Understanding Health Insurance and Policy Using the Massachusetts Health Reform

Abstract: 
The Patient Protection and Affordable Care Act (PPACA), national health reform passed in 2010, is intended to expand health insurance coverage to near-universal levels. While unprecedented on the national level, a similar reform was implemented in Massachusetts in 2006. The Massachusetts health reform and the PPACA are nearly identical in their key elements. These elements include a mandate that all individuals buy insurance else pay a penalty, a mandate that all employers provide insurance else pay a penalty, expansions of Medicaid and subsidized insurance, and the creation of insurance exchanges where individuals can easily buy insurance in the non-group market. Because of the timing of the Massachusetts legislation, it is possible to study its impact on a number of different public health issues and to gain insight into key policy questions under the PPACA. The first aim of this research agenda is to estimate the welfare gains from eliminating adverse selection using an individual mandate. The Massachusetts reform is the first policy in which an individual mandate was used as a means for expanding health insurance in the U.S. In a preliminary study, we find that adverse selection was a problem in the Massachusetts health insurance market in the pre-reform period. We will now use data from a variety of sources to model the marginal and average cost curves as well as the demand curve for health insurance. Using our model, we will estimate the welfare gained or lost as a result of using an individual mandate to correct adverse selection. The second aim of this research is to assess changes in wages, employment, retirement and other labor market decisions as a result of the Massachusetts reform, and the expected changes in these labor market outcomes as a result of the PPACA. We will use data on individuals who switched to and from employer sponsored health insurance and compare them before and after the reform within and outside of Massachusetts. This analysis will allow us to assess the changes in wages and employment that result from the Massachusetts reform. Using a model that we will develop, we will compare this policy with others that could be used to expand insurance coverage. The third aim is to assess the magnitude of the financial risk reduction as a result of the reform. Using data from a Massachusetts hospital bill collector, we can assess the magnitude of risk reduction and estimate the welfare gains of extending coverage to those who are currently uninsured. Each of these aims can be achieved by using a combination of data sources and rigorous theoretical and empirical models. Accomplishing these aims will create the tools to better understand how the PPACA can be implemented most efficiently while providing the most welfare gain for the entire country.
Funded By: 
PARC
Funded By: 
Boettner
Award Dates: 
July 1, 2012 - June 30, 2013
PARC Grant Year: 
Year 19