24 H A S T I N G S C E N T E R R E P O R T September-October 2006

ly insurance with affordable monthly expenses—and they willnot receive one in Massachusetts.

Who Defines “Affordable?”

The board of the Connector is key. Although “stakehold-ers” are well represented among its members, the board

nonetheless has little accountability, especially to uninsuredand low- to middle-income residents. Board members are notelected, and there is little representation of those who are like-ly to be most affected by crucial decisions about affordability,subsidies, and what counts as “creditable coverage.” Reformbased on an individual mandate must make adequate healthinsurance “affordable.” It must also ensure that the plans havereal value. If they do not, then purchasing health insurancemight not be better for one’s health than other spending op-tions, like healthy food or college tuition, leaving individualsto question the legitimacy of the mandate. The board needs,somehow, to start a deliberative dialog about affordability—adialog that engages the bartenders and shop clerks who mightwear “Define ‘Affordable’” T-shirts.

If in the end insurers do not offer affordable products, asdefined either by the Connector or by intended purchasers—or, better still, by the Connector as the mediating institutionof public input—the state of Massachusetts may not come asclose to universal coverage as they and the rest of us hope theycan. If near-universal insurance benefits providers, large em-ployers, and the young and healthy at the expense of employ-ees, small employers, the old, and the sick, the reform will ex-acerbate rather than reduce injustice.

Acknowledgments

Susan Dorr Goold’s work was supported in part by an Eliza-beth C. Crosby Research Award.

1. “Massachusetts Health Plan a Poor Choice for New York: Just Fol-low the Money,” a statement by Leonard Rodberg, New York MetroChapter of Physicians for a National Health Program, athttp://www.healthcareforall.org/mass.html (last accessed September 13,2006).

2. K. Pollitz et al., “Falling through the Cracks: Stories of HowHealth Insurance Can Fail People with Diabetes,” February 8, 2005, athttp://www.healthinsuranceinfo.net/newsyoucanuse/08.html.

3. In 2004, families earning more than $100,000 received 27 percentof the tax benefits for health spending. J. Carroll, “Taxpayers Reject Ideaof Losing Deduction for Health Insurance,” Managed Care 14, no. 12(2005): 11-12.

4. G.F. Anderson et al., “Health Spending in the United States andthe Rest of the Industrialized World,” Health Affairs 24, no. 4 (2005):903-914.

5. See the recommendations of the Citizens Health Care WorkingGroup at www.citizenshealth care.gov/recommendations/interimrecom-mendations.pdf.

The road to hell, it is said, is paved with good inten-tions. So it is with Massachusetts’ recent attempt athealth care reform. The legislation is an attempt to

deal with serious and legitimate problems in the health caresystem, undertaken with the best of intentions. But in theend, it is liable to create far more problems than it solves, leav-ing health care consumers with fewer choices and less controlover their health care decisions while saddling taxpayers withsignificant new costs.

In large part, this is because the Massachusetts reformstems from a faulty premise. It assumes that the primary goalof health care reform should be to extend insurance coverage,with an eventual goal of universal coverage. Having longequated insurance coverage with access to health care and ac-cess to better health, many see an individual mandate as pro-ducing better health outcomes. In reality, the experience of ra-tioning under national health insurance schemes in othercountries shows that insurance coverage and access to care areentirely different things. As the Canadian Supreme Court saidrecently in striking down part of Canada’s national health in-surance program, “Access to a waiting list is not access tohealth care.”

Moreover, evidence that insurance coverage or access tohealth care leads to better health outcomes is uncertain atbest. Evidence suggests that those without health insurancedo receive less care than those who are covered. However,there is also substantial evidence that culture, education, andlifestyle are at least as important as lack of insurance in deter-mining outcomes. At the same time, there is evidence thatmany of those with insurance actually over-consume healthcare because the true cost of care is hidden.

Others, including economists of all stripes, have tended toembrace universal coverage for another reason. When an in-dividual without health insurance becomes sick or injured, he

B Y M I C H A E L TA N N E R

The Wrong Road to Reform

Michael Tanner, “The Wrong Road to Reform,” Hastings Center Report 36, no. 5(2006): 24-26.

H A S T I N G S C E N T E R R E P O R T 25September-October 2006

or she still receives medical treatment. In fact, hospitals have alegal requirement to provide care regardless of ability to pay.Physicians do not face the same legal requirement, but few arewilling to deny treatment because a patient lacks insurance.Such treatment is not free. The cost is simply shifted to oth-ers: those with insurance or, more often, taxpayers. Thus to alarge degree individuals without health insurance are “free-riding” on the rest of us.

But this problem is smaller than commonly believed. Atthe time the bill was enacted, total uncompensated care costsrepresented less than 3 percent of all health care spending inMassachusetts, at the low end of the national average (esti-mated at 3 to 5 percent). In ad-dition, those most likely to gowithout health insurance are theyoung and relatively healthy—those least likely to impose sig-nificant costs on society. For ex-ample, although 18- to 24-year-olds are only 10 percent of theU.S. population, they are 21percent of the long-term unin-sured. For these young, healthyindividuals, going withouthealth insurance is often a logi-cal decision.

The larger problem here isthat this pattern is a form of ad-verse selection: removing theyoung and healthy from the in-surance pool means that thoseremaining in the pool will beolder and sicker. The result ishigher insurance premiums forthose who are insured. The problem is even greater in a statesuch as Massachusetts, where a modified form of communityrating—an economic term referring to the mandated poolingof individuals even where an insurance company might dootherwise—forbids insurance companies from pricing theirproducts based on age or health and requires some forty dis-tinct and often costly mandated benefits. These regulationsincrease costs dramatically for young and healthy individuals,many of whom then decide, rationally enough, to foregohealth insurance. The individual mandate attempts to solvethis problem by forcing young and healthy people into the in-surance pool. Massachusetts also attempted to address thisissue by loosening some of the restrictions and mandates forthose ages nineteen to twenty-six.

Massachusetts chose not to tackle the question of universalcoverage directly through a single-payer system. It also chosenot to rely on free-market reforms and deregulation to lowerthe cost of care and give consumers more choice. Instead it at-tempted to be a little bit pregnant on the issue through acombination of an individual mandate, subsidies, and a re-design of the small-group and individual insurance markets.

Mandated Participation

Most media attention has been on the state’s controversialmandate that every resident have health insurance.

Such an intervention on the part of the state in personal deci-sion-making is “unprecedented,” according to the Congres-sional Budget Office, representing the first time a state has re-quired residents—simply by virtue of living in a state—topurchase any state-defined product.

Advocates of a mandate argue that if we can mandate au-tomobile insurance in order to protect society from the costsimposed by uninsured drivers, we should be able to do the

same for health insurance. Thisis an imperfect analogy, howev-er. First, it has long been recog-nized that driving is a privilege,subject to all manner of regula-tory requirements. If one doesnot like the regulations, includ-ing an insurance mandate, onecan choose not to drive. Ahealth insurance mandatewould not generally give peoplesuch a choice. Second, the rea-son states mandate auto insur-ance is for the protection of oth-ers rather than oneself. Moststates do not mandate you carryinsurance for your own injuryor repair costs. However, autoinsurance does provide a cau-tionary tale of how difficult itwill be to enforce the mandate.Despite fines and other penal-

ties, roughly 7 percent of all Massachusetts drivers remainuninsured—and this is relatively low compared to otherstates. The health insurance mandate is likely to prove evenmore difficult to enforce.

Having mandated the purchase of health insurance, Mass-achusetts had to find mechanisms to make insurance afford-able to low- and middle-income individuals. It did thisthrough a series of subsidies on a sliding scale for individualswith incomes up to 300 percent of the poverty level. Unfor-tunately, the bill’s subsidies are poorly targeted and overly gen-erous. Subsidies would be available for those with incomesranging from $30,480 for a single individual to as much as$130,389 for a married couple with seven children. A typicalmarried couple with two children would qualify for a subsidyif their income were below $58,500. Many of those eligiblefor subsidies were already insured. The subsidies will encour-age businesses to discontinue their health insurance, forcingcosts onto the taxpayers. And subsidies at this level will extenddependence on government well into the middle class.

We should shift thedebate away from its

single-minded focus onexpanding coverage to thebigger question of how toreduce costs and improve

quality.

26 H A S T I N G S C E N T E R R E P O R T September-October 2006

A Controlled Market

Finally, the legislation restructures the individual and smallbusiness insurance markets by creating a new government-

run intermediary, the Massachusetts Health Care ConnectorAuthority, to match buyers with “approved” insurance plans.The Connector is designed to create a form of managed com-petition that provides for private sector insurance within anartificial, government-designed and -controlled marketplace.Insurers are prohibited from competing based on their abilityto price and manage risk, as plans must accept all applicantsand charge everyone the same price regardless of individualhealth risk. In addition, insurers are not able to adjust premi-ums on the basis of age, sex, or other risk factors.

These features of the new insurance market may appearbeneficial and fair, but they are outweighed by the unintend-ed consequences of the regulation. Since the Connector hasthe power to decide what policies will be sold, it will limit in-surers’ ability to reduce cost through benefit design. Conse-quently, competition will occur only at the margins. Insurers,unable to charge more for an increasingly expensive product,will trim costs by cutting back on their reimbursement ratesto hospitals and physicians. In the long run this can lead toless availability of care and a decrease in the quality of the carethat is available. Also, an inability to price according to riskgenerally results in an overprovision of services to the healthyand an underprovision to the sick.

Overall, the Massachusetts reform heads down the wrongroad to reform. The first rule of health care reform should betaken from the Hippocratic Oath: First do no harm. Weshould not forget that for all its flaws, American health care isof the highest quality available anywhere in the world. Mostof the world’s top doctors, hospitals, and research facilities arelocated in the United States. Eighteen of the last twenty-fivewinners of the Nobel Prize in Medicine either are U.S. citi-zens or work here. U.S. companies have developed half of allthe major new medicines introduced worldwide over the pasttwenty years. In fact, Americans played a key role in 80 per-cent of the most important medical advances of the past thir-ty years. By almost any measure, if you are diagnosed with aserious illness, the United States is the place you want to be.

Take prostate cancer, for example. According to OECDdata, even though American men are more likely to be diag-nosed with prostate cancer than are their counterparts inother countries, we are less likely to die from the disease. Lessthan one out of five American men with prostate cancer willdie from it, but 57 percent of British men and nearly half ofFrench and German men will. Even in Canada, a quarter ofmen diagnosed with prostate cancer die from the disease.Similar comparisons are possible for other forms of cancer.Just 30 percent of U.S. citizens diagnosed with colon cancerdie from it, compared to 74 percent in Britain, 62 percent inNew Zealand, 58 percent in France, 57 percent in Germany,53 percent in Australia, and 36 percent in Canada. Less than25 percent of U.S. women diagnosed with breast cancer diefrom it, compared with 46 percent in Britain, 35 percent in

France, 31 percent in Germany, 28 percent in Canada, 28percent in Australia, and 46 percent in New Zealand.

By making universal coverage the focus of their reform ef-forts, the state has injected more government control and reg-ulation into the health care system. The evidence, from bothat home and abroad, is that government control will ulti-mately erode those things that are best about the U.S. systemwhile doing little to solve the system’s problems. Instead, weshould shift the health care debate away from its single-mind-ed focus on expanding coverage to the bigger question of howto reduce costs and improve quality. That will require the in-troduction of market mechanisms to give consumers morecontrol over and responsibility for their health care decisions.

In doing so, we can actually increase coverage and reducethe free rider problem. If young, healthy people can purchaselow-cost catastrophic insurance, they are more likely to thinkbeing insured is in their self-interest. This will go a long waytoward dealing with the adverse selection problem. And to thedegree that market mechanisms make health care and healthinsurance less expensive, more low-income people can bebrought into the system. At the same time, we can maintainthe quality of the American health care system, and most im-portant, preserve individual choice, liberty, and control.

All societies, no matter how wealthy, must set limits onhealth care. Rapid advances in technology combinedwith an aging population make limits unavoidable.

The fact that we in the United States have not agreed on anapproach to setting limits and have lacked the political will tocome up with one is a central impediment to the comprehen-sive reform we so obviously need.

In our 2002 book Setting Limits Fairly, Norman Danielsand I asked how societies can meet the health needs of the

B Y J A M E S S A B I N

“Disappointing butFair”: The Connector’s Challenge

James Sabin, “‘Disappointing but Fair’: The Connector’s Challenge,” HastingsCenter Report 36, no. 5 (2006): 26-28.