Public officials around the country — and a few in Michigan — are waxing enthusiastic about Massachusetts’ new health care law, dubbed "Romney Care," after the state’s governor. While the plan has some virtues, it also has many costly vices. In fact, the costs associated with the scheme may greatly exceed the benefits. Michigan policymakers should hesitate to jump on board without looking more closely at all the details.
The Romney plan goes into effect in July 2007, and essentially mandates health insurance for every state resident, as long as coverage is provided through an employer or is available at a price the government declares "affordable." Subsidies for the "working poor" who aren’t quite poor enough to qualify for Medicaid will be paid from the state’s existing $800 million "uncompensated care pool." The money in this pool comes from assessments (taxes) imposed on hospitals, and also from surcharges (taxes) added to patients’ hospital bills.
In addition, the plan will add a surcharge to insurance premiums based on an individual buyer’s income — the more you make, the more you pay. Another tax will be imposed on those who can afford private health insurance but choose not to buy it (reportedly 40 percent of those in the state who don’t have health insurance can afford it, but choose to go without).
But there are larger, more troubling issues associated with the program. For example:
Job providers who employ more than 10 workers but do not provide them with health insurance assume virtually unlimited liability for health care costs incurred by employees and their families. These employers must also pay significant fines.
A "Guaranteed Issue" law requires insurance companies to sell policies to anyone regardless of pre-existing conditions. That may not sound totally unreasonable, except that technically someone can wait until they become sick to buy coverage, which contradicts the whole concept of "insurance." Essentially, it turns insurance companies into welfare agencies, with the benefits coming from the pockets of those who buy coverage before they get sick. This is not only unfair — it’s a recipe for skyrocketing healthcare costs.
Romney Care does little to reduce extensive mandated benefits that increase the cost of insurance for everyone. Every mandate imposed by any state — from female alopecia treatments (wigs) to chiropractic services — makes insurance less affordable.
The program imposes mandates that strike a blow against privacy and individual liberty. An income/means-test feature turns over to the state government detailed information about the financial affairs of individuals.
In the midst of all these detrimental initiatives, there is one innovative component that deserves further investigation. The program creates an "insurance exchange" where individuals and small groups (fewer than 50 workers) can buy health coverage from competing providers. Dubbed the "Connector," this exchange is an open marketplace where employees can choose the specific health plan that they want, rather than the "one size fits all" coverage offered by their employer. It allows insurers to offer a smorgasbord of competing plans to firms that designate the Connector as their insurance carrier.
In addition to transferring choice from employers to employees, the Connector gives insurers the freedom to develop plans designed for the diverse needs of many clients. This will increase competition and innovation by insurers, and may be an effective way to lower health care inflation and raise health care quality over the long run.
Another positive feature of Romney Care is that two-income families can use the combined contributions from their separate employers to purchase the coverage they need and want. This also applies to a worker with two part-time jobs and the self-employed.
If much of Romney Care sounds complex, contradictory and confusing, that’s because it is. The scheme is a mixture of many things, good and bad: A good-faith effort to solve a knotty societal problem; some innovative ideas; and a heavy dose of government mandates and interference in free markets. In some areas it is a solution looking for a problem, and in others it will make existing problems worse. The bottom lines is, Romney Care is far from being the panacea trumpeted by many media voices, and is certainly not ready for prime time in the Great Lake State.
Michael Bond is an adjunct scholar with the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. He is also director of the Center for Health Care Policy at the Buckeye Institute in Ohio. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.