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RomneyCare - Much Pain, Little Gain - CATO

RomneyCare - Much Pain, Little Gain - CATO

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Published by PRMurphy
Our analysis of CPS data for 2008 shows
that Massachusetts’ health law has had a
smaller impact on insurance coverage levels
and a much higher cost than supporters
claim.Gains in coverage have been overstated
by nearly 50 percent, while costs have been
understated by at least one-third, and likely
more. The law has done little to improve
overall self-reported health, though it does
appear to have crowded out private health
insurance and made Massachusetts a less
attractive place to relocate, particularly for
young people
Our analysis of CPS data for 2008 shows
that Massachusetts’ health law has had a
smaller impact on insurance coverage levels
and a much higher cost than supporters
claim.Gains in coverage have been overstated
by nearly 50 percent, while costs have been
understated by at least one-third, and likely
more. The law has done little to improve
overall self-reported health, though it does
appear to have crowded out private health
insurance and made Massachusetts a less
attractive place to relocate, particularly for
young people

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Published by: PRMurphy on Feb 05, 2012
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In 2006, Massachusetts enacted a sweepinghealth insurance law that mirrors the legislationcurrentlybeforeCongress.Aftersigningthemea-sure, Gov. Mitt Romney (R) wrote, “Every unin-sured citizen in Massachusetts will soon haveaffordable health insurance and the costs of health care will be reduced.” But did the legisla-tion achieve these goals? And what other effectshas it had? This paper is the first to use CurrentPopulation Survey data for 2008 to evaluate theMassachusetts law, and the first to examine itseffects on the accuracy of the CPS’s uninsuredestimates, self-reported health, the extent of “crowd-out” of private insurance for both chil-dren and adults, and in-migration of neMassachusetts residents.WefindevidencethatMassachusetts’individ-ualmandateinducesuninsuredresidentstocon-cealtheirtrueinsurancestatus.Evensettingthatsource of bias aside, we find the official estimatereported by the Commonwealth almost certain-lyoverstatesthelaw’simpactoninsurancecover-age, likely by 45 percent. In contrast to previousstudies, we find evidence of substantial crowd-out of private coverage among low-incomeadults and children. The law appears to havecompressedself-reportedhealthoutcomes,with-out necessarily improving overall health. Ourresults suggest that more than 60 percent feweryoung adults are relocating to Massachusetts asaresultofthelaw.Finally,weconcludethatlead-ingestimatesunderstatethelaw’scostbyatleastone third, and likely more.Our results hold important lessons for thelegislation moving through Congress. As inMassachusetts, there has been no effort to esti-mate the cost of the private health insurancemandates that legislation would impose on indi- viduals and employers. The costs may thereforebe far greater than legislators and voters believe,while the benefits may be smaller than the con- ventionalwisdomaboutMassachusettssuggests.
The Massachusetts Health Plan
 Much Pain, Little Gain
byAaronYelowitzandMichaelF.Cannon
_____________________________________________________________________________________________________
 Aaron Yelowitz is an associate professor of economics at the University of Kentucky and an adjunct scholar at theCatoInstitute.MichaelF.CannonisdirectorofhealthpolicystudiesattheCatoInstituteandcoauthorof 
Healthy Competition: What’s Holding Back Health Care and How to Free It
.
Executive Summary 
No. 657 January 20, 2010
 
Introduction
In2006,Massachusettsenactedasweepinghealth insurance law known as Chapter 58.
1
The law created the nation’s first “individualmandate” to purchase health insurance. Allresidents whom the Commonwealth deemsabletoaffordhealthinsurancemustpurchaseit or else pay a tax penalty that rises withincome. The individual mandate took effecton July 1, 2007, but penalties for noncompli-ance did not begin until December 31, 2007.Noncompliantresidentsfacedthelossoftheirpersonalexemptiontothestate’sincometaxa penalty of $219. The penalty rose the nextyear to a maximum of $912—more than fourtimes the 2007 penalty. Each year after 2008,penalties increase at the rate of health insur-ancepremiumgrowth.
2
Chapter 58 also established the nation’ssecond “employer mandate” (behind Hawaii).BeginningJuly1,2007,thelawrequiredfirmswith 11 or more workers to offer health bene-fits to their workers and to “contribute” specified amount toward the cost of that cov-erageorfaceataxpenaltyof$295perworker.
3
The law created or expanded various gov-ernment subsidies to help residents obtainhealth insurance. It expanded eligibility forMassachusetts’ Medicaid program (Mass-Health) to children in families with incomesup to 300 percent of the federal poverty level(about $66,000 for a family of four); and toadultswhoareunemployed(100percentFPL),HIV-positive (200 percent FPL), or disabled.ThelawcreatedanewCommCareprogramtoprovide subsidies for private health insuranceto families earning up to 300 percent of thefederalpovertylevel.Chapter58alsoimposednewrulesforpri- vate health insurance markets, merged theindividualandsmall-groupmarkets,andcre-ated a new health insurance “connector”where individuals and employees of smallfirms (with 50 or fewer employees) machoose from a variety of health plans. After signing Chapter 58 into law, Gov.MittRomney(R)wrote,“Everyuninsuredcit-izen in Massachusetts will soon have afford-able health insurance and the costs of healthcare will be reduced.”
4
Changes in Massa-chusetts’ uninsurance rate and health carecostsarethereforeimportantmeasuresofthelaw’s impact. Other important indicators of the law’s success include its impacts on over-all health; “crowd-out” of private healthinsurance(thatis,whatpercentageofinsuredpeople simply switched from private insur-ance to government-supported insurance);and the attractiveness of Massachusetts as a place to live.How well Chapter 58 performs on thesedimensionshasparticularrelevancenowthatthefederalgovernmentisconsideringsimilarlegislation. When President Barack Obama told Congress in early September 2009,“thereisagreementinthischamberonabout80percentofwhatneedstobedone,”
5
hewasspeaking of the provisions in federal legisla-tion that mirror the Massachusetts law: indi- vidual and employer mandates; privatehealth insurance subsidies; Medicaid expan-sions; a new health insurance “exchange”;and other private health insurance regula-tions.This study uses data from the March2006–2009supplementstotheCurrentPopu-lationSurvey—whichcoverthe2005–2008cal-endar years—to measure Chapter 58’s impacton some of the above-mentioned factors. OurstudyisthefirsttouseCPSdatafrom2008toexaminecoverageandcrowd-out.Itisalsothefirst to use CPS data to examine Chapter 58’simpacts on self-reported health and in-migra-tion, and the first to explore whether Chapter58 introduced bias into the CPS’s coverageestimates in Massachusetts. We consider thisstudytobeafirstapproximationoftheeffectsof Chapter 58 through 2008, and hope thatfurther studies will refine and augment ourresults.
Methods
To evaluate the impact of the Massa-chusetts health law on coverage levels, crowd-
2
Our study is the first touse CurrentPopulationSurvey data from2008 to examineChapter 58.
 
out, health status, and in-migration patterns,werelyonCPSdatafrom2005through2008.TheMarchsupplementtotheCensusBureau’sCPS has been described as “the survey of record” and “the most viable estimate” of theuninsured.
6
TheBureauoftheCensusadmin-isters the CPS for the Bureau of LaborStatistics, which scientifically selects the sam-ple to represent the civilian noninstitutionalpopulation. The CPS is the official source fornational health insurance estimates like thewidely cited estimate of 46 million uninsuredU.S.residents.TheCPShasaskedabouthealthinsurancesincethe1980s,andthosequestionshave been largely unchanged since 1994.
7
Theresponse rate for the March supplement isexceptionally high compared to other volun-tary household-based surveys. The nonre-sponse rate for the health insurance questionsin Massachusetts in 2008 was 16 percent.Nonresponse rates for other surveys measur-ingtheeffectsofChapter58havebeenashighas 55 percent
8
and 68 percent.
9
Unlike thosesurveys,theCensusBureauincludesresidenceswithout telephones by virtue of conductinginterviews both by telephone and in person.The CPS data are publicly available from theCensus Bureau.
10
To our knowledge, ours isthefirststudytoemploydatafromtheMarch2009 supplement to the CPS, which covers allofcalendaryear2008,andthefirsttoexamineMassachusetts two years prior to the mandate(2005–2006) and two years after the mandate(2007–2008).Considerabledifficultiesarisewhenwetry to measure the impact of a complex piece of legislation such as Chapter 58. For example,the outcomes of interest may be influencedby other changes occurring at the same time.ThefactthatthevariouselementsofChapter58 took effect at different times may furthercomplicate the picture.SimilartoLonget.al.,
11
weemployadiffer-ence-in-differences model to control for many factorsthatmightalsoinfluencetheoutcomesof interest. We compare outcomes in Massa-chusettstothoseofotherNewEnglandstates:Maine, New Hampshire, Vermont, RhodeIsland, and Connecticut. We include controlsforpovertythresholds,maritalstatus,sex,edu-cation,race/ethnicity,andfixedeffectsforstateand year. Our “Chapter 58 effect” is thereforeidentified from the interaction of state andyear. We weight all regressions with the CPSweights, stratify by age group, and estimatemodels without imputed values. We attributeanydifferencesbetweenMassachusettsandtheremaining New England states to the Massa-chusetts law. Our overall results on gains ininsurance coverage are very similar to those of Longetal.WeareunawareofanypublishedestimateofthefullcostofChapter58,includingcoststhat do not appear in government budgets—which is significant in itself. For data on thecosttotheCommonwealthofMassachusettsand the federal government, we rely on esti-mates published by the Massachusetts Tax-payers Foundation.
12
For estimates of thecosts imposed on the private sector, we rely onpersonalcommunicationswithstafffromthe Massachusetts Taxpayers Foundation.
13
CoverageEffects
 A primary objective of Chapter 58 is toexpand health insurance coverage in Massa-chusetts, with the goal of universal coverage.In this section, we examine how many Massachusetts residents remain uninsured,and how much of the increase in coveragesince2006canbeattributedtoChapter58.
HowManyResidentsRemainUninsured?
For 2003 through 2006, the CPS reportedthattheuninsuredrateinMassachusettshov-ered around 10 percent. Massachusetts’ unin-sured rate was low compared to the nationalaverageof15to16percentduringthatperiod.It was especially low relative to southwesternstates,wheretheuninsuredrateoftenexceeds20percent. Various estimates exist of how many Massachusetts residents currently lack healthinsurance. The Commonwealth relies on onesurveythatprovidesanestimateof2.6percent
3
We are unawareof any publishedestimate of thefull cost of Chapter 58.

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PRMurphy added this note
"The penalty rose the next year to a maximum of $912—more than four times the 2007 penalty. Each year after 2008, penalties increase at the rate of health insurance premium growth." cc: @anncoulter #withnewt #tcot #sgp #teaparty
PRMurphy added this note
"The (MA) Commonwealth relies on one survey that provides an estimate of 2.6 percent uninsured in 2008. The Census Bureau’s American Community Survey provides an estimate of 4.1 percent." @anncoulter #withnewt #teaparty #sgp #tcot
PRMurphy added this note
The costs of that legislation (Obamacare) are therefore far greater than members of Congress and voters believe, while the benefits may be smaller than the conventional wisdom about Massachusetts suggests. cc: @anncoulter
PRMurphy added this note
These findings hold lessons for the legislation moving through Congress, which largely resembles the Massachusetts law. As in Massachusetts, there has been no effort to estimate the full cost of the legislation—that is, including the mandates it would impose on individuals and employers. The costs of that legislation are therefore far greater than members of Congress and voters believe, while the
PRMurphy liked this

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