Learning from Massachusetts’ Health Care Experiment

Former Gov. Mitt Romney has taken considerable heat during the Republican primaries for the health-care legislation that passed while he was in office.

Sadly, election-year politics have overshadowed the real lessons of Massachusetts’ experiment.

The core question then-Gov. Romney was trying to answer was this: Should Massachusetts continue to pay hospitals more than $1 billion a year to care for the poor, or should it create a way for individuals to purchase their own insurance?

Romney’s original proposal was simple: Stop subsidizing expensive hospital care and instead require all residents to carry at least catastrophic insurance. Anything beyond that would be a matter of individual choice. The idea was to prevent taxpayers from having to pick up the tab for people unable or unwilling to pay for their own medical care.

To facilitate reform, Romney’s plan established a central agency, an “exchange,” where individuals could buy health insurance directly.

Though the overwhelmingly Democratic Legislature amended Romney’s proposal, the new law, if properly implemented, could have made the health-care market far more customer-focused.

But that didn’t happen. Just months after the law was passed Romney’s successor, Democrat Deval Patrick, became responsible for implementing the 2006 law. Since then, almost every key bureaucratic decision has leaned toward government control and away from individual decision-making and the market.

For example, the exchange’s idea of “minimum coverage” is equal to some of the most generous plans in other states. Additionally, roughly 40 percent of the people in the exchange pay no monthly premium for insurance, while small businesses have been hit with a variety of onerous requirements. Instead of creating a market with many choices, insurance has been over-standardized and the number of available plans limited, curbing innovation in plan design.

The Legislature has done its part by expanding on the simple mandate for catastrophic coverage with eight new mandates.

Even with these deviations from Romney’s original plan, the empirical record on the law hardly matches the overheated views of Romney’s critics.

If the measure of success is the number of uninsured, the plan has worked, with the percentage of uninsured dropping from 9.6 percent in 2006 to 5.6 percent in 2010. Over that same period, the percentage of uninsured nationally increased from 15.2 to 16.3 percent.

Such progress has not come without a cost. Prior to reform, Massachusetts paid hospitals roughly $1 billion per year to provide charity care to the poor. Spending on the programs and entities related to the law totaled $1.3 billion in 2007, the first full year of reform; it increased to $1.96 billion in 2010 and an estimated $2.1 billion last year.

Insurance premium costs have varied since the law passed. As a direct result of the law, those who purchase insurance individually have seen premiums drop. Employees covered by traditional employer-sponsored insurance, who are only indirectly impacted by the law, have seen premiums rise.

On access, 89 percent of Massachusetts adults reported having primary care doctors in 2010, a slight increase. The law has not, however, decreased the number of individuals seeking costly routine care from emergency rooms, but the growth has slowed.

The Massachusetts experience offers several lessons.

First, we need more state experiments. Regardless of what the Supreme Court decides regarding the Patient Protection and Affordable Care Act, the country is deeply unsettled about the federal law. Instead of rushing to redesign one-sixth of the U.S. economy, Washington should have waited for Massachusetts’ results and should have encouraged other states to experiment as well. The federal government did this in 1996 when it reformed welfare: It let the states lead the way.

Second, Romney should not be shy about defending his effort here. Frankly, we need more governors to show similar leadership and courage. Six years in, even with less than ideal implementation, Massachusetts’ experiment has yielded some positive results.

Finally, elections matter. Those in power implement laws, and they can take them in very different directions than those present at the signing ceremony.

Jim Stergios is executive director of the Pioneer Institute. Joshua Archambault is director of health care policy at the institute. This post first appeared at bostonherald.com.

35 replies »

  1. I know that anecdote is not data but: I was laid off at 61 and was covered by my payments into COBRA for 18 months; when that ran out I applied for and was denied Mass Health/Commonwealth Care because although my income was below threshold, I have a 401K. Meaning, I saved money for retirement. I didn’t make much of it back after the crash so there isn’t much of it left but the little there is makes me ineligible. So until I’m 65 I have no health insurance for the first time in 40 years.
    And I’m not the only one. I know other people in this situation. I’m not sure there are fewer people without insurance. They’re just different people.

  2. What success? In Greece and 2-3 other European countries you can’t get certain drugs becuase they are broke. In the NHS they are murdering people by withholding water and food. Almost every country, not aware of one that does but I’ll leave open the possiblity, wont even try to save babies born under 20 or so weeks.

    Define success then argue they are better then us.

  3. “let “me” get all the healthcare I want and let the other guy struggle to do the trade offs.”

    When the other guy works as many hours a week as I do and makes the sacrafices I have then he will be entitled to as much healthcare as I am.

    Welfare Kings and Queens do not have a right to live as I do without putting forth the effort I do. See Pelosi’s latest video to see why I think Medicaid is to generous and they shouldn’t even get that.

  4. “I assume you are talking about single payer systems?”

    Yes and no. Systems range from the French and German to the Swiss.

    “If they want to pay more for more services, why should we prevent them as long as they pay the difference.”

    Because that will concentrate resources from providers to people who can/want to pay more leaving those that can’t as second or even third class consumers trying to get access with limited funds. Ask Medicare or better Medicaid covered individuals and ask them how they fair in the access game – willing providers.

    This is health care not cars or other consumer goods where cheaper versions will still perform the needed function.

    “such a system requires political and public approval of the trade offs required for that set up to be sustainable. ”

    You don’t think economic imcentives/disincentives don’t require “trade offs”? What you really mean is let “me” get all the healthcare I want and let the other guy struggle to do the trade offs.

  5. Peter1, I assume you are talking about single payer systems? If so, then you have identified the other alternative to control costs. Of course, such a system requires political and public approval of the trade offs required for that set up to be sustainable. I don’t think the U.S. will be there for decades, if ever, and the quality of care can suffer. My argument is that the real focus of our system should not be– to clamp down on costs or the amount of care that we receive– instead to give individuals the incentives to seek out low-cost high-quality care. If they want to pay more for more services, why should we prevent them as long as they pay the difference.
    To your second question, individuals means everyone. Why wouldn’t we want all folks regardless of the source of their insurance to be seeking out value?

  6. “Until individuals have the incentive to seek out low-cost, high-quality procedure (just like we do for most other areas of our lives) I am not sure we will have success tackling the waste in the system or containing health care cost growth.”

    Josh, how then can you explain greater success in countries with far greater government control containing costs to about half of what we spend here? Are you saying that if those countries adopted more market controls that would achieve even greater than 50% less cost than the U.S.? As you look at countries with varying degrees of government control you see more market forces less government equals higher costs.

    And when you say “individuals” whom do you mean, those with Cadillac company plans, those earning above $250K, employees with union negotiated health benefits – who?

  7. hmm, no one is addressing the law passed in Pennsylvania that basically puts the public at risk just so fracking can be done to not only lay waste to the ground, but the communities around these sites. Go to http://www.themoderatevoice.com who is the first site I read of the matter, spoken about on Sunday March 18. Gag doctors from protecting their patients, now there is an interesting idea letting government set the pace for health care matters. Disgusting, and so will PPACA follow oh so well.

  8. Thank you all for reading the post and taking the time to post a comment(s).
    Two quick points:
    1) State level innovation has been severely limited by the federal government. Firstly by the tax treatment of employer based insurance, and secondly because of the prominent role that Medicare has played in setting the “rules of the medical road.” So I think it is unfair to write states off as possible innovators based on these constraints.
    2) Health care is not a meaningful market, largely due to these government interventions, and a third party payer system. Until individuals have the incentive to seek out low-cost, high-quality procedure (just like we do for most other areas of our lives) I am not sure we will have success tackling the waste in the system or containing health care cost growth.

  9. There was not much health care to buy. In the early 60s, most hospitals did not even have an ICU yet. Babies born at 36 weeks died.


  10. you didn’t need insurance back then. Most people could afford all the healthcare they needed without assistance. You didn’t need insurance just to see a doctor like today

  11. $5,950 and $11,900 in 2010

    $5,950 deductible is not catastrophic. That is like telling Bill Gates he can’t buy an auto insurance deductible higher then $1000.

  12. no it doesn’t

    Another plan option permitted under PPACA in 2014 is a catastrophic plan. A catastrophic plan will provide coverage for essential health benefits and have deductibles equal to the amounts specified as out-of-pocket limits for HSA-qualified HDHPs. Such deductibles will not apply to at least three primary care visits. A catastrophic plan will be permitted only in the individual market (1) for young adults (those under age 30 before the plan year begins), and (2) for those persons
    exempt from the individual mandate because no affordable coverage is available or they have a hardship exemption.

    You can buy deductibles of 10,000 and more now, under no circumstance will that be allowed under PPACA. The 3 office visits is pointless. And they have to cover essential and preventive as well.

  13. “What was wrong with healthcare pre 1965? It was affordable, people had easy access to care, people were healthier.”

    Great, you go back there. We couldnt diagnose anything since we had no CT scans or MRIs. All lab tests were done by hand, with considerable variation. No ultrasound. No high quality plastics so no catheter based technologies. People stayed in the hospital for a week following a cataract operation. No laporoscopes. Hell, it should have been affordable since we could not do very much. Easy access? Not if you did not have insurance or money.


  14. Yes, I am aware that a catastrophic plan is allowed in the ACA. It also has very high deductible plans.


  15. “Insurance would love”

    Peter you don’t even know what insurance is or how it works, how do you have any clue what insurance would love? Stop reading Kos and Huffington and learn something.

  16. “Those that want affordable plans not stuffed with state mandates”

    That’s it isn’t it Nate, reduce coverage to get to “affordable”. Insurance would love buffet style plans where those wanting/needing coverage for certain illness would be forced to buy at higher price due to fracturing of shared risk concept. Wow, what innovation!

  17. The government pays for 50% of all cars and computers?

    The government has an entire department to regulate and manage cars and computers?

    The government requires Best Buy to send the IRS a list of everyone that bought a computer and how much they paid?

    I could go on but they are no where close.

    What was wrong with healthcare pre 1965? It was affordable, people had easy access to care, people were healthier.

    “Yet they have controlled costs twice as well as we have over the last 30 years”

    Doesn’t that argument only make sense of we were trying to control cost? Look how well they have controlled their housing, AC, cars, etc etc. We spend more and have bigger everything. We are a very rich country and piss money away frivolously. We had money to blow and we blew it on healthcare.

    Your also discounting other factors that have a lot to do with cost. If we were all white or better yet asian our cost would be lower. If we weren’t so obese it would be lower.

    “Less argumentatively: how many people have lost mini meds and catastrophic plans at this point?”

    From what I have seen and heard a couple million people have lost coverage due to PPACA. That would include people that lost coverage due to the annual limit changes but their previous plan would not be considered mini med or catastrophic.

    For example, every month I see groups that want to start offering coverage but can’t afford to or groups that are about to drop coverage due to not meeting participation. One way we use to solve this was put in a limited medical plan to see what is going on with the group and fix the problems we could. Then after we get a handle on the risk increase benefits to a more normal plan. With the changes in law we can no longer do this so groups aren’t able to offer coverage or lose the coverage they had.

    I would like to see a study to support these millions of kids having coverage that wouldn’t have otherwise. Did they really add kids that would not have been insured otherwise or did parents add their 25 year old adult children who would have otherwise been on student health plans or individual policies? It’s very easy to manipulate numbers for political sound bites when the media never questions anything they are fed by the left. Just because 2 million people took advantage of the coverage till 26 doesn’t mean they would have been uninsured otherwise.

  18. The markets for automobiles and computers are also full of government regulation, and yet those markets seem to be well-functioning, with price and quality competition that gives a better value each year for the products these industries manufacture. Not so in health care, and as a result, health insurance. Health care is not and never has been a well-functioning market.

    Yes, government interventions in health care have often been misguided and ended up increasing costs. No, the level of coverage is not one of those misguided interventions. Look at the rest of the world, where patient cost sharing as a fraction of total expenditure is as low or lower than here. Yet they have controlled costs twice as well as we have over the last 30 years, and have access to physicians that is comparable to ours (and don’t cherry pick a case of worse access in your retort, or I will just lay out the big studies that give the lie to the cherry picking).

    Less argumentatively: how many people have lost mini meds and catastrophic plans at this point?

    More argumentatively again: I’d say “all the kids” are overwhelmingly happy with the changes from the ACA. Millions more of them have insurance already.

  19. all the people that lost their mini meds and catastrophic plans

    All the kids that wanted an individual policy they can’t buy any more

    Those that want affordable plans not stuffed with state mandates

    Why don’t you try answering the question Peter, what market is void of government interference?

  20. What market is void of government interference? The reason so many people are uninsured is its illegal to sell them the insurance poilicy they want to buy

  21. Many governors and legislators are simply criticizing and opposing and refusing to implement the PPACA, and offering no alternatives, despite the fact that this will result in what they say they oppose — management by Washington bureaucrats.

    Why? Because a problem is a political asset. A solution is not. Screaming against the other party’s solution plays well, gets people riled up, and doesn’t tie you to anything. But propose a solution (let alone try to implement one), and you are instantly in the world of subtle refinements and infinite debates and battles within the solution (as this column lays out nicely) at the same time that you have made yourself a political target for anyone who can find something wrong with your solution. Politically, there is very little payoff in coming up with a solution to anything complex, and lots of payoff in continuing the argument.

  22. We do need more experimentation and variation in state models for funding healthcare. Definitely. I advocate a number of solutions, but I don’t think anyone has The Answer.

    “Innovation in plan design” is not just about health care plans thinking up more ways to be opaque and difficult. They have had maximum opportunity to do that all along. “Innovation in plan design” is about experiments like BCBS of Massachusetts’ Alternative Quality Contracting, or the Vermont Blueprints, or Cigna’s Choice Fund incentivized wellness plans. Or establishing onsite health clinics at large employers for voluntary employee use. Or allowing the use of direct pay primary care.

  23. Steve, Jim and Joshua: there is a catastrophic plan option in the ACA. It is also designed so that younger people use it, allowing them a lower cost option since the community rating would otherwise make them subsidize those who are 50-65 when costs really start to go up. Can you tell me what you don’t like about it?

    I do agree with both the authors and Steve that experimentation should be encouraged by states. But do you want to see experimentation go so far as to allow no exchange? It sounds like you are just talking about the required benefits. With the final rules issued for the exchanges and the basic benefits, I’m more confident there will be significant variation.. We will not see just 25 copies of Massachusetts, plus Vermont and 24 copies of some minimal conservative approach. I’d guess at this point that we end up with at least 6 distinct models that will be tested under good experimental conditions (as good as it gets outside of a lab in the messy real world).

    Sure, for experimental purposes it would be better if we allowed a control group to keep doing things the old way for a couple years. Maybe the administration can let a deeply red state get a waiver on implementing the 2014 ACA insurance provisions and see what that looks like.

  24. No. They are not clear at all. Every year, we have someone end up out of network w/o realizing it. You need a flow chart to figure out what is covered and not covered, and how much you will owe. Of course, many of us in small corporations need to change insurers frequently to hold down costs. It takes about a year to figure out each new plan.


  25. I don’t agree there was a rush. the bill was revised numerous times over the course of a year, and the ideas in it had in many cases been floating around for 10, 20, even 40 years. As you know, there are many ideas that came from market-based thinking first proposed by Republicans and right-leaning think tanks.

    I also disagree on the history: Romney was not only trying to get a more rational solution to charity care for hospitals. That was not his rhetoric at the time. Universal coverage with better financial security for the uninsured was also a goal, in fact the more important one, because if you don’t care about the uninsured then there is an easy solution to the charity care problem: stop paying for it.

  26. Lisa, expected total out of pocket cost is actually very hard to figure out for most non-HMO insurance products, especially if you go out of network. Looking at a list of benefits does not do it.

  27. “Over that same period, the percentage of uninsured nationally increased from 15.2 to 16.3 percent.”

    There’s a market void of government interference that is waiting for the private insurance industry to harness “individual decision-making and the market” with ‘innovative” products. How come they aren’t?

    “Washington should have waited for Massachusetts’ results”

    Waited how long. Health care success/failure is a moving target even in single-pay countries that requires constant changes and intense oversight.

  28. Insurance companies come up with varied plans to suit the needs of the insured. They are pretty clear as to what the out of pocket cost to the comsumer may be depending on length of stay in the hospital, co-pays.etc .

  29. Yeah, “experimenting” with peoples’ health and lives.

    We don’t want “health care,” we want umpty thousand inscrutable “health care PLANS.”

  30. I agree in principle about states experimenting. In reality, they have not been doing it. As to the particulars, I would disagree very much with..

    ” innovation in plan design.”

    What this really means is that insurance companies, just like credit card companies, come up with many different plans that make it difficult to ascertain true costs and services.

    I would agree very much with the idea of fewer mandates and offering catastrophic plans. However, this would need to be monitored to make sure it is not just some way for free riders to take advantage of the system. Expand the number of plans, but make sure that competitors compete based upon the same plan, so that we are really seeing price and service competition, rather than hidden costs.