Examining the Massachusetts Health Care Plan

June 28, 2007

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WASHINGTON — In spring 2006, amid much fanfare, Massachusetts enacted legislation ensuring universal health insurance coverage to all residents of the Commonwealth. The Massachusetts plan was touted as revolutionary by both the Democratic state House and Senate, and by then-Governor Mitt Romney, a Republican. But despite the across-the-aisle backslapping that followed the plan’s enactment, serious questions remain about the end result of this act of Bay State bipartisanship.

In the policy analysis “The Massachusetts Health Plan: The Good, the Bad, and the Ugly,” Cato Institute adjunct scholar and University of Illinois professor of law and medicine David Hyman examines the structure of the Massachusetts health plan, and identifies its strengths and weaknesses.

The most important “good” of the Massachusetts plan, Hyman contends, is the reemergence of the states as players on the field of policy. “After eight decades of treating the states as embarrassing impediments to the glorious sweep of federal power, the left has suddenly embraced federalism,” he notes. “Perhaps the return of the states will mark the return of fiscal rectitude and small (state) government. Hope springs eternal.”

Most worrisome about the plan, however, is the employer mandate (“pay-or- play”), which requires that — by July 1 — employers who have 11 or more employees and who do not make a “fair and reasonable” contribution to their employees’ health insurance must pay an annual fee to the state. Hyman argues that is an unsettled question whether such a mandate could ever lead to universal coverage.

He points to Hawaii, the only state with such a mandate. “Almost 30 years after the mandate was enacted, 10 percent of Hawaiians are uninsured — a percentage that is either higher than or comparable to that of Massachusetts.”

Why would that be? A big part of the reason many people lack health insurance is that it is too expensive. A big part of the reason why health insurance is too expensive is overregulation. “The desire to over-regulate the health insurance market appears to be hard-wired into Massachusetts policy- makers’ DNA,” writes Hyman.