Letter to Health Care Conference Committee on MHTC Reform Priorities

March 10, 2006

Senator Richard Moore
Chairman
Joint Committee on Health Care Financing
State House, Room 312-D
Boston, MA 02133

Dear Chairman Moore:

Despite the rancor over new taxes and details of a legislative compromise that has yet to be hammered out, Massachusetts still has an opportunity to institute historic health care reform this legislative session.  The Council is working with legislative and Administration leaders, health care providers and other business groups to salvage a compromise more consistent with what we have been actively supporting since last summer that will expand insurance options for hundreds of thousands of Massachusetts residents, improve the cost accountability for those contributing to health care services, and reduce the burden on employers who already offer health insurance but have been stuck paying into a broken system for decades.

The public focus has been almost exclusively on the proposed $295 tax on employers that do not offer health insurance to their employees.  While this should not be the entire focus of the debate, the Council opposes this new tax for the following reasons:

• There was a viable option – Senate President Travaglini’s bill – on the table that included an individual mandate, an exchange that would allow people to purchase flexible insurance products at pre-tax prices, and would have allowed the state to secure nearly $400 million in annual Medicaid funding.  All without imposing any new costs on businesses.  The plan, unanimously approved by the Senate, was projected to insure an additional 300,000 people - or more than half of the estimated uninsured residents in Massachusetts.  Both Governor Romney and Senate President Travaglini resisted any new tax on employers and we feel that undermining their resistance by endorsing a new tax was unwise in political and public policy terms;

• Legislative history overwhelmingly indicates that new taxes such as the one proposed last Friday never reduce or disappear over time – even if they outlive their usefulness.  In fact, there are already indications that the $295 number – up from $62 just two weeks ago – might increase again before this debate is over.  Past examples of targeted tax funds being diverted from their original purpose include the Medical Security Trust Fund, the Workforce Training Fund and the tobacco settlement funds, to name just a few.

• It is uncompetitive: no other state imposes such an assessment and it would be piled on other high costs facing Massachusetts employers.  As the Massachusetts Taxpayers Foundation wrote in opposition to a health care payroll tax: The proposed payroll tax would also have significant negative economic impacts, placing an added burden on the Massachusetts economy at a time when the state’s job growth is badly trailing the nation’s. Firms operating in Massachusetts face some of the nation’s highest labor costs, health insurance premiums, energy costs and unemployment insurance taxes. A new payroll tax would only worsen the competitive disadvantages that these firms already must contend with as a result of these high costs.  While the proposed tax is intended to be targeted and not broadly applied initially as a payroll tax, we believe it would still have a chilling effect on the state’s economy.

So not only will this tax place a burden on employers that doesn’t exist in other states, it doesn’t address the fairness issue that most of those supporting the creation of a new revenue stream last week have been touting. 

If this were about fairness then the new tax would have been accompanied by a reduction or elimination in the $62 assessment that providing employers contribute to the free care pool.

• To his credit, House Speaker Sal DiMasi initially proposed relief for providing employers in his health care bill.  If that concept were to emerge as part of a package that also expanded the burden of paying for free care to those firms who do not provide insurance, we would support the package—if it also contained several related provisions. 

• We would also recommend well defined safeguards to ensure the assessment will not rise, including that the control for setting the assessment on an annual basis be given to the state Auditor or Inspector General. The ceiling for non-providers would not exceed $295 per employee and the ceiling for provider would not exceed $62.

• In terms of actually reforming the system, three prerequisites for the Council are the creation of a health care exchange that will allow residents to purchase flexible health plans on a pre-tax basis, instituting an individual mandate for purchasing health insurance and creating system-wide cost and quality transparency.  As Harvard Pilgrim Health Care CEO Charlie Baker and others have been saying: the only element discussed in the health care reform bill that will reduce costs is transparency.  Physician fees vary by 30 percent or more.  And provider payments can vary by up to 300 percent or more in certain cases.  We need to lift the veil over the system and use information to influence the market and patient and doctor behavior.  All three versions of the health care reform bill offer different versions of transparency.  But for transparency to be effective, the manner in which the information is managed and proliferated matters.  Attached please find a memo from the Council and other organizations outlining what constitutes an effective transparency structure.

• As another matter of fairness, the conference committee should devise a better system for distributing the free care pool funds to providers based on utilization.  The current system does not properly compensate hospitals for the patients they serve.  If we are changing how the pool is funded, then it makes sense to change the way funds are paid out of the pool.

The CEO members of the Massachusetts High Technology Council are committed to supporting true reform of the state’s health care system.  If you have any questions about the priorities outlined in this letter, please feel free to contact me.

Sincerely,

Christopher R. Anderson
President