How Not to Reform Health Care

Massachusetts is widely touted as a model for health-care reform. It isn’t.

By Michael Tanner
Tuesday, June 9, 2009

As the national debate over health-care reform begins, many in Congress are looking to Massachusetts as a model for what that reform might look like. Indeed, from mandates and subsidies to some form of exchange or “connector,” many of the key components of the Massachusetts reforms are likely to end up in the bill to be voted on this year.

But three years after it was voted in, experience suggests the “Massachusetts model” actually provides an object lesson in how not to reform health care. The program has failed in its main goal 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.

There is no doubt that the Massachusetts program has reduced the number of people without health insurance in the state — but by how much is a matter of considerable dispute. According to official statistics, the state’s uninsured rate has declined from 10.4 percent in 2006 to just 2.6 percent today. However, there are several reasons for doubting the accuracy of this number. For example, a door-to-door survey by the Census Bureau in March 2008 estimated that 5.4 percent of state residents were uninsured. And an examination of state income-tax returns indicates that roughly 5 percent of residents were uninsured as of Jan. 1, 2008. The best estimates suggest that more than 200,000 Massachusetts residents remain uninsured, out of the 670,000 uninsured in 2006. That’s a far cry from the “universal coverage” that was promised when the bill was passed.

Health-care costs continue to rise much faster in Massachusetts than in the nation as a whole. Proponents of the reform promised that it would reduce costs. Gov. Mitt Romney said “the cost of health care would be reduced” and the plan would make health insurance “affordable” for every Massachusetts citizen. Supporters went so far as to suggest that the reforms would reduce the price of individual insurance policies by 25 to 40 percent. In reality, since the program became law, insurance premiums have been increasing by 10 to 12 percent per year, nearly double the national average. On average, health insurance costs $16,897 a year for a family of four in Massachusetts, compared to $12,700 nationally. Meanwhile, total health-care spending in the state has increased by 28 percent.

New regulation and bureaucracy are limiting consumer choice and adding to costs. A new mandate for prescription-drug coverage was added, and high-deductible policies were restricted. Some Massachusetts residents who were happy with their old insurance policies have had to change their coverage in order to comply with the mandates.

Although much of the burden falls on individual policy-holders, the costs to the taxpayers have also skyrocketed. Despite one tax increase already, the program faces huge deficits in the future. As a result, the state is considering caps on insurance premiums, cuts in reimbursements to providers, and even the possibility of a “global budget” on health-care spending — with its attendant rationing.

The reforms have added a new burden on companies, especially smaller ones, wanting to do business in the state. The Small Business and Entrepreneurship Council cites the Massachusetts health-care regulations and the mandate on companies as its reasons for ranking Massachusetts dead last among the 50 states for business-friendly health-care policies.

A shortage of providers, combined with higher demand, is increasing waiting times to see a physician, especially primary-care providers. The wait for seeing an internist, for example, has nearly doubled since the reforms were implemented.

Supreme Court Justice Louis Brandeis rightly called America’s state governments “the laboratories of democracy.” States are able to experiment with policies on a small scale before these policies are adopted by the whole nation.

Let us hope that Congress learns from the failure of the Massachusetts experiment.