In 2006, Governor Mitt Romney (R), working with a Democratic state legislature, passed and signed the Massachusetts Health Care Reform Act, a groundbreaking piece of legislation aimed at ensuring that every citizen of the Bay State possessed health insurance, while simultaneously lowering the cost of health coverage and improving access to quality care.
Unfortunately, the program in practice has been a colossal failure, expanding state bureaucracy and government control over the health care market and provider-patient dealings, while simultaneously driving up health insurance premia, increasing health care costs, and creating a chronic shortage of providers – all at an annual price tag of over twice the originally-estimated $600 million.
The Massachusetts Health Care Reform Act took a three-pronged approach to dealing with the “problem” of the state’s uninsured population, which was relatively low at the time (about 550,000 according to state figures, and 657,000 according to the U.S. Census Bureau).
First, it expanded subsidies for low-income (below 300% of the federal poverty line) residents to obtain health insurance. While this sounds like a valuable benefit being provided to indigent Massachusetts residents, the funding for those subsidies was primarily pulled from the state’s so-called “free care pool,” which had provided medical and mental health services to poor Bay Staters at locations ranging from community clinics to emergency rooms, regardless of their insurance status. As an ironic result of this program, more poor residents had access to subsidized insurance, but fewer could afford care when faced with a deductible and coinsurance – meaning the amount the patient had to pay up front before insurance kicked in, and the percentage of treatment costs past the deductible that fall on the policyholder. The burden of paying for service the Health Care Reform Act placed on the state’s indigent population, combined with the draining of resources from facilities that had previously cared for the poor free of charge, left a larger number of poor Massachusetts residents without access to care than before the system was ostensibly “reformed” to help them gain more affordable access to care.
Second, under the Health Care Reform Act, all businesses with over 11 employees located within Massachusetts were legally required to provide health coverage for their workers or face a fine of $295 per uninsured employee. Besides being a flagrant violation of the federal Employee Retirement Income Security Act (ERISA) – a federal law that, among other things, prevents states from mandating employer benefits – the employer mandate has failed to fulfill its primary purpose in the eyes of those who pushed for its inclusion in the bill: not enough employers have opted to pay the fine (rather than offer health insurance to employees) to cover the portion of the program cost ($45 million) that proponents expected. In fact, by Spring of 2008, only $5 million had been collected from businesses that declined to offer coverage to their workers – an amount less than one-half of one percent of the $1.1 billion the program cost state taxpayers that year. The vast majority of the rest of that cost had to be covered by diverting funds from the “free care pool,” which, again, severely limited the indigent population’s access to care.
Third, and by far most onerous, the Massachusetts Health Care Reform Act imposed a so-called “individual mandate” on the state’s population, making the failure to carry health insurance a violation of state law which that is punishable by a fine (the level of the penalty is currently $1,068 per individual,). The fine, which is collected along with state income tax, essentially operates as an onerous, regressive new tax on the uninsured (despite the fact that those who actually file and pay income taxes are statistically the least at risk of being uninsured). The fine can be avoided if an uninsured individual can prove to the state that “no affordable coverage is available” – something that over 20% of the state’s total uninsured have successfully shown, despite promises that the Health Care Reform Act would bring the cost of insurance down to a level that would be affordable by all of the state’s residents.
A new “independent agency,” called the Connector, was established by the state government to oversee the enactment of the employer and individual mandates and the implementation of health insurance subsidies for the indigent population. Along with monitoring compliance with those mandates, the Connector is responsible for determining what insurance policy each resident must enroll in, be they subsidized or paying full price, and for enforcing a rationing of care to those who qualify for subsidized coverage. Benefits for those who are below 300% of the poverty line (thus qualifying for subsidies) are limited by what the indigent individual is able to pay in terms of premium, deductible, and coinsurance, with those at the bottom of the income pyramid often qualifying for such severely restricted coverage that they would have been far better off remaining uninsured and continuing to receive care at facilities funded by the “free care pool.”
While the establishment of an agency to study the relationship between the uninsured and high health care costs and to help those who qualify for state-administered health coverage programs choose the best fit for their circumstances is not a bad idea in principle – Pennsylvania’s Health Care Cost Containment Council is a good example of one that functions well – the Connector has simply become another regulator, on top of the existing Massachusetts Department of Insurance, that gums up the health care market with excess regulation and adds to the cost of health insurance through the surcharges added to premia in order to fund its continued operation.
As with most government-related oversight boards, the Connector has been beset by requests from special-interest advocates, and it has had a very difficult time saying no to many of them. The result has been the imposition of onerous coverage mandates on the insurance policies state residents are now required by law to purchase. With a current total of 43 coverages that are required to be included on every single policy sold within the state, from coverage for the services of nurse midwives to Mental Health Parity (an innocent-sounding mandate that requires mental health to be covered, dollar-for-dollar, to the same level as physical health), insurance premium and health care costs have skyrocketed under the Health Reform Act. Further, the addition of so many mandates has actually caused nearly 200,000 previously insured Bay Staters to lose their coverage status because the prescription drug coverage in their private policies was no longer deemed “up to snuff” by the new gatekeeper of health insurance “quality” in Massachusetts.
Massachusetts’s attempt at health care reform has increased the number of insured residents by 443,000 (covering about 66% of those who previously lacked insurance). However, the program has cost far more than predicted ($1.1 billion in FY 2008 and $1.3 billion in FY09), due in part to the fact that over half of those added to the rolls of the insured qualify for some form of subsidy. As the program was hemorrhaging cash last fall, current Governor Deval Patrick (D) declared that it would be kept afloat at all costs, even though (quite ironically) the only way to continue funding it was to drain money from the public hospitals and community clinics that had already been providing care, under the free care pool, to those who were now appropriating that funding in the form of insurance subsidies. Further, the state’s redirecting of free care pool funding and imposition of caps on reimbursements for care has created an access problem by dramatically reducing the number of providers available to see and treat patients, regardless of whether those patients have insurance or not – a reinforcement of the fact that insurance, even when it is as universally prevalent as a government can make it, does not equal access to care.
Far from reducing the cost of health insurance, Massachusetts’s individual mandate has driven costs up at twice the average national rate. This was entirely predictable; after all, what can possibly reduce downward pressure on a price more effectively than a legal requirement to purchase it, whatever the cost? According to the Connector, the least expensive price for an insurance policy for a 50 year old non-smoker in 2008 was $3,599 a year ($299.94 per month), with a $2,000 deductible. Next door in Connecticut, that price was just $1,468 a year ($122.36 per month, with a $2,500 deductible) – and Connecticut hadn’t even spent $1.3 billion on controlling and engineering their state’s health care marketplace!
This disparity in premium costs across state lines demonstrates that one of the most effective steps that can be taken to reform the U.S. health care system is not to emulate Massachusetts’s over-regulated and over-priced attempt at “reform,” but to create a true national health care marketplace by allowing the purchase of insurance policies across state lines – a practice that is currently prohibited by federal law. Permitting residents of one state to purchase coverage under another state’s rules would prevent states like Massachusetts from requiring residents to purchase incredibly overpriced insurance policies loaded up with unnecessary coverage mandates, because residents would be free to simply look elsewhere for a less costly and less cumbersome policy. This competition would force states to pay less attention to special interest groups pushing for their pet coverage to be added to that state’s roster of mandates, and more to becoming competitive in that national marketplace – something which would naturally drive down the cost of insurance premia.
Rather than try to foster competition between insurers and providers, to break away from the third-party-payer model that necessarily drives up costs due to a lack of communication and pricing transparency, or to promote effective health coverage solutions like consumer-driven health care and retail clinics, the architects of Massachusetts’s program put their faith in bureaucracy, regulation, and government control.
The result could not be more clear: with billions having been spent on a program that has failed to improve access to care, that has failed to prevent insurance costs from rising at twice the national average, and that has failed to extend coverage to more than two-thirds of those who previously lacked it, the Bay State’s grand foray into “universal health care” via individual mandate has been a colossal failure, and should serve as an example of what not to do, rather than what to do, for all who seek real health care reform.