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April 13, 2006

Joy, worries on healthcare

Joy, worries on healthcare

Boston, Ma., 4/12/06: At Faneuil Hall Gov Mitt Romney signed health care bill with many political figures present. Front row, l-r Timothy Murphy (cq) Massachusetts Health & Human Services Secy, Robert E. Travaglini, Senate President, Sen Edward M Kennedy, Lt Gov Kerry Healey and Salvatore DiMasi Speaker of Mass. State House of Representatives. ( David L Ryan/Globe staff photo) Library Tag 04132006 National/Foreign / edwardmkennedy

David L. Ryan/ Globe Staff

Governor Mitt Romney signed the landmark health insurance bill in Faneuil Hall yesterday as political leaders, including Senator Edward M. Kennedy, looked on.

Governor Mitt Romney signed most of a sweeping new healthcare bill into law yesterday at a festive Faneuil Hall ceremony hailed as a hallmark of bipartisan achievement, even as healthcare specialists expressed concern that the plan could start losing money in three years.

The bill will require all state residents to have health insurance by July 1, 2007, and require businesses with 11 or more workers to pay $295 per employee annually if the companies do not provide insurance. Romney vetoed the fee, but the Legislature is expected to override the veto.

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In a moment widely praised as historic for the state and seen as a big boost to Romney's presidential aspirations, the Republican governor basked in the credit and shared some, too, as he was joined by Democratic leaders of the Legislature and US Senator Edward M. Kennedy.

But amid the wide grins and handshakes, questions surfaced about the cost and the sweep of the legislation, which makes Massachusetts the first state to try to insure nearly all of its residents through an individual mandate to buy insurance.

A legislative staff analysis estimates that the groundbreaking healthcare plan would start losing money in two to three years, which could put pressure on lawmakers to spend more tax money, increase the fee on businesses or scale back the coverage of the sweeping bill. The analysis projects that the plan will be about $160 million short of its estimated cost of $1.56 billion in the fiscal year that starts July 1, 2008.

A number of economists and health policy specialists interviewed by the Globe said that the plan's financing is solid for the next two years, especially since lawmakers have added a cushion of money in case of unexpected costs.

But some specialists warned that the picture is less certain after that. ''There are a lot of things that have to happen right for there to be enough money," said John Holahan of the Urban Institute, a nonpartisan policy research organization in Washington, D.C.

Rising healthcare costs could easily outstrip the money raised by the bill through state and federal contributions and the employer assessment, observers said.

Some lawmakers, conceding they may have to revise the new law as it is implemented, said they are counting on a number of factors breaking their way for the plan to continue without more state spending, including being able to control medical costs and negotiate more federal aid.

Other concerns have surfaced, as well. Some legislators and insurers say the premiums on new, private health policies will be about $325 a month for individuals, more than originally envisioned by Romney. Some conservative critics have also complained that the bill amounts to a huge expansion of government. And some businesses worry that the $295 fee will be burdensome.

Before signing the bill yesterday, Romney vetoed eight provisions in the 145-page bill, including the business fee and an expansion of Medicaid benefits for certain recipients. His vetoes exposed tensions with Democratic lawmakers that have bubbled beneath the surface during the long, delicate, and highly political negotiations among the governor, House, and Senate over the watershed legislation.

''I don't understand how the governor can veto part of the bill and take full credit," said state Representative Patricia A. Walrath, a Stow Democrat who co-chaired the legislative committee that crafted the final bill.

House Speaker Salvatore F. DiMasi, a chief proponent of the employer assessment, rebuked the governor during the ceremony for vetoing the provisions.

''Governor Romney, this bill was crafted after long and difficult negotiations," DiMasi said in his remarks from the podium. ''To change anything will disturb the delicate balance that made this law possible."

The vetoes promise to be more symbolic than meaningful, because the House and Senate passed the bill overwhelmingly and are expected to override all the vetoes. DiMasi told reporters yesterday that House leaders would quickly study the vetoes and schedule override votes.

Under the bill, Massachusetts aims to cover nearly all of its 500,000 to 600,000 uninsured residents through a combination of the employer assessment, new subsidized private health plans, a requirement that individuals be on a health plan, and other measures. The first-of-its-kind measure has received heavy national and international attention.

''After so many years of false starts, our actions have finally matched our words, and we have lived up to our ideals," said Kennedy, who has worked closely with state leaders on the plan and canceled a trip to India, in part to be at yesterday's ceremony.

Senate President Robert E. Travaglini said that ''never in my wildest dreams" did he envision being at a bill-signing for such a historic agreement.

''We can all share the credit for this landmark legislation," said Travaglini, singling out not just elected officials but the business leaders, insurers, healthcare advocates, and others who were crucial in crafting the bill. ''But the biggest victory is for the people of Massachusetts, who will now have equal access to the most renowned healthcare in the world."

Travaglini and other lawmakers said the Legislature may have to pass revisions as the new law is set in motion, affecting insurers, hospitals, doctors and community health centers, and the state's uninsured.

Romney was asked after yesterday's event whether policymakers know what the real price tag is for the bill.

''I think what we can know is how much it's going to cost over the next three years," he responded. ''We've done the best human beings can do to carry out the full analysis and review." He leaves office in January.

The plan is heavily dependent on a special pool of federal money, which the federal government was threatening to withdraw if the state did not pass a healthcare bill. The $610 million annually is guaranteed into 2008 under a so-called Medicaid waiver. At that point, Massachusetts officials must renegotiate the contract with the federal government. Legislators are hoping that despite the federal deficit, the state will negotiate an increase in funding beyond the $610 million to help close the health plan's revenue gap.

Also at issue is the state's ''free care pool," a pot of money used to pay hospitals for treating uninsured residents. Legislative leaders assume that use of the pool will drop dramatically as more uninsured residents buy insurance. The savings will go toward subsidies to help low-income uninsured residents buy health plans. But legislators who crafted the healthcare plan said they actually expect free care payments to fall even lower, also helping to close the revenue gap.

''If anything, we tried to be conservative in our estimates," Walrath said in an interview.

Still, even if these issues break in the state's favor, financial pressure on the plan will only grow.

Medical inflation, which has been pushing up health insurance premiums by 10 to 14 percent annually as more patients seek increasingly expensive treatments and technology, is another wild card.

In their projections, legislative staff members assumed that medical costs will grow 10 percent annually in the first three years of the plan. They estimate that the subsidies that help pay insurance premiums for low income people will cost $725 million by the budget year that starts July 1, 2008. But if medical costs continue to grow at 10 percent a year, the cost of the subsidies could reach nearly $800 million by 2010, unless the state opts to provide lower subsidies.

Senator Richard Moore, Democrat of Uxbridge, cochairman of the Joint Committee on Health Care Financing, said he does not believe that the program will run a deficit, partly because legislators have included several cost-control measures.

Those measures include a new pay-for-performance program that will require hospitals and doctors to meet quality and efficiency standards to earn Medicaid rate increases starting in the second year of the plan.

''I assume medical costs will at least stabilize, and we won't see the double-digit increases we've seen," Walrath said in an interview.

Michael Widmer -- president of the Massachusetts Taxpayers Foundation, a nonpartisan research organization in Boston -- said he believes that the Legislature's plan is financially sound but that it could very well require additional revenue.

''There are no significant traps," he said. ''But numbers like this will never work out exactly. We think [that ] it may well take some additional state dollars, but that it's likely to be a manageable amount."

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