If Americans want mandated healthcare coverage, it would be possible for individual states to provide it to them. But almost none of them do. Understanding why they do not—and what that means for a federal mandate—is critical as the nation debates the future of healthcare reform.

At present, Massachusetts is the only state to have such an individual mandate, and I will discuss its experience in more detail below. Connecticut has come close, with a law that authorizes a board “to evaluate implementation” of a mandate that individuals get coverage, but the law does not actually mandate coverage. The Connecticut general assembly overrode Governor M. Jodi Rell’s veto of the legislation, which appoints a board to develop by January 1, 2011 a public health insurance option that promotes universal coverage (to take effect by July 1, 2012).

Hawaii has required employers since 1974 to offer coverage to employees working at least 20 hours weekly. Subsequent employer mandates in states such as Oregon, Washington, and California were either repealed or never took effect. In January 2008, the California legislature rejected a mandate that individuals get coverage. Maine and Vermont have programs that offer subsidized health insurance but without a mandate.

A common explanation for the dearth of mandates is that states cannot afford them. MIT’s Jonathan Gruber, for example, concludes that “states cannot meaningfully innovate in this area without a massive injection of federal funds.” But the question arises as to why the alleged insufficiency of state resources does not simply indicate that citizens, a significant majority of whom are insured, are unwilling to pay the costs in higher taxes or reduced health services that mandates would require. How specifically does federal action overcome that unwillingness to pay?

The most obvious answer is that in contrast to states, the federal government has greater ability to raise taxes. States that raised taxes to pay for mandates would encourage outward migration of individuals and businesses, reducing a state’s tax base; it is significantly more difficult to flee the country.

Indeed, this is one reason Hawaii is something of an outlier. Hawaii’s remote location mitigates outward migration that might occur due to its employer mandate. However, it is worth noting that research conducted by University of Michigan health economists Tom Buchmueller and John Dinardo, along with Rob Valletta of the Federal Reserve Bank of San Francisco, suggests that while Hawaii’s mandate has increased the total number of insured workers, it has also led employers to rely more on exempt, part-time employees.  

Just as important—and worrisome when it comes to a proposed federal mandate—states cannot pay for reform by running persistently large budget deficits. The inability to print money makes it more difficult to enact unfunded programs with visible, front-loaded benefits and opaque, back-loaded costs.

One argument for why a national health insurance mandate conceivably could be supported by voters who reject state-level mandates is that federal reform could help fund such a mandate by substantially reducing Medicare and Medicaid cost growth. If that is the case—and it is a big if—reform legislation that is enacted would have to contain concrete and transparent means to achieve such savings, without recourse to artificial deadlines and limited vetting. The nonpartisan Congressional Budget Office has said current proposals in Congress would not reduce such costs.   

Now back to Massachusetts, the only state with a mandate that individuals have coverage. It is not yet known how many people have been or will be attracted to the state by subsidized insurance, including those with high-cost, pre-existing health conditions. The statute requires six months of residency to become eligible for subsidized coverage, but it is not clear whether it is being enforced.

Either way we do know already that enrollment in Massachusetts’s subsidized Commonwealth Care program and the total cost of subsidies have been significantly higher than initially projected. This is despite the fact that Massachusetts’s estimated proportion of its non-elderly population without health insurance before the mandate (9 percent) was half the national rate (18 percent), so that the need for subsidies to reach universal coverage was less that in many other states. Massachusetts was also able to reduce the need for new taxes, at least initially, by using hundreds of millions of dollars of federal funding from a special Medicaid waiver and by accessing substantial sums from its previously established fund for uncompensated hospital care.

States have largely resisted mandates because their cost requires significantly higher taxes or cutting other parts of the budget. Supporters of healthcare reform at the federal level should not pretend it is any different.

Scott Harrington is a professor of healthcare management and insurance and risk management at the Wharton School of the University of Pennsylvania and an adjunct scholar at the American Enterprise Institute.

Image by Darren Wamboldt/Bergman Group.