

And it allows, if you want, higher deductibles, high co-pays, but that's up to the insurance company.  Some will do that; some will do different things.  The other group, which are people who we are subsidizing - we don't have deductibles in that plan.  This is a subsidized population, low income.  There are not deductibles there.  And there are limited co-pays, but not as high as in the other plans, but there are limited co-pays.  So the economics are slightly different in the two programs.

It's an honor to be here with you.  I appreciate the work which you do, John, through all of your publications.  The National Journal has exposed this and other innovative policy ideas.  We're facing some tough times as a country and continuing to go on with Medicare like it is, Medicaid like it is, Social Security like it is would be devastating to the future of this country.  We're going to have to come up with some good ideas.  I hope this is one of them.  If it's not, some other state can come up with a better one and we'll copy it.  Thanks so much.  (Applause.) 

MR. SULLIVAN:  Well, that was very special.  A plug from the publisher: we had Governor Romney, Kennedy and the others on our cover in a special issue we did in June on the subject.  But thanks much, Governor. 

Okay, Ed Howard, do you want to come on up and the rest of our panel, and we're going to continue on.  We've got a fabulous array of people who have been experts in this area for a long, long time.  Most of you know them.  You've probably been on other panels with them.  Ed is executive vice president of the Alliance for Health Reform, which is a company that's been providing unbiased information to officials, journalists, health policy folks for a good number of years, and he knows what he's doing.  And I'm going to turn it over to Ed to introduce his fellow panelists, and really take on the program.  So if you're all set for that?

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And I'd like to pick up, if I can, with something that was triggered by the article by Marilyn Serafini that you have in your handout.  She quotes one of the analysts as saying that the three most important factors making the Massachusetts plan significant are: one, it's a bipartisan agreement; two, it's a bipartisan agreement; and, three, it's a bipartisan agreement.  Ron Pollack, why don't we start with you?  How far does the significance of the Massachusetts plan go beyond the fact that it is a bipartisan agreement or does it go beyond that?

RON POLLACK:  Thank you.  Thank you, Ed.  I think I'm going to hold on to this.

MR. HOWARD:  All right.

MR. POLLACK:  First, I guess I want to preface my response to your question, Ed, just in terms of expressing our own view about this proposal, and I think most of you are going to consider it an oxymoron.  We were very cautiously enthusiastic, and I think perhaps the most significant thing that Massachusetts did was it changed, I think, the dynamics of how health care has been dealt with in this country before.  And, Ed, as you know - you've heard it at least as often as I have - Stuart Altman, who has experienced lots of different iterations of health care failures, has said repeatedly that the history of health care reform and efforts to expand coverage have involved a very specific and corrosive dynamic; namely, every group, whether liberal or conservative, whether Democrat or Republican, whether they're a specialist interest group or a goodie-gooder, they all come to the table with their first priority proposal, and when it appears that their top priority proposal is not going to be adopted, they either walk away from the table or they oppose what's left on the table. 

And another way of saying that is: everybody's second favorite choice has been the status quo.  And so it's not very surprising that we've ended up with the status quo.  We can get into it, as I presume we will, a vigorous conversation about the substance of this proposal, but what I think is so wholesome about what happened in Massachusetts, and that's very different from what we've experienced in other contexts, is that there was a coming together of strange bedfellows, disparate groups, across ideology, across party, and I think that's a very important lesson for all of us to learn, both at the state level and particularly at the national level, where that kind of cooperation is even rarer today than it's been throughout the history of effort at health care reform. 

As a last comment I'd make, Ed, about that is that what we're seeing at the state level today in Massachusetts is a wonderful illustration of this, but it's also true in other states like Vermont, and Maine, and Illinois is that governors and state legislators are saying that we're not getting leadership out of Washington.  This issue is not getting priority attention, there's no energy being given to this question, and yet with each passing year, more and more people are uninsured - 46.6 million people, which is only a point-in-time number, reflects more that the aggregate - underscore the word aggregate - population of 24 states plus the District of Columbia.  That's extraordinary when the number of uninsured is almost equal to the population of half the states in the United States.  And yet -

MR. HOWARD:  I don't want to cut you off, but I do want to give our other panelists a chance to weigh in, if they so choose.  (Laughs.)

Tim, do you want to respond to that?  How much can we read into this, beyond fact of the coming together that Ron was talking about?

TIMOTHY MURPHY:  From my perspective, obviously, being able to work with the Democratic legislature to come up with some what we think are tangible and real solution, is obviously an important lesson.  From my perspective though, having to kind of work in the policy details, what I thought was refreshing about what we did within Massachusetts is that people are willing to kind of dig into the numbers to understand how our system works today.  The governor mentioned a couple of different things: our uncompensated care pool, our Medicaid program, how much health care costs and what the quality is within our system. 

People are really willing to basically do their homework, so we're able to go and analyze who was actually uninsured in Massachusetts, why were they uninsured?  We were able to use survey data, interview data to understand that, to help us form what are the right policies to have.  We were able to reach out to consumer groups and to insurance groups and really kind of get "best in breed" on various ideas.  And then ultimately we were able to run that through an econometric model, Dr. John Grover at MIT helped us with that, and then I had a staff of folks on my team who were very much kind of financially minded, and so we could go test assumptions - base case assumptions, down side assumptions, upside, how do we think this will play itself out?  And then, I think that we gave a lot of thought to how you would implement. 

So from my perspective, the real lesson learned from my side of it was not only that people are willing to work together from a political perspective, but people were willing to go and actually analyze the information available to us and say, you can come up with some real solutions.  And so people were focused on end goals as opposed to scoring points kind of along the way, and I think that that's very significant and I think that - I want to put a plug in for my boss - that's what he demanded of us and that's his background and that's the way he comes at his type of things.  It's let's cut through all the noise and let's get down to the facts.  And I think that that type of leadership made a real difference, and it was - I'll tell you just as someone who worked in a legislature, when I was right out of college, and did that for four years in Massachusetts, and then after working in the private sector and coming back many, many years later, working for Governor Romney.  I haven't worked on an issue where people actually dug in the way they did, and I think that made a real difference.

MR. HOWARD:  Ed Haislmaier, you've helped other states work on these issues.

ED HAISLMAIER:  Yes.  I'll follow up on Ron's comment, because I agree with him on the politics: I think it is very significant and it is kind of - I think, that's the part that's attracted the most attention, and the idea that there could be some bipartisan.  If you take a conservative governor and a very liberal five-to-one - you know, a conservative Republican governor with a very liberal, Democrat legislature five to one against him and come up with agreement in Massachusetts, well, it's probably a lot easier in virtually any other combination in any other state to come to some agreement.  So, I think there's a great political impetus there. 

The policy wonk in me, however, doesn't want to give the politics more than 50 percent of the importance.  I think, it is really, really important to understand that there are significant policy changes in this model that do have bipartisan appeal, by the way, and I've seen that in other states.  And I would put it this way: I see this - and you could quibble with it, but I really think this is the first enactment at either the federal or state level of a really significant change in the organization of insurance markets, in possibly as far back as 1974 with ERISA.  And on the public subsidies side, I think this is - again you can argue, but I think this is probably the most significant new proposal to fundamentally change how public subsidies are handled in health care since maybe the Medicare reforms - payment reforms in the early '80s.  Now, one might come up with some other examples and we can debate the significance of it, but I think those are two significant policy issues, so I think that very much has a lot of merit in consideration.

MR. HOWARD:  You mentioned the subsidies, and Mike Tanner in his question suggested that maybe there was not complete final agreement on what those subsidies ought to be.  How affordable is this coverage really going to be from the standpoint of consumers, and if it's perceived as not very affordable, isn't there going to be pressure to spend more on subsidies, or exclude people from the mandate in first place?

MICHAEL TANNER:  I guess I could weigh on this, and the last question, because I actually think bipartisanship can be overrated.  (Laughter.)  Partisanship exists for a reason, or at least it used to: because there is broad, philosophical differences.  We had two parties for a reason: we had people who had brought philosophical differences.  Admittedly, there's

And part of this is the subsidies question.  The subsidies reach up to 300 percent of the poverty level.  A family of four earning $60,000 a year qualifies.  It's well up into the middle class.  It extends the number of people who are dependent on government well up into the middle class, and I think that's a fundamental shift in the way we should be looking at government and health care on this.  And once you establish subsidies, if you'll just look at the history of any government program, it's always to expand them.  It's always for more money.  You've now created a constituency which is going to say: well, you were giving me 50 percent; I want 60 percent and I'm going to go to legislature and demand that.  There's always going to be pressure to up those subsidies, up the income level, and higher percentage in terms of how much of the insurance cover they're going to pay. 

And I would really predict that once Governor Romney's not there and we see a Democratic governor with a Democratic legislature, that you're going to see more subsidies next year, and more subsidies the year after that, and very soon we'll be down the situation where about half the people in Massachusetts are going to be having government provided health care.

MR. HOWARD:  JoAnn, your boss has had some things to say about affordability?

JOANN VOLK:  Going back to the historic nature of the agreement, I think--I don't want to minimize the cooperation that had to take place and innovations here--but I think it's also important to know we cannot underestimate the sort of hammer of the potential loss of $385 million in Medicaid money that the governor referred to, and a hard deadline when that would occur unless something was accomplished.  And secondly, I think there's some important pieces here that were sort of punted to - after the legislative process, be it with the connector or the regulatory process, and that is what the coverage is actually going to look like - we don't know that yet - and how are they going to make it affordable, both for those who qualify for subsidies under 300 percent of poverty and for everyone else who now has an individual mandate to purchase coverage. 

MR. HOWARD:  Ron, and then Tim.

MR. POLLACK:  Perhaps the most controversial aspect of this legislation was the individual mandate.  And our view is not doctrinaire about that, it's really dependent on if you mandate having coverage for people, it's got to be affordable for people.  And just to say there's a mandate without making it affordable is a ruse.  The governor went threw the numbers for one person living alone, and those reflect the numbers many of us have seen.  I just want to reflect on some other numbers in this; not critically, but just so you'll understand there's very significant cost on the part of people. 

For a four-person household, two children, two parents, between 250 and 300 percent of poverty, the premium on an annual basis is over $3,200.  And mind you, that still doesn't deal with things like what the deductible might be, and what the co-payment would be.  Now, Mike said before that he's worried that some folks shockingly up to 300 percent of poverty need help.  Well, at $60,000  for a family of four, which is what 300 percent of poverty is, today the average cost of employer provided coverage - that means group coverage as opposed to individual coverage, which is always more expensive - the average cost is over $11,000.  That's more than 1 out of every $6.  And that doesn't even include the deductible and the co-payments and services that are not covered.  So I think it is very reasonable to say that people up to 300 percent of poverty, possibly even higher, but certainly up to 300 percent of poverty need some help. 

And so I guess I just want to conclude on this in saying, one of the things that happen in debates about cost and subsidization is it only focuses on the premium.  Now, the premium is clearly a significant factor in the equation, but it's not the only factor in the equation.  If you have a deductible, you don't get a penny of coverage until you pay the premium, and the deductible, and then you got co-payments, and you've got services that are not covered.  And so you have to take a look at - and it's one of the cautions we will have to have in terms of looking at the success or lack of success in the Massachusetts plan is, is the cost sharing in terms of all facets of it - premiums, deductibles, co-pay - realistic?  My hope it is, but I think it's very reasonable to go at least up to 300 percent of poverty.

MR. HOWARD:  Tim Murphy.

MR. MURPHY:  Yes.  Just a couple of comments.  One, the plans and the benefits for those individuals who are between 100 and 300 percent of the federal poverty level have been voted on, they have been made available the insurance companies are, if you will, filling in the details as  we speak.  In addition to that, the amount of money that the individuals have to pay on the sliding scale - the slide that the governor showed - that is the numbers.  That has also been voted on. 

I think it was appropriate for the legislation not to include and write in stone: this is what it will be.  I think if you take a look at the analysis that went behind those numbers, they're very close to what the governor had put out originally.  They're a little lower.  But the ten-member board that's responsible for this program I think did a lot of significant work, looked at other states who have kind of attempted kind of, if you will, voluntary premium assistance programs; kind of looked at that, saw that some were higher, some were lower.  Where did they end up with?  How successful were they? 

We also then took a look at where is it if an individual who's at 300 percent the federal poverty level who's getting offered insurance and taking it through their employer, what are they paying on a monthly basis?  And we made sure our rates a little bit higher than that, to be candid.  Now, on average in Massachusetts about $84 a month - we didn't want to be below that.  We didn't want to kind of, if you will, incent people to drop employer-based insurance, and that's my other point. 

Make no mistake that this Commonwealth care program for these people between 100 and 300 percent the federal poverty level is not meant to be the panacea for all the working poor to go and get the government program.  Look at your data, and in Massachusetts, the overwhelming majority of those folks take health insurance and they take it through their employer.  This was meant to be a program which basically dealt with people who fell through the cracks of an employer-based system.  And we've structured certain of our insurance laws to ensure that companies don't go and set up, if you will, subsidiaries of: "Here are all my working poor so I'll go and push them over to the government program and then I'll offer insurance just to my higher wage workers". 

So, again, I just want to give some context to some global comments that get made here, and I appreciate that.  But the details, the thought that's been put into this, the work that's been done to date, a lot of discussion, a lot of kicking around of ideas, and I think we've come up with something that as the governor said, isn't perfect, it can't be perfect, and that we're going to learn from.  But it's a very robust structure, I believe, that it's been built upon and it's not meant to solve everything that comes within health care and say -

MR. HOWARD:  Yes, Ed.

MR. HAISLMAIER:  Very quickly.  I won't comment on the substance, I'd like to do that later, but on the political or the legislative design I think it's significant that we pay attention to that.  What this does is the fundamental design of the legislation, and therefore the fundamental agreement that the legislature and the governor reached, is to say we're going to take a defined pot of money - and this was, by the way, the feds were involved in that, too - and we're going to identify a population that we're going to target with that pot of money.  And here's how we think we're going to make it work. 

Now, we can debate for a long time whether that would work, whether is - (off microphone) - if you play around with it, then that's kind of what I've been doing with, you know, some of these, as I said, you can come to some reasonable ballpark assumptions that anyway between 25 percent and 50 percent of the truly uninsured probably don't need much if any subsidy to get coverage.  They just need to have the coverage stick to them instead of the job.  The rest will need very varying degrees of subsidy.  It is going to take more subsidies in Mississippi or Louisiana than it is in Maryland or Massachusetts, but that's a factor of the economy.

MR. HOWARD:  Thank you.  Yes, sir?

Question:  Yes, hi.  I'm John Westin.  I'm with United Jewish Communities.  Thank you all for your participation.  I've actually got two quick questions.  The first for Secretary Murphy: Governor Romney mentioned health savings accounts as a tool in the new reform package.  I'd like you to discuss that and sort of reconcile that with what he was saying about Boston Medical Center and how when you give people or al