A Limited Health-Care Success in Massachussetts

"Right now the Gov. Romney/Massachusetts' plan gets a failing grade on the ground," says Cato's Michael Cannon. "Massachusetts's pioneering plan to provide universal health coverage is off to a good start," enthuses The New York Times.

Signed into law on April 12, 2006, Massachusetts' health reform has become a Rorschach test for reformers: Advocates of free-market plans see the failure of government intervention. Single-payer supporters see the folly of private heath insurance. What very few are seeing is the Massachusetts plan.

But the Massachusetts plan is an interesting experiment in its own right. The product of a compromise between former Gov. Mitt Romney and an overwhelmingly Democratic state legislature, the Massachusetts plan is one state's attempt to rationalize its insurance market and get within spitting distance of universality. The plan made insurance more straightforward to buy, merged the individual and small-business markets to increase their purchasing power, implemented subsidies to make it more affordable for low-income residents to purchase health insurance, and instituted an individual mandate that forces nearly all residents to show proof of coverage or face a financial penalty.

All of which makes the Massachusetts plan a fairly ambitious initiative. But compared to the problems facing health-care, it's extremely modest. Health care reformers talk a lot about "comprehensive health reform." They mean reform that addresses all three parts of our health-care crisis: access (how many people have care), cost (how much they're paying for it), and quality (how good it is). The Massachusetts plan was not comprehensive health reform -- it did virtually nothing for cost or quality. (The legislation even set up a commission to look into cost and quality -- politician-ese for doing nothing). Rather, the Massachusetts plan sought something far simpler: Spend what money was necessary, and impose what penalties were necessary, in order to achieve something very close to universal health coverage.

Did it succeed? We don't know yet. The plan has a three-year implementation process and we're about halfway through. The early evidence suggests that the plan is on track to achieve its goals. But even if it were to prove fully successful, it wouldn't be enough to solve Massachusetts' health-care problems, much less the nation's. Without solving cost, you can't solve health care. The question is whether expanding coverage helps create the political incentives to face down cost.

Much of what we do know comes from an Urban Institute survey that studied working-age adults in the fall of 2006, which was before the plan's implementation, and then surveyed them again in the fall of 2007, a year after the plan came into effect. Over that time period, the uninsured rate for working-age adults dropped by about half, to 7.1 percent. The uninsurance rate for adults with incomes below 300 percent of the poverty line dropped by 11 percent. And this study tracked the period before the individual mandate really went into effect, at which point the program saw its largest surge in enrollment. The best estimates now suggest the uninsured rate is somewhere between 5 percent and 7 percent.

Covering this many adults has cost a fair amount of money, and the Massachusetts plan is coming in at about $150 million over budget. The reason? There are more uninsured people in Massachusetts than experts originally thought, and the response has been more enthusiastic than expected. Some of the plan's opponents have used this to blast the plan as a typical case of inefficient government. "They make it sound like the Big Dig," complains Jon Gruber, an MIT economist heavily involved in the plan's creation. "It's not. We're covering the uninsured and it turns out there's a lot of the uninsured. If you were doing the Big Dig and it turned out the tunnel was six times as long, you wouldn't be surprised it cost six times as much."

Insofar as the plan's point was to cover the uninsured, covering more of the uninsured may be pricey, but it's not a failure. It's an expensive success. A more relevant measure of the plan's efficiency is costs per enrollee, which have been lower than expected. Cost per enrollee came in under budget in 2007, by about $2 a month. In other words, the program is operating a bit more efficiently then expected, but covering more people than anticipated.

As for the individual mandate, there's very little data, because it didn't kick in till this year. Essentially, there are two questions with the mandate: Is it feasible (can the state gather the information for enforcement?), and is it sustainable (what's the political fallout when the mandate comes into effect?).

Here's what we do know: The underlying mechanism has proven extremely successful. The mandate is enforced through the tax code: All residents of Massachusetts have to report their insurance status, including proof of coverage, on their tax forms. Last year 98.4 percent of the state complied. That clears up the first question: The mandate's underlying mechanism actually works. People will report their coverage status, which means you can figure out who does and does not have insurance, and act accordingly. Next comes implementation: Does the mandate enrage those exposed to it? Does it compel them to purchase insurance? Some of both? We should know the answer in about a year.

For now, however, the program enjoys broad public support. According to the Urban Institute, 68 percent of working-age adult residents approved of the plan in the fall of 2006. In the fall of 2007, a year into implementation, 71 percent approved. Similarly, a Harvard School of Public Health survey found 61 percent approval in September 2006. Come June 2007, 67 percent approved. The program is becoming more, rather than less, popular with time.

Presumably, that's because the plan is succeeding at what it set out to do -- increase health-care coverage in Massachusetts. But it's failing at what it never tried to do -- substantially cut costs. With health costs rising at their traditional velocity, the Massachusetts plan is currently an unsustainable success. Jon Kingsdale, executive director of the Commonwealth Health Insurance Connector Authority (the plan's governing body) concurs: "I don't think a major increase in access is ultimately sustainable unless we contain costs."

As care becomes less affordable, fewer people can afford it. As Kingsdale says, "We have a national policy on cost containment. Every year, when there are double digit increases [in health spending], we throw another 2 million people on the rolls of the uninsured." In theory, the individual mandate forbids that response. The subsidies, which are available to people earning up to 300 percent of the poverty line, mean the state is committed to footing the bill for low-income people. The mandate presumes residents can afford coverage, and it'll spark a political revolt if voters find themselves penalized for not buying a product they can't afford. In other words, one of two things can happen: Either Massachusetts can figure out how to control costs, or it can let the program become unaffordable and repeal the legislation.

This is, at least in the abstract, the political logic of focusing on access first: Expanding access creates pressures that force the system to figure out how to control costs. There's evidence this is beginning to happen in Massachusetts. The legislature is beginning to consider cost-control measures. "We call it health care reform 2," says Kingsdale. If they fail, the Massachusetts plan will go down in history as an interesting, well-intentioned, but ultimately inadequate experiment. But if their commitment to coverage leads it to stare down costs, it can look forward to the day when everyone looks at the plan and sees the same thing: a success.