REFORM AT ONE YEAR: HINDSIGHT—THE MASSACHUSETTS MISTAKE

A year after the passage of health care reform, fewer than half of Americans support it, a similar percentage believe that it has already been found unconstitutional or soon will be, health care costs are continuing to rise far faster than the CPI, and the Republican Party has seized on the issue as a sure election winner.

The Obama administration and congressional Democrats, now thoroughly on the defensive, are clearly surprised at the public and political reaction. But should they be? This post—on the reliance on Massachusetts as a model—is the first of three that will look at some of the miscalculations—and sheer bad luck—that have helped to undermine reform.

When Governor Mitt Romney signed Massachusetts’ reform bill into law in 2006, it was widely regarded as a bipartisan political triumph, and one that was supported by the public and by most of the state’s insurers and providers. Massachusetts would be the first state to require virtually all legal residents to have coverage (with tax penalties imposed on those not complying), while providing subsidies for lower-income individuals not eligible for government programs, as well as to implement a state-administered brokerage function (the Connector) to allow competitive selection of health plans.

By the fall of 2008, as congressional efforts to design national health care reform moved into overdrive with the election of Barack Obama, the Massachusetts legislation was widely regarded as a success. Public reactions were generally positive, the numbers of uninsured had fallen, and there had been no dramatic increase in costs. It was scarcely surprising that the Massachusetts model emerged from the field of competing proposals as the favorite of most Democratic lawmakers.

Unfortunately, the elected officials in Washington DC failed to recognize that Massachusetts was an exceptional state in terms of health care. Even before the state’s reform bill was enacted, the percentage of uninsured was very low. It was also a socially very liberal state, far more likely than most to support reform efforts (in fact, Massachusetts had passed, but then revoked, a slightly different version of health care reform a dozen years earlier). And, of course, the economy was still in its boom period when the new law was passed.

Massachusetts had other advantages that would not transfer to national reform. As a small state, with only a small percentage of the population likely to be directly affected by reform, implementation could be much faster—less than a year for most provisions of the state’s new law. Similarly, interfaces between programs like Medicaid and the state subsidy program could be handled at the state level, without federal involvement.

In fact, even some of Massachusetts’ apparent success proved illusory or at least oversold, presaging criticisms that would later be leveled at national reform. Although Massachusetts does now have the highest rate of insured in the country, the goal of universal coverage has not been achieved, with some five percent of the state’s population still without insurance. The Connector has failed to influence costs for either public or private payers, and government program expenditures are creating an ever bigger hole in the state budget. The Connector also has had only marginal success in attracting non-subsidized enrollees (although a revamped small business offering is finally showing some gains). And, of course, along with the rest of the nation, Massachusetts has continued to suffer from the effects of the prolonged recession.

Massachusetts clearly has some value as a prototype for national reform, but the Accountable Care Act might have been very different if its authors had recognized just how small a percentage of the state’s population had gained coverage (and added to overall expenditures), or realized that the state’s efforts had had no discernable cost control effect.