The Massachusetts Health Care Revolution: A Local Start for Universal Access

There is a standard health policy joke that goes like this. A health policy expert dies and goes to heaven. When there, he is greeted by God himself, and the Lord says that the health expert can ask one question of Him before entering heaven. The health expert chooses to ask God, "Will we ever have universal health insurance coverage in the United States?" To which God answers, "Yes, but not in my lifetime."

This joke summarizes the prospects that policy experts see for universal coverage in the United States. For senior policy-makers, this reflects the battle scars earned in past national conflicts over universal coverage. There has been no serious national attempt at universal coverage since the Clinton Health Security Act in 1994. Democratic presidential candidate John Kerry talked much more about lowering health insurance premiums than about broad expansions of coverage.

Over the past few years, however, significant coverage expansions have started to percolate up from the states. Maine's "Dirigo" program, enacted in 2003, gained national attention for its bold structure and large subsidies to individuals and employers. More recently, the state of Illinois announced plans to cover all uninsured children in the state. While these are dramatic expansions, they provide much less than universal coverage. In particular, they do not cover individuals who choose not to take up coverage even at highly subsidized rates, including the eight million children nationwide now eligible for public insurance but still uninsured.

A much bolder step was taken by the state of Massachusetts. Legislation enacted this April transforms the nature of the insurance market, subsidizes a large share of the low-income population so that they can afford health insurance, and mandates that all residents be covered by health insurance. This is truly a comprehensive reform that should bring the state closer to universal coverage than has been achieved anywhere else in the United States. But the legislation provides only a blueprint, with many details to be filled in. Its impact will depend on how state legislators and regulators resolve these outstanding issues.

In this article, I summarize the accomplishments, prospects, and pitfalls of the Massachusetts approach. I begin with a discussion of the major issues facing attempts at universal coverage, and the failings of approaches suggested by both the left and the right. I then turn to the specifics of the Massachusetts legislation, and how it cleaves a path down the center that addresses the shortcomings of either extreme. Finally, I discuss the remaining issues that are to be resolved in Massachusetts, and address the question of whether Massachusetts' approach can work in other states or in the nation as a whole.

Universal Coverage: What Are the Issues?

Any approach to universal insurance coverage in the United States must address three critical issues. First is the problem of pooling. Providing insurance efficiently requires large pools of participants created independently of the participants' health status. Absent such pools, insurers will be reluctant to offer insurance, or will do so only at very high prices, out of fear that their customers will be mainly people with serious health problem (a phenomenon known as adverse selection), who will then turn out to be very expensive. The majority of Americans can access insurance pools, either through large firms or publicly provided insurance, but most of the uninsured do not have access to any such pooling mechanism. Most of the uninsured do not work for an employer that offers insurance. Solving the problem of the uninsured thus requires developing a new pooling mechanism, either through government insurance or through private insurance pools such as that used by federal employees. The success of attempts to create a new pool will depend on its scale. Existing attempts to create state-level pools for small businesses have generally failed because they did not attract a sufficient number of enrollees to overcome concerns about adverse selection and to spread administrative costs. This is what recently caused the collapse of California's PacAdvantage plan, a voluntary pool for small businesses.

Second, there is the question of affordability. Health insurance is expensive...