Massachusetts Slashes Funding, Rations Care

Published August 6, 2009

Massachusetts has cut funding for its statewide taxpayer-funded health insurance program by $115 million, or 12 percent, despite increased enrollment, because of a drop in available funding resulting from the ongoing national economic downturn.

Enrollment in the program, called Commonwealth Care, grew from 165,000 to 177,000 between April and July of this year, according to state figures. Officials expect enrollment to rise to 212,000 by 2010.

Rationing Begins

Commonwealth Care administrators plan to address the shortage in funding and increase in enrollment by rationing care to those signed up for the program.

The state plans to delay providing benefits to up to 18,000 residents who qualify for fully funded health care, and to eliminate dental coverage for 92,000 low-income enrollees. Coverage also may be revoked for 28,000 legal immigrants who were covered under Commonwealth Care last year. The state is also considering slowing payments to companies that provide the insurance policies for Commonwealth Care enrollees.

Several federal legislators, including Massachusetts Senator Edward Kennedy (D), have specifically cited Commonwealth Care as a model for their national health care reform efforts. The program’s many shortcomings show it should not serve as an example of what to do, said Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute.

Model Failure

“Massachusetts illustrates the problem with relying on government to secure your coverage,” said Scandlen. “Faced with lower revenues in a time of recession, the state finds it necessary to reduce spending. So the state government is allowed to drop coverage when it needs to tighten its belt during hard economic times, but working people are not allowed to make that same choice.”

Michael Tanner, director of health and welfare studies at the Cato Institute in Washington, DC, believes the claims of success of the Massachusetts health care program, and its accompanying individual mandate law, have been much over-hyped.

“There is no doubt that the Massachusetts reforms have reduced the number of people without health insurance in the state, but by how much is a matter of considerable dispute,” Tanner said. “According to official state statistics, the state’s insured rate declined from 10.4 percent in 2006 to just 2.6 percent today, leaving just 167,300 state residents without insurance. However, there are several reasons for doubting this number.”

Those reasons include uncertainty about the number of uninsured in the Bay State before the individual mandate was imposed, and the lack of data on program enrollment since the state’s budget woes began forcing it to cut subsidies for coverage.

Rising Costs

In addition, Tanner said, “The Massachusetts model is unsustainable. It does not address one of the primary problems with America’s health care system today: rising health care costs.

“[When designing the law], Massachusetts health reformers rejected proposals that would have reduced the rising cost of health insurance, such as eliminating regulations that drive up insurance premiums or limit competition in the insurance industry,” Tanner added. “They also neglected to create incentives, such as increased cost-sharing, for consumers to become more value-conscious in their purchasing decisions. Instead, they increased regulatory costs and then simply threw money at the system through subsidies. Not surprisingly, therefore, the cost of health care—and health insurance—in Massachusetts continues to rise.”

Premiums for family coverage in Massachusetts now average more than $15,000 per year, and since Massachusetts’ health care mandate became law, health-sector administrative costs have risen by an additional 4.3 percent, according to state figures.

What Not to Do

“Experience so far suggests that the ‘Massachusetts model’ actually provides an object lesson in how not to reform health care,” said Tanner. “The program has failed even by its own goal criteria of achieving universal coverage. It has failed to restrain the growth in health care costs. And it has greatly exceeded its initial budget, placing new burdens on the state’s taxpayers.

“At the same time, the Massachusetts Plan has increased bureaucratic control over the state’s health care system, limiting consumer choice,” Tanner said, “and it has set the stage for still more state intervention in the future, including price controls and explicit rationing. Health care reformers in other states and at the federal level should look carefully at the failures of the Massachusetts model, and learn from them.”

Thomas Cheplick ([email protected]) writes from Massachusetts. Joe Emanuel ([email protected]) writes from Georgia.