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Bay State's Plan, a Model, Still Fraught With Problems

WHEN Massachusetts Gov. Michael Dukakis unveiled the state's groundbreaking universal health-care act in April 1988, it was hailed by many as a model for the rest of the United States. The act promised that by 1992, every Massachusetts resident would able to afford to purchase reasonably priced health insurance.

The Bay State's experiment has been buffeted by a regional economic slowdown, significant state budget deficits, and the threat of skyrocketing costs. So far, however, it remains on course.

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``It's been a rocky year and a half,'' admits James Hooley, commissioner of the Massachusetts Department of Medical Security. ``But we're still in business.''

The act, which is being implemented in several steps, provides for a four-year transition period before becoming fully effective. By the end of this year, 100,000 of Massachusetts' estimated 600,000 uninsured persons will be covered by the program.

The act takes full effect in 1992, when most employers with six or more workers will be assessed $1,680 yearly per employee. If the employer provides health-care insurance, he can deduct the cost of those premiums from his annual assessment.

This money, with additional funding from the state, will go into a pool to provide insurance coverage to those workers whose employers do not provide it, to those working for smaller firms, and to the self-employed.

What this will cost the state is not clear. The 1989 payments to hospitals were met only after the legislature authorized an emergency bond issue to raise the money. Governor Dukakis's spartan budget proposal for fiscal 1991 calls for continued on-schedule implementation of the program.

But many are concerned about potential cost to the private sector. The assessment is subject to an escalator clause after 1992, notes Richard Mastrangelo, general counsel of Associated Industries in Massachusetts.

``It could be like the Social Security tax, which started low, but now has skyrocketed,'' Mr. Mastrangelo says. With state health-care costs already 35 percent higher than the national average, and costs nationally rising at 1.5 to two times the consumer price index, ``it will become a competitiveness problem for the state,'' he says.

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But the state's Mr. Hooley says the rising cost of health care, not the universal insurance program, is the problem. The escalator is pegged to a market basket rate of inflation for health care, which was 8 percent nationally last year, he says. This is far less than recent insurance rate increases of from 20 percent to 100 percent in Massachusetts. In addition, he says, the law contains several provisions which will help in the fight to control health-care costs.

There are still hurdles to overcome, however. A study released last week by Hooley's department found several problems facing the small-business health insurance market.

The market study showed that small groups must pay more than large groups; employees with preexisting medical problems are almost always excluded by insurers; older workers get charged more; and premiums for the whole group can rise dramatically if one member has a serious illness.

These problems must be resolved in order to get more small businesses to provide health insurance to employees, Hooley says. The department plans a series of public hearings in March to explore possible solutions.

There may also be legal challenges to the law.

Federal law prohibits states from requiring employers to provide their workers with health insurance.

Hooley says he expects some sort of legal challenge, ``but our people believe we have a reasonable case.''

Dr. Stephen Davidson, an associate professor of health-care management at Boston University, says the program does not address what he diagnoses as the primary cause of health-care cost increases: multiple payers. This results in everyone in the system trying to push his costs on to someone else, he says.

``The plan is a good thing in that it tries to cover people not covered by insurance. But the state is still only one payer among many, and will be faced with financial constraints,'' Dr. Davidson says. He believes only a federal program which provides for one payer can keep costs down.

``The program doesn't solve all the issues in health care,'' Hooley says. ``But it does begin to address the problem and bring everybody in....

``It's not perfect, but better in my estimate than what we have in other states, where they are not trying to address the issues at all.''

On Page 7 of the March 2 edition, the 1990 tax of $16.80 on Massachusetts businesses is different from the $1,680 assessment, effective in 1992.

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