Policy Documents

The Massachusetts Health Plan: Much Pain, Little Gain

Aaron Yelowitz and Michael F. Cannon –
January 19, 2010

In this Policy Analysis, the authors account for the 2006 Massachusetts health insurance law that mirrors the legislation currently before Congress. After signing the measure, Gov. Mitt Romney (R) wrote, “Every unin- sured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced.” But did the legislation achieve these goals? And what other effects has it had? This analysis is the first to use Current Population Survey data for 2008 to evaluate the Massachusetts law, and the first to examine its effects on the accuracy of the CPS’s uninsured estimates, self-reported health, the extent of “crowd-out” of private insurance for both chil- dren and adults, and immigration of new Massachusetts residents.

The authors reveal that Massachusetts’ individual mandate induces uninsured residents to conceal their actual insurance status. The official estimate reported by the Commonwealth almost certainly overstates the law’s impact on insurance coverage by 45 percent. There is also evidence of substantial crowding-out of private coverage among low-income people. The law appears to have compressed self-reported health outcomes, without necessarily improving overall health. The study suggests that more than 60 percent fewer young adults are relocating to Massachusetts as a result of the law. Finally, the authors conclude that leading estimates understate the law’s cost by at least one third or more.

There are important lessons for legislation moving through Congress. As in Massachusetts, there has been no effort to estimate the cost of the private health insurance mandates that legislation would impose on individuals and employers.

Aaron Yelowitz is an associate professor of economics at the University of Kentucky and an adjunct scholar at the Cato Institute. Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.