Would health reform be good for Massachusetts?

All eyes are on Massachusetts special Senate election, which pits Republican state senator Scott Brown against Democratic attorney general Martha Coakley. Brown has sought to ...
by | January 19, 2010 AT 3:00 AM

All eyes are on Massachusetts special Senate election, which pits Republican state senator Scott Brown against Democratic attorney general Martha Coakley. Brown has sought to make the election a referendum on national health reform: he's vowed to block it if elected. However, that's not because he doesn't like health reform per se. In fact, he supports Massachusetts's attempt to provide health insurance to all. Instead, Brown has argued that Massachusetts doesn't need health reform because it already has it. As Brown told Fox News, "Why would we subsidize and pay for something we already have? It makes no sense."

So is Brown right? Would health reform help or hurt the Hub? Would a hard-headed voter looking out for number one do better to spurn national health reform or embrace it? To try to answer this question, let's examine how different constituencies in Massachusetts would fare if national health reform passes.

  • Businesses. Massachusetts currently requires businesses that don't offer health insurance to their employees to contribute $295 per uninsured employee to the connector. That's not nearly enough to cover the cost of health insurance. (Advocates of universal coverage chose a low figure to preempt business opposition.) Both the House and Senate bills would impose much larger (and much more realistic) levies on small businesses. (The House bill exempts businesses with payrolls of less than $500,000; the Senate, firms with 50 employees or less.) Bottom line: businesses are better off under the status quo -- in the short run. (More on this qualification below.)
  • People with "Cadillac" health insurance plans. Both the Senate and House bills would help finance the subsidies for health insurance with taxes on so-called "Cadillac" plans, which offer unusually high-benefit levels. The Commonwealth is a high-cost, high-benefits states. Bottom line: in the long-run, the "Cadillac" tax will squeeze Massachusetts residents.
  • The middle class. Community rating? Bans on preexisting conditions? Massachusetts residents already have these protections, thanks to health reform. They're one of the reasons why Massachusetts's own version of health reform remains so popular. Bottom line: A wash.
  • The Connectors. At the hear of health reform is the Connector, an innovative health exchange where individuals and small businesses can purchase health insurance. One hotly debated issue at the state level is how much regulatory power health exchanges should have. (The Connector has a lot, but some states feel exchanges should be clearinghouses, not regulators.) Health reform interferes with the operations of the exchange, if a more restrictive version of exchanges was authorized. The Bottom line: Health reform probably won't interfere with the Connector.
  • Bottom-liners. Massachusetts probably doesn't stand to receive much in the way of new federal dollars from health reform. "There are some provisions in the bill that suggest we will get a little more money for certain populations, but we don't realize as much benefits as some states," says Anya Wallack, executive director of the Massachusetts Medicaid Policy Institute. "States that have very low eligibility levels are obviously going to realize a lot more federal dollars than Massachusetts."  Bottom line: Health reform would provide Massachusetts with some additional funds but not much.  
  • The cost cutters. Small sample size, sweeping conclusion but here it is: people in Massachusetts who are serious about controlling costs and improving outcomes want health reform. "There are two big impediments to states to doing cost control on their own," says Wallack. They can't tackle the costs of long-term care, and, thanks to ERISA, they can't tax or regulate ERISA plans. "I think that having some sort of federal framework really helps states in the long-run," says Walack. "The feds in the long term will have to help with the cost problem in ways that no states can do on their own." She should know. Walack is also on Massachusetts's commission to control health care costs. Bottom line: It would be a lot easier to contain costs and improve quality working with the feds. 
In summation, businesses focused on the short- to medium-run would probably do better under the status quo. People with generous benefits might be better off too. In the long run, though, businesses might well benefit from the greater cost control that might result form health reform. As for Massachusetts taxpayers, they're not much affected either way. As net contributors to the federal budget, Commonwealth residents always pay more when a major social program is created or expanded. However, without national health insurance, Massachusetts will be in a lonely position.

"It may be difficult to sustain the Massachusetts reforms over the long term, if it's the only the state that has near-universal coverage," warns Princeton sociologist Paul Starr (a supporter of health reform). "So if you think the Massachusetts reforms are a good thing and you want to keep them, the surest way to see that happen is to build them into federal law for the entire country."

That, of course, is precisely why supporters and opponents of health reform are doing everything they can to influence this election.

Have I missed something? Please let me know with comments below.

Update: MIT economist Jonathan Gruber adds the following interesting plug for federal action: "[A] nother advantage of federal, which is the ability to run budget deficits. A program like this is naturally counter-cyclical, as needs rise in the recession. States, with their balanced budget requirements, aren't the right place to carry out policies such as this. Federalization would allow for the natural counter-cyclicality that this program requires."