Study: Massachusetts Universal Care Plan Is Mostly Bad, Ugly

Published August 1, 2007

A study released in late June by the Cato Institute assesses the strengths and weaknesses of Massachusetts’ universal health care plan, which took effect on July 1.

“The Massachusetts Health Plan: The Good, the Bad, and the Ugly,” by David Hyman, shows the program’s best result to date is that it leads the way for states to re-emerge as significant policy-setting entities in the health care arena.

“Since many states have balanced-budget requirements, and none can print money, it will be interesting to see how these state-based reform strategies are modified when the fiscal reality of their plans slaps reformers in the face,” Hyman writes. “Perhaps the return of the states will mark the return of fiscal rectitude and small (state) government.”

Rising Costs

The “bad” about the plan, Hyman writes, is its mandate forcing employers with 11 or more workers who do not make a “fair and reasonable” contribution to their health insurance to pay an annual fee to the state.

“There is little or no evidence that pay-or-play will achieve universal coverage,” Hyman writes, citing how poorly it has worked in Hawaii, the only state with such a mandate still in effect. After 30 years, 10 percent of Hawaiians are uninsured–a figure that is either “higher” than or “comparable” to Massachusetts’.

The “ugly” will kick in after the fourth year, Hyman says, when the program’s true costs will be shouldered. Though the projected cost for the health plan is approximately $1.4 billion per year from now until 2010, Hyman said, no amount has been budgeted for the fourth year and beyond.

“The out-year costs are likely to be large because the Massachusetts plan does nothing to control the cost of health care,” Hyman writes, “and health care in Massachusetts is already pricy because of the heavy reliance on teaching hospitals and academic medical centers.”

Over-Regulating Insurance

Though only time will tell whether Massachusetts’ health plan will work, there are enough “bad” and “ugly” features to raise serious concerns, “particularly when the desire to over-regulate the health insurance market appears to be hard-wired into Massachusetts policymakers’ DNA,” Hyman writes.

“If we want to make health insurance more affordable and avoid the ‘bad’ and the ‘ugly’ of the Massachusetts plan, Congress–or, barring that, individual states–should consider a ‘regulatory federalism’ approach,” Hyman continues. “Under such an approach, insurers and insurance purchasers would be required to subject themselves to the laws and regulations of a single state but allowed to select the state.”

Polling Citizens

Massachusetts citizens generally support the new health care reform law, according to a Kaiser Family Foundation poll conducted in June.

Of 1,003 respondents, 67 percent of those who know of the new law support it, while 16 percent oppose it.

“Given reports of sticker shock and ongoing debate about the law, we might have expected overall support to fall, but in fact, support is widespread and has gone up,” noted Kaiser Family Foundation President Drew Altman in a news release.

Michael F. Cannon, director of health policy studies at the Cato Institute, said the Massachusetts plan won’t work.

“The Massachusetts health plan is a well-intentioned attempt to solve a problem that no state government can solve,” Cannon said. “Congress created our employment-based health insurance system, and only Congress can fix it.

“Congress should also fix the Medicaid program, which tempts state officials to expand government at every opportunity–the Massachusetts health plan being a prime example,” Cannon added. “As David Hyman recommends, states should focus on making health insurance more affordable, primarily by allowing their residents to purchase health insurance policies licensed by other states.”

Dr. Sanjit Bagchi ([email protected]) writes from India.