Romney’s plan will allegedly perform the miracle of covering all of Massachusetts’ 555,000 or so uninsured residents without new taxes or a government takeover of health care.
Massachusetts Republican Gov. Mitt Romney’s plan to offer universal health
coverage to everyone in his state is inspiring other governors, including
Michigan’s Jennifer Granholm, to consider similar programs. But RomneyCare is
the wrong prescription for anyone who believes that consumer choice — not
government mandates — is the key to better and more cost-effective health care
in this country.
Romney’s plan will allegedly perform the miracle of covering all of
Massachusetts’ 555,000 or so uninsured residents without new taxes or a
government takeover of health care. Maybe that’s a credible sales pitch in the
home of the Big Dig, but in the real world it’s extremely unlikely.
The plan imposes an unprecedented mandate requiring every Massachusetts resident
to have health insurance by July 2007. Initially, those who fail to comply will
be punished by losing their personal exemption on the state income tax.
Continued non-compliance will invite a penalty equal to half the cost of a
standard insurance policy — as determined by the state.
Romney justifies these measures on grounds that uninsured individuals are
free-riders who force others to pay their emergency room tab when they fall
sick. He claims this costs the state $1 billion every year.
Under his plan, removing that $1 billion burden will allow the state to
subsidize coverage on a sliding scale for uninsured people with incomes up to
300 percent of the poverty level — more than $55,000 for a family of four. Since
the median income for a typical family is $44,389, RomneyCare effectively
extends new entitlements well into the middle class, notes Michael Tanner,
Director of Health and Welfare Studies at the Cato Institute.
Entitlements have a habit of exceeding original cost projections. Romney relies
on an MIT econometric model to claim a total cost below the cost of
uncompensated care, but this calculation is based on current health care use
rates. In contrast, a legislative analysis that reasonably assumes higher use
rates predicted at least a $160 million shortfall within the first two years.
This will drive up overall health care costs and insurance premiums, which in
turn will necessitate larger subsidies. Furthermore, the program will encourage
employers to drop coverage of employees who can qualify for state-subsidized
coverage. It all translates into more government health care spending,
inevitably paving the way for future tax hikes.
What about those who aren’t covered by their employer, or by government programs
such as Medicare and Medicaid, and so won’t qualify for the health insurance
For them, Romney has created something called "connector coverage," which he
touts as a market-based innovation. Any individual who buys coverage through a
newly minted "Massachusetts Health Care Connector" can do so with pre-tax
dollars, just as employers currently do.
In principle, this is a promising approach that will allow more individuals to
buy their own insurance that will follow them from job to job, freedom not
available to those with employer-provided insurance. Furthermore, this Connector
will band individuals and small businesses into large purchasing pools, giving
them the same economies of scale that large employers use to negotiate better
Unfortunately, this is not all the Connector would do. It will also vet
insurance plans, allowing only those it deems to be of "high quality and good
value." Catastrophic plans that offer only bare-bones coverage with high
deductibles aren’t likely to qualify, given that the Massachusetts Legislature
has already mandated some 40 benefits — including hair prostheses and
So the Connector plans are likely to be expensive, which means some individuals
will be forced to pay the penalties rather than buy the plans — a rather
perverse side effect. This will thwart the state’s purported goal of universal
coverage, and generate political pressure for premium caps and price controls.
In effect, RomneyCare will likely restrict consumer choice, lead to new taxes
and open the door to crippling regulations on the insurance marketplace. This is
not a model that other states should be too eager to emulate — at least not
until it is proven that these concerns are unjustified
Shikha Dalmia is
a senior analyst at the Los Angeles-based Reason Foundation and an adjunct
scholar with the Mackinac Center for Public Policy, a research and educational
institute headquartered in Midland, Mich. Permission to reprint in whole
or in part is hereby granted, provided that the author and the Center are