The Massachusetts Health Plan: Much Pain, Little Gain

Policy Analysis, No. 657, January, 20, 2010

16 Pages Posted: 29 Jan 2010 Last revised: 10 Feb 2013

See all articles by Aaron Yelowitz

Aaron Yelowitz

University of Kentucky - Department of Economics

Michael F. Cannon

Cato Institute

Date Written: January 28, 2010

Abstract

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." But did the legislation achieve these goals? And what other effects has it had? This paper is the first to use Current Population Survey data for 2008 to evaluate the Massachusetts law, and the first to examine its effects on the accuracy of the CPS's uninsured estimates, self-reported health, the extent of "crowd-out" of private insurance for both children and adults, and in-migration of new Massachusetts residents.

We find evidence that Massachusetts' individual mandate induces uninsured residents to conceal their true insurance status. Even setting that source of bias aside, we find 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, we find 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. Our results suggest that more than 60 percent fewer young adults are relocating to Massachusetts as a result of the law. Finally, we conclude that leading estimates understate the law's cost by at least one third, and likely more.

Our results hold important lessons for the legislation moving through Congress. 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.

Keywords: Massachusetts health care system, health insurance, Mitt Romney, individual mandate, insurance coverage, ACA

JEL Classification: H10, I11, I13, I18

Suggested Citation

Yelowitz, Aaron and Cannon, Michael F., The Massachusetts Health Plan: Much Pain, Little Gain (January 28, 2010). Policy Analysis, No. 657, January, 20, 2010, Available at SSRN: https://ssrn.com/abstract=1543988 or http://dx.doi.org/10.2139/ssrn.1543988

Aaron Yelowitz

University of Kentucky - Department of Economics ( email )

Lexington, KY 40506
United States

Michael F. Cannon (Contact Author)

Cato Institute ( email )

1000 Massachusetts Avenue, N.W.
Washington, DC 20001-5403
United States
202-218-4632 (Phone)
202-842-3490 (Fax)

HOME PAGE: http://www.cato.org/people/cannon.html

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