1. Reproduced with permission from BNA’s Health Care
Policy Report, Vol. 14, No. 48, 12/11/2006. Copyright
஽ 2006 by The Bureau of National Affairs, Inc. (800-
372-1033) http://www.bna.com
M e d i c a i d
The Impact of Massachusetts Medicaid Reform Throughout the Nation
BY MARTIN D. SELLERS, CEO,
SELLERS FEINBERG & ASSOCIATES
I
n the not too distant past, health care reform, real re-
form aimed at radically increasing access to afford-
able health insurance for all, seemed to be at an im-
passe. Over the years, some well-intentioned attempts
to revise the health system have been made with vary-
ing degrees of success (including Hawaii, Minnesota,
Vermont, New Hampshire, Maine, and California), but
all came short of the transformational change states so
desperately need.
Today, states all across the United States, both red
and blue, still desire the kind of marketplace revolution
that brings real-world, practical results. They are look-
ing to reduce their number of uninsured and protect
employer-sponsored insurance through a variety of ap-
proaches that combine Medicaid options, insurance re-
form, market-based competition, better managed care,
and improved consumer responsibility.
Without major changes to the health care system,
low-income Americans’ access to affordable health in-
surance is at risk. And as most health care experts and
thought leaders will acknowledge, when addressing big
issues and policy challenges, effective reform (i.e. sus-
tainable long-term solutions) must be driven by sound
public policy that deftly balances public sector man-
dates with private industry objectives.
As governors and state legislatures are and have been
passionately interested in expanding health care cover-
age, the advent of Massachusetts’ recent plan now of-
fers proof that universal coverage is indeed possible.
With the serious need to address Medicaid and health
care reform remaining, the Massachusetts-style reform
has sparked a re-emergence of state-based solutions to
a pervasive, complex problem.
States are eager to understand how Massachusetts’
bipartisan legislation combines the concept of personal
responsibility through an individual mandate on the
purchase of health insurance with government subsi-
dies to ensure affordability. Governors and their top
staff are certainly curious to see if—whether in part or
in whole—the big idea emerging in the Northeast can
be adapted to their situations and effectively work in
tandem with policy solutions tailored to their own
unique circumstances.
The action taken by the Commonwealth of Massa-
chusetts this year has encouraged a vigorous national
debate not just throughout federal and state govern-
ments but among industry stakeholders and the general
populace about how to successfully address the coun-
try’s problem of the uninsured.
Mr. Sellers is chief executive officer of Sellers,
Feinberg, a health care consulting firm based
in Philadelphia specializing in Medicaid and
transformative health care reform. The firm,
which advised Massachusetts on its reform
plan, can be reached by calling (215) 564-3014
or e-mailing info@sellers-feinberg.com.
VOL. 14, NO. 48 DECEMBER 11, 2006REPORT
COPYRIGHT ஽ 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. 20037 ISSN 1068-1213
A
HEALTH CARE
POLICY!
BNA’s

2. Enter Massachusetts
With health care costs skyrocketing and the nation’s
uninsured population swelling to 46 million, frustrated
states have taken matters into their own hands, not will-
ing to adopt a ‘‘wait and see’’ attitude with regard to on-
going efforts in Washington. Massachusetts, like many
states, has been continually working to find a way to
provide access to affordable health care for its unin-
sured population.
In April 2006, Massachusetts announced that through
determined work and inventive thinking it had discov-
ered a breakthrough solution that would allow the Com-
monwealth to expand health coverage to nearly all
those who need it and to realize innovative changes in
Medicaid, transforming it into a more effective pro-
gram.
This caught the attention of the Centers for Medicare
& Medicaid Services (CMS), which allowed the Com-
monwealth to keep $385 million in federal funds
(through its Section 1115 waiver). Expertly navigating
through all aspects of the Medicaid financing compo-
nent was critical to the identification of alternate terms
under which these dollars could be retained.
Simply put, the Massachusetts solution provided a
new approach to achieving universal coverage by incor-
porating sound thinking from government policymak-
ers, public and private sector providers, advocacy orga-
nizations, and industry stakeholders.
Due to the nature of the political dynamics within the
Commonwealth and the potential risks for the main
safety net providers—Massachusetts’s major hospitals,
any discord between these parties would have derailed
the proposal.
In fact, it is this broader vision that grabbed the inter-
est of the federal government and encouraged it to help
Massachusetts redirect funds away from hospitals pro-
viding unmanaged care directly to uninsured individu-
als and reformulate these dollars as subsidies to pur-
chase private health insurance.
Now, Massachusetts is promising to deliver universal
coverage (with individual mandates) in an environment
where government ensures the availability of affordable
coverage for all and provides subsidies through Medic-
aid, relying on the private market and competition to
suppress costs and increase quality.
Gov. Mitt Romney (R), his administration, a team of
state and federal lawmakers from both parties and the
lead consultants at Sellers Feinberg were able to de-
velop a plan designed to reduce the growth in overall
health care costs, increase provider reimbursements,
and improve coverage and care for a large portion of
the Commonwealth’s uninsured people, approximately
420,000.
It is important to note that all participants in the pro-
cess understood this reform effort with its promise of
universal coverage would not succeed unless the final
plan was truly comprehensive. Therefore, Massachu-
setts worked to ensure that certain efforts were made to
contain provider costs, modernize the health delivery
system and improve the mandates placed on insurers
and employers.
While employers remain the primary source of insur-
ance for individuals and families, the architects of the
new law made certain a key principle—the individual
mandate—was an integral component of the reform. As
such, all residents must obtain health insurance by July
1, 2007.
The individual mandate requires that people who can
afford insurance buy it. Individuals who fail to get
health insurance by July 2007 will first lose their per-
sonal exemption on their state taxes. In subsequent
years, they will have to pay a penalty that could be as
high as 50 percent of what an affordable health care
premium would cost.
The central mechanism by which health insurance is
purchased and provided, the Commonwealth Care
Health Insurance Connector, will be a clearinghouse
linking groups of people and businesses to pools of pri-
vate insurance plans and products. The Connector, a
quasi-governmental entity that is state-appointed (but
independently run), will help make insurance more af-
fordable by banding people together to secure dis-
counted group rates.
To further encourage the purchase of insurance, the
plan provides public subsidies for low-earning families
on a sliding scale according to income level. Residents
making less than 300 percent of the federal poverty
level, who are currently not eligible for Medicaid, will
receive government-funded premium assistance to aid
their purchase of private insurance plans. Those with
incomes above 300 percent of the federal poverty level
will be able to purchase new lower-cost policies from
private health insurance companies through the Con-
nector.
The Massachusetts’ reform agreement has caught the
attention of elected officials and health care stakehold-
ers across the country, and many are engaged in new
efforts to determine what is possible in their states.
Since Massachusetts revealed its plan, many want to
know if this dramatic reform can be recreated in their
state or even nationwide.
Not only is the significant restructuring of health care
good social policy, but as it now has the potential to
drive the market in a new direction, it engenders good
economics as well. With its sweeping proposal for com-
prehensive Medicaid and health care reform, the suc-
cess of Massachusetts’ plan has launched the Common-
wealth into the spotlight—leading many to wonder if
Massachusetts’ approach will emerge as a national
model for states seeking similar reform initiatives.
What About Other States?
While Massachusetts continues to move forward with
its ambitious plan to provide health coverage to its un-
insured residents, other states are trying to find an-
swers to the same problem. Could the effort being un-
dertaken in the Northeast work in other areas of the
country? Each with its own distinct challenges and ob-
stacles to overcome, states are being inspired by the
Commonwealth’s all-encompassing compromise and
are examining whether elements of the Massachusetts
model will work in their own states.
Michigan
Since taking office in 2003, recently re-elected Gov.
Jennifer M. Granholm (D) has worked to reduce health
care costs and expand access to health care in Michi-
gan. Through her administration’s efforts, she has ex-
tended affordable prescription drug coverage and
health care coverage to more than 292,000 people and
streamlined the state’s Medicaid system, allowing for
greater coverage at significantly reduced costs.
Granholm announced earlier this year that she wants
to dramatically reduce the number of uninsured indi-
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12-11-06 COPYRIGHT ஽ 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. HCPR ISSN 1068-1213

3. viduals in the state. For Michigan, this means insuring
the state’s 1.1 million uninsured through the governor’s
proposed Michigan First Healthcare Plan, and provid-
ing subsidized premiums to enable improved access to
affordable health care coverage.
Granholm’s plan would establish an Exchange (a
connector-type entity) to help to provide access to af-
fordable private insurance products for individuals and
small businesses. Her proposal would provide premium
subsidies for people to buy private insurance through
the Exchange and would cover adults with incomes up
to 200 percent of the poverty level.
Washington
Gov. Christine Gregoire (D) also is considering major
health care reform for Washington State. Currently,
Gregoire co-chairs the Washington Blue Ribbon Com-
mission on Healthcare Costs and Access, which is ex-
ploring ways to deliver accessible, affordable, quality
health care for all Washington residents. Today, the
state believes its health care system does not suffi-
ciently meet these quality-of-life concerns.
By the end of December 2006, the Blue Ribbon Com-
mission must recommend a sustainable five-year plan
to substantially improve access to affordable health
care for all Washington residents. Over the course of
the next five years, the Legislature will move to imple-
ment the vision of the commission to create a health
care system that provides every Washington resident
the ability to obtain needed health care at an affordable
price.
Presently, Washington provides health care to about
1.3 million children and adults. The state’s projected
cost for health and health-related programs will be $4.5
billion in 2006, which is nearly 28 percent of all state ex-
penditures. One of many reasons to reform the state’s
system is to enable it to provide high-quality health care
at lower costs. Many hope such reform also will impact
positively the manner in which private sector health
care systems operate in the Washington marketplace.
By 2012, the commission envisions a system that will
provide every Washington resident the ability to receive
necessary health care at an affordable price (all chil-
dren should be covered by 2010). To realize this vision,
both public and private sectors in Washington will need
to significantly improve access to affordable health cov-
erage while advancing the overall well-being of citizens
through preventive medicine and wellness programs.
New Mexico
This summer, New Mexico Gov. Bill Richardson (D)
proposed a major Medicaid expansion and possible uni-
versal coverage for all state residents. Depending on the
findings of the commission he appointed to explore uni-
versal insurance coverage options, expected next year,
New Mexico may embark on a proposal to provide uni-
versal health care by 2008.
In addition to appointing the task force, Richardson’s
proposal included four other major elements. First,
New Mexico would phase in employer-sponsored
health insurance benefits for companies doing business
with the state. Second, the state would determine the
number of state government employees who lack health
coverage. Currently, if employees decline enrollment,
the state does not check to see if they have coverage
through a spouse or other entity.
Next, New Mexico would look to maximize its Med-
icaid coverage. For fiscal year 2008, Richardson will
seek funding to increase coverage for adults through a
two-year, phased-in approach. The initiative will be spe-
cifically designed to help low-income adults earning up
to 100 percent of the federal poverty level.
And finally, Richardson would expand the state’s in-
surance coverage program to help more working
adults, raising coverage to those individuals under 300
percent of the poverty level with cost sharing based on
income. Expanding this public/private partnership with
small employers will help cover working New Mexico
residents who currently do not have access to reason-
ably priced insurance.
Indiana
In November Indiana Gov. Mitch Daniels (R) pro-
posed a simple yet original health plan that would pro-
vide health insurance coverage for more than 100,000
state residents, reduce smoking rates and immunize
more Indiana children. The health initiatives would be
funded by an increase in the state’s cigarette tax.
An estimated 14 percent of Indiana’s population,
more than 550,000 individuals, currently has no health
insurance. The proposed plan would be funded by an
increase in the state’s cigarette tax—which is the 36th
lowest rate in the country—and a variety of federal
funds.
Daniels has suggested an increase of at least 25 cents
but will ask the Legislature to determine the precise
amount. The number of uninsured who could receive
coverage would increase based upon the size of the
cigarette tax increase. With a 25-cent increase, it is es-
timated up to 120,000 people could receive coverage.
With a 50-cent increase, about 200,000 could receive
coverage.
The governor’s three-part health insurance coverage
plan would help state residents who can least afford
coverage. It would be available to those who earn less
than 200 percent of the federal poverty level and who
are without employer-sponsored health insurance. If
the plan receives approval by Indiana’s General Assem-
bly, the proposed effective date would be Jan. 1, 2008.
States Continue to Lead Reform
Medicaid is rapidly changing, and governors are
leading state-based Medicaid and health care reform
across the country. Even as Congress passes major
changes at the federal level, including the new opportu-
nities provided in the Deficit Reduction Act of 2005, the
pace of reform is likely to accelerate in the coming
years.
Now that the 2006 midterm election results are in, so
is the very real possibility that come January the
Democratic-held Congress may work to reinvigorate its
own brand of national health care reform—even as
many states pursue their own initiatives. It will remain
to be seen whether any such movement at the federal
level will work in tandem with the states’ efforts.
Following Massachusetts’s health care transforma-
tion, other states have been taking bold and creative
steps to improve health care for their own residents.
Governors, operating as the country’s agents for
change just as they did with welfare reform, are model-
ing different, effective ways to expand health coverage
to specific groups of people who need insurance but
cannot afford it.
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4. In the past, ‘‘state health care reform’’ meant expand-
ing public programs to cover tens of thousands of unin-
sured. Now, governors are considering reforms that
would cover hundreds of thousands of previously unin-
sured people by using a combination of public and pri-
vate sector approaches.
Oftentimes, states have been the ones to develop and
implement new policy solutions. The current health re-
form environment is no different. As state legislatures
convene in 2007, the challenge may well become bal-
ancing their desire to move forward with waiting to see
if transformational change will be adopted at the na-
tional level. Many will argue that it is the states that
must continue to lead.
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12-11-06 COPYRIGHT ஽ 2006 BY THE BUREAU OF NATIONAL AFFAIRS, INC., WASHINGTON, D.C. HCPR ISSN 1068-1213