NCPA - National Center for Policy Analysis

THE MASSACHUSETTS HEALTH PLAN: MUCH PAIN, LITTLE GAIN

January 20, 2010

In 2006, Massachusetts enacted a sweeping health insurance law that mirrors the legislation currently before Congress.  After signing the measure, Gov. Mitt Romney (R) wrote, "Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced."  The Cato Institute's Aaron Yelowitz and Michael F. Cannon wonder if the legislation achieved these goals and what other effects it had? 

Using the Current Population Survey data for 2008 to evaluate the Massachusetts law, Yelowitz and Cannon concluded:

  • Massachusetts' individual mandate induces uninsured residents to conceal their true insurance status; even setting that source of bias aside, the official estimate reported by the Commonwealth almost certainly overstates the law's impact on insurance coverage, likely by 45 percent.
  • In contrast to previous studies, there was evidence of substantial crowdout of private coverage among low-income adults and children; the law appears to have compressed self-reported health outcomes, without necessarily improving overall health.
  • More than 60 percent fewer young adults are relocating to Massachusetts as a result of the law.
  • Leading estimates understate the law's cost by at least one third, and likely more.

The results hold important lessons for the legislation moving through Congress, say Yelowitz and Cannon.  As in Massachusetts, there has been no effort to estimate the cost of the private health insurance mandates that legislation would impose on individuals and employers.  The costs may therefore be far greater than legislators and voters believe, while the benefits may be smaller than the conventional wisdom about Massachusetts suggests. 

Source: Aaron Yelowitz and Michael F. Cannon, "The Massachusetts Health Plan: Much Pain, Little Gain," Cato Institute, Policy Analysis no. 657, January 19, 2010.

For text:

http://www.cato.org/pub_display.php?pub_id=11115 

 

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