Myth 7. Universal coverage, enforced through an individual mandate, as in Massachusetts, will achieve universal access and reduce costs.

According to the implicit hypothesis underlying the rush to “health care reform,” the main barrier to ideal care for all at an affordable cost is the absence of universal “coverage”—payment and supervision—by an appropriate (governmental or government-credentialed) third party.

Without such a mechanism, some patients will avoid needed care or needlessly jam emergency rooms. Some clinicians and facilities will not get paid, or not provide care, or shift costs, or perform unnecessary but well-remunerated services. Insurers will avoid the sick.

The hypothesis is summarized by Linda J. Blumberg and John Holohan: “Some of the most prominent shortcomings of the U.S. health insurance market are rooted in the fact that the system is a voluntary one” (N Engl J Med 7/2/09). The market “segments” health risks, and avoids the sick rather than “managing” their care.

Massachusetts is the grand bipartisan experiment to test this hypothesis. The individual mandate—requiring purchase of insurance by law—brings in funds from “free riders” who use care without paying for it, or low-risk persons who decline to pay their “fair share” to subsidize coverage for higher-risk persons. (The latter phenomenon is called adverse selection—low-risk persons drop coverage rather than pay the high premiums resulting from community rating or guaranteed issue.)

To compensate for the perceived unfairness of forcing people to buy an unaffordable product, the Commonwealth subsidizes persons too well off to qualify for Medicaid but judged too poor to afford premiums. This expense is supposed to be offset by decreasing (“redirecting”) payments for uncompensated care.

The “Connector” is supposed to help people choose suitable coverage that meets all its requirements.

The results of the experiment, which took full effect on July 1, 2007:

  • Premiums are approximately double those in many other states. Premiums in those states will double if Congress passes universal coverage with guaranteed issue and modified community rating (Council for Affordable Health Insurance).
  • Premiums in Massachusetts are increasing twice as fast as the national average (Eagle Forum 7/3/09).
  • Only 18,000 people have used the Connector to buy insurance during the past 3 years (ibid.).
  • The number of uninsured decreased, almost entirely because of subsidies rather than the mandate, but 200,000 remain uninsured (Michael Tanner, Cato Briefing Papers No. 112, 6/9/09).
  • The number of people receiving uncompensated care declined only 36% (ibid.).
  • State spending on all health programs has increased 42% since 2006. There are huge deficits despite tax increases. Eligibility reviews have already removed 25,000 people from the subsidy program (ibid.).
  • Substantial adverse selection is taking place; the combination of subsidies and mandates may actually be making the insurance pool older and sicker (ibid.).
  • Instead of unifying and rationalizing two dysfunctional regulatory schemes, the Connector has become an aggressive new regulatory body, adding more mandates plus a 4% increase in administrative costs (ibid.).
  • Insurers were ordered to cut payments to providers by 3% to 5%, and a cap on total spending (global budget) is under consideration.
  • Utilization has increased; supply of services has not. People are having more difficulty finding a physician and must wait longer for an appointment (Merritt Hawkins, 2009).

Already called the New Big Dig in May 2008, “the Massachusetts nonmiracle should be a warning to Washington.” The Obama plan, however, is “Massachusetts on steroids” (Wall St J 5/21/08).

Additional information:

10 thoughts on “Myth 7. Universal coverage, enforced through an individual mandate, as in Massachusetts, will achieve universal access and reduce costs.

  1. For more information on this topic, please see my article from the Fall 2008 issue of The Objective Standard:

    “Mandatory Health Insurance: Wrong For Massachusetts, Wrong For America”

    The “Massachusetts system” was supposed to guarantee “universal health care” for Massachusetts residents, while decreasing costs and increasing quality. But in reality, costs have skyrocketed out of control, and patients are waiting longer for care.

    The Massachusetts system is kept afloat only by subsidies from the federal government (i.e., the other 49 states). If we adopt this system at the national level, I don’t think we can count on Russia or China to bail us out!

    Trying to “solve” the health care crisis by forcing everyone to buy health insurance would be like solving the problem of homelessness by forcing everyone to purchase a downtown condo.

    Paul Hsieh, MD
    Freedom and Individual Rights in Medicine (FIRM)

  2. I mailed the following to my Wisconsin Senators yesterday.

    Senator Russ Feingold
    506 Hart Office Bldg.
    Washington DC

    Dear Senator Feingold:

    I strongly urge you to vote against the health care bill now under consideration in the Senate. I am a physician who practiced medicine for ten years before the congress passed the Medicare and Medicaid laws in 1965. The increasing interference by government rules and regulations that followed inexorably made it impossible for me to evaluate and treat my patients on the basis of my knowledge and best judgment and subject to penalties if I did so. I therefore left the practice of medicine on September 17, 1991. I have been working since that time to restore freedom for individuals to deal with their physicians as voluntary traders in every respect including discovering the nature of the problem, the diagnostic tests to be performed, the treatment to pursue and the fees to be charged with the patient’s responsibility for payment for those services. Parents are properly responsible for their dependent children in these matters

    America was founded on the principle of Individual Rights. It recognized the sovereignty of the individual in matters of his own life and that the government’s responsibility was the protection of those rights and nothing else. That principle has been abandoned in favor of the government as the provider of every thing to everybody and the producers as the servants of the needy whose products are properly confiscated by the state and distributed to the needy.

    Increasing government interference is the cause of the current problems and more of the same can only make it worse. The underlying cause is the ethical code of altruism that holds the moral life as that which rejects the individual’s right to his own life and that living for others is the good. The consequence in action has been the Death camps of Nazi Germany, the slaughterhouse of the Soviet Union, the savagery of Zimbabwe, the mass murder of Cambodia and the welfare state in America.

    Free markets in medicine and all values human life requires is the moral and practical solution to the current disaster.


    Ralph C. Whaley MD
    460 S. 5th St.
    Barron, WI 54812-1509

  3. The idea that we as a country are responsible for healthcare of our population is the root of all of our current healthcare problems. Unfortunately, this is a political and moral “hot potato” that is rarely acknowledged or addressed openly. If individuals were completely responsible, financially and otherwise for their healthcare, there would be inherent pressures for people to follow healthier lifestyle habits. Yes, it’s true that we wouldn’t be able to afford the “miracle” drugs and expensive diagnostic procedures, but our country would be healthier as a whole. Can we really say we are at an advantage since the advent of medical insurance? Are we healthier? Medical fees couldn’t rise at an exorbitant yearly rate but medicine would be “high touch” rather than high tech and people

  4. would necessarily begin to take more responsibility for their own health,
    When people are spending other people’s money, there’s just an inexorable pressure to increase spending. This hold true in healthcare as well as every other government program. It’s as close to “a law of nature” as can be!

  5. This should be sent to every house and senate member. I hope this has been done. We need people to understand the data, not the fluff that Obama puts forth.

  6. The basic problem with this and all other desires of government to provide services to people is an economic one. Basic economics indicates that we have unlimited needs wants and desires, but a limited means with which to fulfill them. This according to basic economic principles leads to the making of choices. On an individual basis this means that we ration what we buy based on what we can afford. On a governmental basis this is distorted because in addition to taxation, the government can borrow and print money in order to fulfill its desires. Individuals cannot tax, or print money, but they can borrow money in limited ways. In the current debate about healthcare the first question that should be asked is whether we can afford it. If we can’t, then we should walk away and say that. Whether we desire it or not is irrelevant to the underlying idea of affordability. The proposals that the AMA, American Hospital Association and the insurance industry are promulgating are being done to make sure that the health bill gets passed. Each has carved out some promise from the government in exchange for their support. For the AMA the promise presumably was the elimination of the formula calling for increased cuts each year, which each year Congress has overridden. However what each entity fails to understand is that this is just a divide and conquer strategy on the part of the government. The government goal is to get a health care bill passed no matter what. The government has proposed a 70% reimbursement cut to hospitals. So no matter what get said up front, when the bill passes, the government will revert to its full cuts in order to try to make the health care bill work. Taxes on the health benefits of the employed will be enacted, because there are few areas to extract money from in the system. When the hospitals find out that they cannot sustain 70% cuts in funding at the same time that they have to provide care to 20% more patients, they will all go under and the government will have to take them over as the government did for GM since the healthcare system is too big to fail. Private insurers will be undercut by the government plan, so they are on borrowed time too. Physicians, who cannot sustain practices at the severly curtailed reimbursement rates planned (currently planned 25% cut in Medicare reimbursement), will go to work initially for the hospitals but ultimately for the government. Care will be available if only patients are willing to wait. Politicians and their friends will get all the care they want because of their connections. We will be left with a socialized medicine system that costs more and covers less. Can we name a single government program that runs on time delivers what it says and goes away when it is done? The Medicare drug bill was supposed to cost a certain amount but that cost too has spiraled out of control despite the $4 prescriptions from WalMart. The pharmaceutical industry will be another victim since only cheap old drugs wil be mandated. No company will be able to afford to bring new drugs to the market for what the government is willing to reimburse for them. Should we allow government to get involved in health insurance, or healthcare? They already are to a massive degree, and have driven up the cost of healthcare, due to increased mandates. The electronic health record system that is proposed, cannot work yet because there is no interoperability standard for healthcare that will work with all of the legacy devices and all of the software and hardware vendors. The physician bonuses are unlikely to be accessible just as the pay for performance rewards have in large measure been unobtainable because physicians couldn’t meet the documentation requirements that the government mandates. Why would it be any different with the electronic health record bonuses? Physicians who expend funds on this type of technology particularly in small offices had better pay close attention to costs before making any kind of buying decision, since the return on investment is likely to be poor.
    Ultimately we should not worry. If we as individuals went into a bank and wanted to borrow $5 million to buy a house, but told the banker that our kids and grandkids and greatgrandkids would repay the loan, the banker would laugh us out of the bank. Our government is doing this now. The true estimates for the health plan are closer to $4 trillion, but since the $1.8 trillion dollar plan was too expensive the Congress decided to scale back the costs but none of the goals to $600 billion. The fact that it is an absolute falsehood doesn’t bother anyone. The reason we need not worry is that given all of the debt and the escalated borrowing printing and taxing of money, it will be less than 5 years before the whole system collapses. Medicare and Social security are estimated to be bankrupt in 5 years. Two years ago when the level of borrowing was lower the estimated time to bankruptcy was 18 years. In response to our indebtedness the government is accelerating their borrowing. NY Times Nobel Prize Winning economist Paul Krugman is advocating a new round of stimulus money to get the economy out of its mess. Surprising for such a bright man, he doesn’t recognize that in former days, borrowing for economic stimulus was on a much smaller base of borrowed money. Now we have maxed out our credit with China France and 30 other countries leaving us with only the oil states still loaning us money. We should be frightened by the IOU’s issued in California. State workers cannot pay their electric bills and rent with IOU’s. Therefore they will not continue to show up for work. The same will be true for the state police prison guards, and so on. The federal government has the ability to borrow and print money which the states do not. However that will only last for a finite period of time longer. Within the next 5 years the entire economy of the US will collapse economically. When that happens we will just have to be there to pick the pieces. There is not the political will to stop the train heading toward the chasm ahead. Nor is their the willingness on the part of the people on the train to jump off the train for fear of getting hurt (as opposed to the fear of dying when the train plunges into the chasm). Trying to get our politicians to stop this is pointless. They are too keen on getting reelected. We learned after last September’s debacle when the Congress despite intense letter writing emails and phonecalls from their constituents to stop the stimulus bill from passing, passed it, that Congress no longer represents the governed. Since Congress is hell bent on ignoring the represented, the system will collapse of its own accord economically, just as the Soviet Union did. It would now seem inevitable. We must remain strong to pick up the pieces afterward.

  7. Why emulate Massachusetts? Did you know that MA requires physicians to have an NPI in order to get a medical license? That MA licensing has considered forced participation in insurance panels (specifically Medicare) to get a license (not enacted….yet…). It is a very “statist” state with liberal trappings.

  8. As has been stated here by at least one other commenter – and I have stated so myself in previous comments to other AAPS news items – it is the lack of self-responsibility that is at the core of the “health care crisis”, if one wants to use that term. It is a situation created, maintained and even stimulated by government. When many people readily accept from government the proceeds in money or services extorted from their neighbors (or others at a distance), they are not being self-responsible. Very few of them would actually steal money from those producer others or fail to pay them for a contracted service, but these nonresponsible individuals will take and even demand that government provide services – in this case health care – to them, and others of course so as to appear concerned about those “less fortunate”. And when people do not directly pay for what they are obtaining, they tend to make more use of it – as the wait times in the Merrit Hawkins study showed for Massachusetts. (This is similar to the tendency by a great many to overeat at all-you-can-eat buffets or drink to excess at open bars.) But since governments do not produce anything that people willingly pay for, they get funds only by taking money, with threat of force or actual use of it, from taxpayers (and even if borrowed, the taxpayers pay the principle and interest). Yes, there is the government currency printing press too and the injection of those “new” dollars into the economy – which actually steals from the citizenry too.

    Each person is an individual and can properly only speak for him/her (hir) self, and in some cases for hir direct dependents. But the use of plural pronouns, “we”, “our”, “us”, actually distorts one’s thinking – whether the speaker or writer is trying to appeal to some vast audience or just thinks it is somehow stylistic. The distortion in reasoning is taking place on the part of the speaker/writer and the listener/reader – except for those few of the latter who are already well aware of the potential problem and catch the incorrect usages. (For more see ) Therefore I think that one of the major ways to get to and stay on the root factor of self-responsibility is to not make use of or tolerate the use by others of “we”, “our”, “us” except where the group is clearly defined and the user of those plural pronouns has some authority to speak/write for that group.

    I urge that everyone concerned with this increasing government interference in health care not to let politicians, lobbyists or anybody get away with ignoring the individual – the individual who is supposed to provide the service that someone else wants (but that someone doesn’t want to come to a mutually agreed on arrangement with the provider) or the individual taxpayer who is being extorted to pay for that service going to someone else (maybe even hirself), or be fined or jailed if not compliant. I urge that readers to write letters and comments that primarily talk about yourself – as did Ralph Whaley – and do not apologize for doing so.

    If I were living in Massachusetts, I (even at age 64) would be one of those “low-risk persons who decline to pay their “fair share” to subsidize coverage for higher-risk persons.” This is because I do not and will not pay for prepaid health care. I want only true catastrophic major medical insurance ($25k deductible). I will continue to consult physicians when and if I need them, which has been rarely due to my numerous health degeneration prevention measures. (Most often it is when I want some test or chemical for which government has declared physicians as the gatekeepers.) A reasonably priced plan of this type does not appear to exist – as a result of government, I am convinced. I’ve stated this situation in numerous public locations and to the government legislators for where I live in AZ. I do *not* want to be told by government that I must pay into some plan or be fined or jailed, if caught. And if the IRS is involved, avoiding such payment becomes extremely difficult.

  9. I was curious about Janis Chester’s statement re. Mass and NPI (National Provider Identifier) and so went to Mass medical board website page for fees and general info. I did not find any mention of NPI at all.
    If there is somewhere else that Massachusetts makes this a requirement for licensure, it would be best to provide a link. Otherwise faulty information may be circulating and can be used negatively by those supporting (more) government intrusion in health care.

    Interestingly though, there is this at that webpage as the last item under “Contents of an application form for full licensure…” :
    “A statement that the applicant will not charge to or collect from a Medicare beneficiary more than the Medicare reasonable charge for the physician’s services, in compliance with M.G.L. Ch. 112, S. 2.

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