Massachusetts' Approach to Universal Coverage: High Hopes and Faulty Economic Logic

Abstract

Massachusetts' new universal coverage law has been lauded as a national model. The legislation expands Medicaid HMOs to cover all of the poor (free of charge) and near poor (with partial subsidies), and requires the rest of the uninsured to pay for private coverage. Large employers that don't offer coverage will pay a small tax. Other provisions raise Medicaid payment rates to providers; expand some smaller programs for the poor; allow dependents to remain on family policies up to age 25; and require increased public disclosure of medical price and quality data. Unfortunately, the legislation includes grossly inadequate funding for the promised subsidies and assumes that the uninsured, most of whom are in lower-income families, can afford substantial premiums. Moreover, the required coverage will leave gaping holes—co-payments and deductibles that will leave families vulnerable to bankruptcy. All of the new coverage will be purchased from private insurers with high overhead costs. The bill includes no credible cost-containment mechanisms. The legislation reflects a political calculus favoring private insurers, and ignores the imperative of cost control and the financial realities of cash-strapped families. Hence, it is unlikely to achieve universal coverage or to stabilize the state's health care financing system.