Romney Signs Universal Health Care Bill

Massachusetts Governor Mitt Romney has signed a law giving universal health coverage.

Gov. Mitt Romney on Wednesday signed into law a landmark bill designed to guarantee virtually all Massachusetts residents have health insurance. However, the governor vetoed a key portion of the bill — a $295-per-worker assessment on businesses that do not provide health insurance. Some critics have called that provision a tax on businesses. The bill, intended to extend coverage to Massachusetts’ estimated 550,000 uninsured, is being touted as a national model, thrusting the state to the forefront of the national debate about how to provide near-universal health care coverage without creating a single government-controlled system. It’s also a political coup for Romney as he weighs a potential run for the Republican presidential nomination in 2008. The bill could be a centerpiece of that campaign if Romney can credibly claim pushing through a groundbreaking health care reform package.

Romney touted the plan in a WSJ op-ed yesterday. It sounds too good to be true: “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced. And we will need no new taxes, no employer mandate and no government takeover to make this happen.”

It turns out, he’s figured out a way to soak the federal taxpayers for most of the cost:

I assembled a team from business, academia and government and asked them first to find out who was uninsured, and why. What they found was surprising. Some 20% of the state’s uninsured population qualified for Medicaid but had never signed up. So we built and installed an Internet portal for our hospitals and clinics: When uninsured individuals show up for treatment, we enter their data online. If they qualify for Medicaid, they’re enrolled.

A good idea, really, and these people qualify for the program. But if all states did this, the costs would skyrocket at the national level. Further, since people in Massachusetts also pay taxes to the federal goverment, it’s only a matter of time before there are “new taxes.”

Another 40% of the uninsured were earning enough to buy insurance but had chosen not to do so. Why? Because it is expensive, and because they know that if they become seriously ill, they will get free or subsidized treatment at the hospital. By law, emergency care cannot be withheld. Why pay for something you can get free?

Of course, while it may be free for them, everyone else ends up paying the bill, either in higher insurance premiums or taxes. The solution we came up with was to make private health insurance much more affordable. Insurance reforms now permit policies with higher deductibles, higher copayments, coinsurance, provider networks and fewer mandated benefits like in vitro fertilization–and our insurers have committed to offer products nearly 50% less expensive. With private insurance finally affordable, I proposed that everyone must either purchase a product of their choice or demonstrate that they can pay for their own health care. It’s a personal responsibility principle.

So, people are forced to buy health insurance whether they want it or not.

Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on government is not libertarian.

True enough. But why not simply mandate that those people who go to the ER and have the means to pay, pay?

Now, granted, many states mandate liability insurance to drive a car. But driving is a licensed activity that we have deemed a “priviledge” bestowed by the state. Being alive is one of those inalienable rights endowed by our Creator, or so our founding principles tell us.

Another group of uninsured citizens in Massachusetts consisted of working people who make too much to qualify for Medicaid, but not enough to afford health-care insurance. Here the answer is to provide a subsidy so they can purchase a private policy. The premium is based on ability to pay: One pays a higher amount, along a sliding scale, as one’s income is higher. The big question we faced, however, was where the money for the subsidy would come from. We didn’t want higher taxes; but we did have about $1 billion already in the system through a long-established uninsured-care fund that partially reimburses hospitals for free care. The fund is raised through an annual assessment on insurance providers and hospitals, plus contributions from the state and federal governments.

I support subsidizing the health costs of those who honestly can’t afford it and means testing for such a program is reasonable. But it is simply dishonest to pretend that this is not an unfunded mandate on business or that, once this stream is tapped, it will not lead to a tax increase. Right now, it’s found money. But a $1 billion is chump change when you’re talking about funding health care for an entire state.

To determine if the $1 billion would be enough, Jonathan Gruber of MIT built an econometric model of the population, and with input from insurers, my in-house team crunched the numbers. Again, the result surprised us: We needed far less than the $1 billion for the subsidies. One reason is that this population is healthier than we had imagined. Instead of single parents, most were young single males, educated and in good health. And again, because health insurance will now be affordable and subsidized, we insist that everyone purchase health insurance from one of our private insurance companies.

Enough for what? For how long? Surely, $1 billion won’t last forever. Indeed, I’d be surprised if it lasted two years.

And so, all Massachusetts citizens will have health insurance. It’s a goal Democrats and Republicans share, and it has been achieved by a bipartisan effort, through market reforms.

Romney is wielding some smoke and mirrors. But, if you believe this is going to be free, you’re smoking something, too.

There are some good points to this bill, to be sure.

The Heritage Foundation helped craft a mechanism, a “connector,” allowing citizens to purchase health insurance with pretax dollars, even if their employer makes no contribution. The connector enables pretax payments, simplifies payroll deduction, permits prorated employer contributions for part-time employees, reduces insurer marketing costs, and makes it efficient for policies to be entirely portable. Because small businesses may use the connector, it gives them even greater bargaining power than large companies. Finally, health insurance is on a level playing field.

Two other features of the plan reduce the rate of health-care inflation. Medical transparency provisions will allow consumers to compare the quality, track record and cost of hospitals and providers; given deductibles and coinsurance, these consumers will have the incentive and the information for market forces to influence behavior. Also, electronic health records are in the works, which will reduce medical errors and lower costs.

Hurray! Those are actual free market solutions that sound plausible.

How much of our health-care plan applies to other states? A lot. Instead of thinking that the best way to cover the uninsured is by expanding Medicaid, they can instead reform insurance.

Will it work? I’m optimistic, but time will tell. A great deal will depend on the people who implement the program. Legislative adjustments will surely be needed along the way. One great thing about federalism is that states can innovate, demonstrate and incorporate ideas from one another. Other states will learn from our experience and improve on what we’ve done. That’s the way we’ll make health care work for everyone.

The problem is that very few of Romney’s ideas actually impact the real problem: the exploding cost of health care. Indeed, the plan will have the overall effect of increasing demand, since some people who would only go to the doctor in an emergency will now go more routinely.

FILED UNDER: Campaign 2008, Health, , , , , , ,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Steve Verdon says:

    And nobody stops to think that maybe giving away “free” health care could be the reason for the exploding costs. This kind of economics isn’t rocket science, but for some damn reason this obvious answer seems to elude just about everyone.

  2. just me says:

    I agree with Steve-I think half the problem with healthcare is that too much of it is perceived as being “free.”

  3. “Indeed, the plan will have the overall effect of increasing demand, since some people who would only go to the doctor in an emergency will now go more routinely.”

    Yes, but I’m not sure if this change in demand is going to impact prices in an upward or downward manner. Remember, if you only go to the doctor in an emergency, you’re probably going to the ER rather than a family doctor – and ER care is MUCH more expensive, and the real area that’s overworked right now.

    If these same people start going to see a normal general practitioner (either a true family doctor or a walk-in clinic), then the ER is going to waste a lot less time and effort on patients who don’t truly have emergencies, and insurance providers are going to spend a lot less money on these patients.

    So while the total demand for health care may rise, the redistribution of the demand makes it very unclear how this will impact prices in the real world.

    I’m philosophically opposed to large parts of this plan as well. But even so, I have to admit that it just might actually accomplish something, and it looks a lot more promising than anything else I’ve seen proposed by pretty much anybody ever. If it actually works, even at a higher cost, it’s a good thing, and I’m willing to sacrifice my high-minded theory in favor of, “hey, it actually works.”

    That is, however, if it actually works, and that remains to be seen.

  4. Steve Verdon says:

    If it actually works, even at a higher cost, itâ??s a good thing, and Iâ??m willing to sacrifice my high-minded theory in favor of, â??hey, it actually works.â??

    Uhhmmm Russel, if the costs are higher, then it isn’t actually working. As you note, substituting visits to the general practitioner vs. the ER could save money. But if the end result is that we end up spending even more money, then the plan is a failure.

    After all, even the uninsured have access to health care, they just go to emergency rooms that cannot turn them away. So it isn’t really a coverage issue, it is an incentive issue (as you are framing it). If the incentives work, but cost us more, then why bother. Go with the cheaper model, IMO.

  5. floyd says:

    now let’s all just sit back and watch the law of unintended consequences at work. this should be fun![lol]

  6. Lunacy says:

    SOME people choose not to buy health insurance because they never use it, not because it is too expensive.

    Well, it’s obviously too expensive if you never need to use it.

    I spent years buying health insurance for my son and myself. I used it for my son one time, and that was only because he needed medication. After 5 or 6 years I dropped him from the company family plan (which, by the way, cost me the same as it cost the ladies with 5 sons). I often felt guilty about it but got over it quickly when I considered the racket.

    I got his shots at the health department. What more does a healthy kid need? I spent around 100 dollars a month for 5 to 6 years to insure a kid who has never even had stitches, let alone strept throat or a broken arm. His boy scout check ups cost 45 dollars.

    He is now 19. So, in the 18 years that he was my legal responsibility, I personally spent around 8000 dollars on insurance over 5 to 6 years, 3000 for braces that weren’t covered, 300 on dentistry that wasn’t covered and 300 dollars on routine visits after I dropped him from my work insurance. So essentially, I spent much more on unused insurance than I did without the insurance, even if you factor in what wasn’t covered.

    I should have dropped him years before and saved that money in an account. He’d have enough to buy that POS Mustang he wants to fix up.

    Maybe another part of the problem with free or universal health insurance is the same with health care in general. People tend to think they are entitled to exist without any suffering or strife. They don’t know how to administer their own care without the oversight of a doctor. And they demand to be set to right over the least bit of deviation from normal.

    Let’s take the common cold. There is no cure. Why waste your time and your doctors’ time on a visit that cannot possibly do anything practical for your ailment?

    I could say more but I’ve said enough. My father is a retired ER physician. I currently work at a teaching hospital. In all my raising I never went to the doctor unless I knew something was wrong that I couldn’t deal with myself, through either ignorace, lack of skills or the laws of drug distribution. However, I am surrounded by people who consume health care services and medications like they were essential needs for the most benign and exaggerated ailments/ discomforts/ disorders. I’m not sure I want to call them hypochondriacs but I don’t have a better term at the moment.

    Lunacy

  7. anjin-san says:

    And if lunacy’s son had, god forbid, become seriously ill? Guess a cool car would be the least of anyones worries…

  8. Lunacy says:

    If he became seriously ill I’d pay for it the same way I’ve paid for everything else.

    With cash or credit.

  9. Lunacy says:

    And BTW: POS equals Piece of S#*t

    As in junker he needs to rebuild.

    Himself.

    Without Romney’s assistance.

  10. ICallMasICM says:

    As someone who operates a small business in MA I would offer that there are about a million problems with this but who’s counting. This should be a little disconcerting plus factor this in. If I own a small business employing 11 or more people (I don’t employee 11 but could in the foreseeable future)I could cut my cost of supplying them group health by about 90% by terminating the group health plan and paying the $295 per worker. Then the insurance is compulsary to the individual and if they are making less than 3 times the poverty level around $45K then they get a state subsidy. In most industries in this state that’s not going to happen because subsidized health is part of the comp package but in small low wage companies (ie. cleaning, delivery) there would be a lot of incentive to pay the $295 and shift the burden over to the worker and ultimately the taxpayer. Obviously I have some problems with the idea that you can force anyone to buy health insurance who doesn’t want to bear the expense for whatever reason but the other problem I have as an employer is that the gov’t is now deciding how I have to compensate my employees. There’s a reason why MA is one of two states in the US to lose population and why it lags in job creation. MA is 7th in per capita tax burden and has one of the highest COL in the nation. The second is interference. When Gillette sold out to P&G CEO James Kitts said flat out that there’s an anti-business environment in MA and there is. Now the gov’t is requiring businesses to provide a form of compensation to all employees or pay a surcharge to the state. MA already requires one of the highest contributions for unemployment insurance and has a 5.3% state income tax rate and a 5% state sales tax. And they wonder why they’re hemorrhaging population and jobs.

  11. bryan says:

    One wonders how the people who are suddenly getting this health care “benefit” and seeing their wages decline are feeling about this latest Mass. miracle?