- Overall, mandated coverage areas account for 12.8%-14% of health insurance premiums
- Changing state law would not affect at least half of the mandates
- areas covered by federal law
- areas health insurers would cover any way
- obsolete treatments
- 6 areas account for most of mandated costs
- maternity care
- mental health
- home health
- preventive care for children
- infertility services
- hearing aids
- Of these 6 areas, 3 would be unaffected by state action
- Repeal of the other 3 would result in significantly less than 5% savings
- Therefore, repealing mandated coverage areas is far from a fiscal panacea and other ways of controlling health care costs should be explored.
Controlling healthcare costs is a hot topic these days. One issue that is being debated is whether changing mandated areas of coverage is one way in which savings can be found (see for example http://www.mackinac.org/14080 regarding the issue in Michigan and comments on this website). Would changing the mandated coverage areas in Massachusetts actually have a significant impact on healthcare costs? Although the data clearly exist to answer this question, the answer is not completely easy to see.
When Massachusetts mandated “universal” health coverage in 2006, the law required that there be a review of the financial impact of all mandated coverage areas before any new ones could be enacted. That report was issued in 2008 by the Division of Healthcare Finance and Policy; it relies on data from 2004-2005 and is available at http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/mandates/comp_rev_mand_benefits.pdf. At that time, Massachusetts had 26 mandated coverage areas. Since the publication of that report, mandates for two new areas have been enacted, two have been expanded and a variety of others have been discussed. Reports on all of these are available on the Division’s website at http://www.mass.gov/?pageID=eohhs2agencylanding&L=4&L0=Home&L1=Government&L2=Departments+and+Divisions&L3=Division+of+Health+Care+Finance+%26+Policy&sid=Eeohhs2. In the 2008 report, the 26 mandated areas of coverage are estimated to account for 12% of the cost of premiums. With the more recent enactments, that number stands between 12.8% and 14%.
The report divides the mandates into two types: 1) those where changes in state law might well affect healthcare cost and 2) those where changes to the state law would be expected to have little or no impact on healthcare costs. This second group is made up of areas covered by federal mandates, where removal of the state mandate is irrelevant, areas that would be covered by insurers even in the absence of a mandate due to either their cost-effectiveness for the insurer or consumer demand, and those areas in which spending is so low as to be essentially non-existent (this is due mainly to mandates for obsolete treatments-see below).
Of the 12% of premiums estimated to be due to mandated areas in 2008, 80% of that cost, or 10% of premiums, was due to five areas: maternity, mental health, home health, preventive care for children, and infertility services. These areas still represent the lion’s share of the cost of mandated areas. Of these, two areas, maternity care and preventive care for children, in 2008 fell in the second category, where action by the state is expected to have no impact on costs. Mental healthcare has since moved into that category (see below).
The single largest mandated coverage area is maternity care, representing 3.73% of premiums. As it is required by federal law (http://www.insurance.wa.gov/publications/health/2105-Mandates.pdf beginning on page 5 provides a list of federally mandated areas), and also heavily demanded by consumers, removal of the state mandate would have no effect on insurance offerings and therefore no effect on cost.
The second largest area is mental health, which in the 2008 report represented 2.21% of benefits. In 2008, both the Commonwealth of Massachusetts and the federal government passed mental health parity acts, which increased the coverage in this area, raising it to 2.22-2.5% of premiums (http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/mandates/mental_health_parity_report.pdf). Since the federal government passed a similar bill, it is now the case that the Massachusetts mandate no longer has any impact on cost, as insurers are required to provide this coverage by federal law. The enactment of Massachusetts law regarding so called “collateral” services in children’s mental health is expected to have a negligible impact on costs (http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/mandates/childrens_mh_mand_ben_review.pdf).
The third largest area is home healthcare, representing 1.93% of premiums. No changes have been enacted in this mandate since the 2008 report, so this is probably still a reasonable estimate of its cost.
In fourth place is preventive care for children at 1.12% of premiums. As mentioned above state action in this area is expected to have no impact on costs.
The last of the top five is infertility treatment. In 2008, this area was estimated to be responsible for 0.89% of premiums. Recently, the infertility mandate has been extended to bring it in line with medical recommendations. This is expected to add between 0.04% and 0.31% of premiums, raising the total to between 0.93% and 1.2% of premiums (http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/09/Infertility_Report.pdf).
Since the 2008 report, two new mandates have been enacted, insurance coverage for autism treatment and for hearing aids. The addition of the requirement for autism treatment is expected to add between 0.24 and 0.49% of premiums. It is expected to also lower some state costs in other areas as health insurers pick up coverage (http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/10/mb_autism.pdf). Coverage of hearing aids is expected to add between 0.32% and 1.29% of premiums (note that this mandate does not affect those on Medicare, which does not cover hearing aids, and therefore will be primarily applicable to those under 65) (http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/10/mb_hearing_aids.pdf). Other new mandates have been proposed, but thus far have not been passed.
These data suggest that if the Commonwealth were to repeal all of the most costly mandates for which such repeal would have an effect, we would be repealing the mandates for infertility and home healthcare as well as the newly enacted hearing aid legislation. This would result in a maximum savings of 4.42% of premiums.
There are many arguments for and against the mandates on non-fiscal grounds, which I will not discuss here. It should be noted, however, that the true savings of repealing the home healthcare mandate and the hearing aid mandate are probably less than might be expected. In the case of the home healthcare mandate, repeal might cause care to take place in a more expensive care environment (this fact may well mean that insurers would continue to cover home healthcare even in the absence of a mandate). For hearing aids, there is expected to be savings further down the line, as those who can more readily receive hearing aids need fewer services for speech and mental health issues. Thus the 4.42% maximum savings is likely a large overestimation of the actual potential savings.
Although in the effort to contain rampant healthcare cost increases, it is important to consider every option, the data show that repeal of mandates is not the panacea that some suppose. This does not mean that a watchful eye should not be kept on mandates. So long as we continue to propose and pass new ones, the amount of spending attributable to them will rise, albeit slowly. In addition, as treatment costs change, the estimates we have now will no longer be valid. It would therefore be wise to require a periodic review of the entire mandate picture rather than solely of newly proposed legislation.
In addition, several mandates (notably the autism one) are very specific about the treatments they cover. If at some point, these treatments are no longer the ones of choice, these mandates will be obsolete. This is the case, for example, with the mandate for bone marrow transplants for breast cancer (see for example http://content.healthaffairs.org/content/20/1/207.full). These mandates will remain on the books, causing health insurers to continue to offer coverage for treatments that no one actually needs and coverage of the newer more up-to-date treatment will not be covered by the existing mandate. While the effect on cost of obsolete mandates is negligible, a periodic review of the medical efficacy of existing mandates (a review which is required of newly proposed ones) might well be sensible.
Mandated coverage areas do increase the cost of healthcare. The amount of the increase, however, is quite small, and clearly less than 5%. Although periodic review of mandates is sensible for many reasons, repeal of mandates for fiscal reasons is not the solution for rising healthcare costs. It is, at best, a tiny drop in the bucket.