Monday, September 29, 2008

Hsieh Article on Massachusetts Mandates

The Fall 2008 issue of The Objective Standard will be carrying my article on mandatory insurance and the Massachusetts health plan entitled, "Mandatory Health Insurance: Wrong for Massachusetts, Wrong for America".

The full text is only available to subscribers, but nonsubscribers can purchase copies of the PDF file here for only $4.95. (I don't get any money from these purchases.) The print edition of the journal will also be available for purchase in many Barnes & Noble bookstores.

For those who are interested, here is the free preview of the opening section:
"Mandatory Health Insurance: Wrong for Massachusetts, Wrong for America"

Paul Hsieh

The Plan and Its Popularity

In April 2006, Massachusetts became the first state in the nation to require that all of its residents purchase health insurance. This mandatory insurance was the centerpiece of a “universal” health care law hailed by analysts as an “innovative bipartisan plan.”[1] Republican governor (and former presidential candidate) Mitt Romney proclaimed that “every uninsured citizen in Massachusetts will soon have affordable health insurance,” that costs would be reduced through “market reforms” encouraging “personal responsibility,” and that the plan would require “no new taxes... and no government takeover.”[2] The plan had support from organizations and individuals across the political spectrum, including the conservative Heritage Foundation, the liberal group Health Care for All, and Democratic Senator Ted Kennedy.[3]

The Massachusetts plan was, in part, a response to today’s health care costs, which are rising twice as fast as inflation, making insurance increasingly unaffordable for many employers and individuals.[4] Currently, approximately 47 million Americans have no health insurance.[5] In an effort to solve the problem in their corner of the country, Governor Romney and the Massachusetts state legislature enacted this plan with the twin goals of reducing the cost of health care and guaranteeing coverage for all Massachusetts residents.

The Massachusetts plan consisted of the following major elements: The state would establish a quasi-governmental authority known as the Commonwealth Health Insurance Connector (or “Connector”) to serve as a clearinghouse through which individuals would be able to purchase state-approved insurance plans. Every resident would be required to purchase a health insurance plan, either from a private insurer or though the Connector, with stiff financial penalties for those who failed to comply.[6] Residents who could not afford insurance would have their expenses subsidized by the state in part or in full, depending on their income. Employers with more than ten employees would be required to provide health insurance for their workers or pay a special fee to subsidize coverage for low-income individuals.[7] In theory, the plan would lower individual patients’ insurance costs by enlarging the pool of insured patients. In particular, younger, healthier patients (who often choose not to purchase insurance) would be required to do so, thus paying a portion of the health costs of the larger population.[8]

The plan was attractive to liberals and conservatives alike. Liberals embraced it because it supposedly promised “universal coverage” without requiring them to support politically risky Canadian-style “single-payer” socialized medicine.[9] Conservatives embraced it because it supposedly encouraged “personal responsibility” while preserving a “market framework” for health insurance.[10]

For these reasons, mandatory health insurance has become popular with politicians in both major political parties, including Republican California governor Arnold Schwarzenegger and former Democratic presidential candidates Hillary Clinton and John Edwards.[11] The idea has been endorsed by the National Small Business Association and the National Business Group on Health (an association of large businesses).[12] Several states besides Massachusetts and California—including New Jersey, Ohio, Rhode Island, Pennsylvania, Illinois, and Colorado—have considered or are considering some version of mandatory health insurance.[13]

Yet two years after its inception, the Massachusetts plan has failed to achieve either of its goals. The plan did not lower health care costs, nor did it achieve universal coverage. Thus, given the growing popularity of mandatory health insurance, Americans would do well to take a close look at the results of the Massachusetts plan—and, more importantly, at the reasons for those results...



Acknowledgments: I would like to thank Diana Hsieh, Lin Zinser, and Brian Schwartz for their enormously helpful suggestions and advice.

1 William C. Symonds, “In Massachusetts, Health Care for All?” Business Week, April 4, 2006.

2 Mitt Romney, “Health Care for Everyone?” Wall Street Journal, April 11, 2006.

3 Edmund F. Haislmaier, “The Significance of Massachusetts Health Reform,” Heritage Foundation Web Memo #1035, April 11, 2006; Marilyn Werber Serafini, “The Mass.-ter Plan,” National Journal, June 10, 2006, pp. 3–4.

4 Milt Freudenheim, “Health Care Costs Rise Twice as Much as Inflation,” New York Times, September 27, 2006; Julia Appleby, “Health insurance premiums vault past inflation,” USA Today, September 11, 2007.

5 John Donnelly, “47 million Americans are uninsured,” Boston Globe, August 29, 2007.

6 “Health Care Reform Act of 2006,”; and Boston Business Journal, “Mass. health insurance penalties to spike in ’08,” December 31, 2007,

7 Serafini, “Mass.-ter Plan,” p. 4.

8 Betsy McCaughey, “The Truth About Mandatory Health Insurance,” Wall Street Journal, January 4, 2008.

9 Christopher Lee, “Simple Question Defines Complex Health Debate,” Washington Post, February 24, 2008.

10 Edmund F. Haislmaier, “The Massachusetts Health Reform: Assessing Its Significance and Progress,” Heritage Foundation Lecture No. 1044, June 28, 2007, pp. 6–7.

11 Kevin Sack, “Massachusetts Faces a Test on Health Care,” New York Times, November 25, 2007.

12 Kent Hoover, “Business groups split over individual health mandate,” Silicon Valley/San Jose Business Journal, February 29, 2008; “Big business backs health insurance,” Associated Press, January 30, 2008.

13 David W. Chen, “New Jersey to Consider Health Plan to Cover All,” New York Times, March 18, 2008; “Healthcare Group Recommends ‘Individual Mandate’ on Health Insurance,” Gongwer News Service Ohio, March 26, 2008; “R.I. studying Mass. health plan,” Barre Montpelier Times Argus, November 26, 2007; Laurie McGinley, “Should Insurance Be Mandatory?,” Wall Street Journal, June 30, 2007; Reed Abelson, “Mandatory Coverage Is Easier Said Than Done,” New York Times, June 11, 2007; Tim Hoover, “Health coverage gets new push,” Denver Post, March 28, 2008.