The Price of RomneyCare

UHCEF Article of Interest

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Wall Street Journal Editorial (click here for original article)

July 29, 3008

Gearing up for 2009, liberals are eager to claim Massachusetts as a Valhalla of health reform. Their enthusiasm is apparently evidence-proof.

Even Mitt Romney, who should know better, took to these pages recently to proclaim, “Health-care reform is working in Massachusetts.” Shortly after Mr. Romney’s self-tribute, Governor Deval Patrick wheeled out a new $129 million tax plan to make up for this year’s health spending shortfalls. Yet partisans are cheering the cost overruns as a sign of success.

Supporters are exultant because 350,000 people are newly covered since former Governor Romney’s parley with Beacon Hill Democrats in 2006; this cuts the state’s uninsured rate by about half. That’s not the promised “universal” system, but never mind. The ominous news is that only about 18,000 people — or 5% of the newly insured — have taken advantage of the “connector,” which was supposed to be the plan’s free-market innovation linking individuals to private insurers.

Most of this growth in coverage has instead come via a new state entitlement called Commonwealth Care. This provides subsidized insurance to those under 300% of the poverty level, or about $63,000 for a family of four. About 174,000 have joined this low- or no-cost program, a trend that is likely to speed up.

As this public option gets overwhelmed, budget gaskets are blowing everywhere. Mr. Patrick had already bumped up this year’s spending to $869 million, $144 million over its original estimate. Liberals duly noted that these tax hikes are necessary because enrollment in Commonwealth Care is much higher than anticipated. But of course more people will have coverage if government gives it to them for free. The problem is that someone has to pay for it.

Thus the extra tab of $129 million, which may need to go higher because it relies on uncertain federal funds from Medicaid. For now, Mr. Patrick wants one-time (yeah, right) charges of $33 million on insurers and $28 million on providers, plus some shuffling of state funds. The balance comes from an estimated $33 million boost in the state’s “pay or play” tax: If businesses don’t offer “fair and reasonable” insurance to their employees, they get hit.

This is a textbook example of how business taxes evolve into “pay or pay,” the first recourse of state-funded health systems. Politicians love levies on business because they disguise the overall bill from voters. But such taxes are merely passed along to workers in the form of reduced take-home pay, since all health costs are part of compensation.

The main reason people are uninsured is because coverage is too expensive. Massachusetts didn’t have many options for reforming the way health dollars are laundered in the third-party payment system created by the federal tax code. But it could have helped make insurance cheaper by reforming its private market before defaulting to public programs.

The Bay State has long served up coverage-specific insurance mandates, such as for fertility treatments, which raise costs. Yet in a just-deserts twist, Massachusetts health planners are now reviewing ways to trim mandates because the state is footing more of the bill, even if they didn’t care when imposing them on individuals and small business. A state-sponsored study shows that total spending on mandates was $1.32 billion in 2005, or 12% of premiums. The study is devastating despite its pro-mandate slant.

Not that such practical lessons have stopped liberals from joining the Massachusetts parade. They have to gussy up the state’s model because the extravagant claim that led to its creation — that health care will be less expensive if everyone is covered — is being relentlessly discredited. It’s the same claim they want to make when they try to pass a similar plan for the whole country in next year’s Congress.