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Massachusetts health care — wonky, with a healthy dose of reality

Family Feud: WSJ Hits Mitt Yet Again

Family Feud: WSJ Hits Mitt Yet Again

May 2, 2006

Boy, those Wall Street Journal editorial writers can't stop whacking Mitt Romney on the MA health reform law. Here's today's contribution:

Mitt's Non-Miracle
Well, that didn't take long. Only two weeks ago Massachusetts passed an experiment in compulsory, subsidized health insurance, and already it's turning into an employer mandate and a vehicle for increasing the role of government.

Last week the Democrat-controlled Massachusetts legislature began moving in just that direction, overriding all of the line-item vetoes that Republican Governor Mitt Romney had cast in an effort to give the state's new insurance law a market-oriented veneer. Various Medicaid expansions were restored, as, more importantly, was a $295-per-employee annual penalty on employers who don't provide health insurance.

That $295 may not sound like much, but it's sure to grow over time. And in any case the real employer penalty in the bill is a draconian provision that puts employers on the hook for the major medical bills of employees they don't insure. This might as well be considered an employer mandate, since it means just one case of cancer for an uncovered employee would be enough to wipe out a small business.

Meanwhile, Governor Romney recently offered what sounded like a response to some of our editorial criticisms at an appearance before the U.S. Chamber of Commerce in Washington. "The key factor that some of my libertarian friends forget is that today everybody who doesn't have health insurance is getting free coverage from the government," he said. He also repeated his claim that treating such free riders adds significantly to the cost of private insurance for those who do have it, thus justifying his compulsory scheme.

Nice try, Governor. But there's actual data out there on the cost of "free care" for the uninsured, and the numbers suggest it should rank fairly low among policy makers' concerns. A 2003 study by Jack Hadley and John Holahan in the policy journal Health Affairs estimated that in 2001 the nationwide cost of such uncompensated treatment was $34.5 billion, or 2.8% of all health spending.

That's not nothing, but neither has it been the major cost driver for private insurance that the Governor claims it is. The real cost drivers are two regulations -- guaranteed issue and community rating -- that unreasonably restrict the freedom of insurers to offer and price coverage, and which his new law explicitly preserves in his state. If Governor Romney thinks care for the uninsured is expensive now, wait until Massachusetts taxpayers see how much his government-heavy "solution" costs.

Wow. Where to start? How about this -- guaranteed issue and community rating mean that insurance in Massachusetts is available when consumers need it; it means that all insurers compete on a level playing field and can't make their money by dropping folks when they get sick. It's true -- guaranteed issue and community rating make insurance more expensive than coverage in states where insurers can drop you or jack up your premiums 300% when you have the nerve to get sick.

Here's the surprise -- levels of uninsurance are lower in Massachusetts than at least 40 other states, and states with levels close to ours tend to have similar kinds of consumer protections. How to explain? Part of the answer comes from a brand new Health Affairs study just released this morning (bless the timing!) on the dynamics of the individual insurance market in California. Click here for the full article. Here's the abstract:

This paper summarizes the results from a study of consumer decision making in California's individual health insurance market. We conclude that price subsidies will have only modest effects on participation and that efforts to reduce nonprice barriers might be just as effective. We also find that there is substantial pooling in the individual market and that it increases over time because people who become sick can continue coverage without new underwriting. Finally, we show that people prefer more-generous benefits and that it is difficult to induce people in poor health to enroll in high-deductible health plans.

Get that, Mitt and WSJ? Price is only part of the decision equation, and not the biggest one. And people don't want slimmed down benefit plans with high deductibles either.

By the way, we sure as heck hope that $295 grows over time. Under the law, though, it is scheduled to go down over the next two years as levels of uncompensated care drop.