Massachusetts Health Care Plan Intrusive, Expensive
Massachusetts Health Insurance Plan
The new Massachusetts health plan has dominated the policy conversation recently, causing more division among conservatives than liberals.
This health insurance law, designed to make the state the first in the nation to achieve universal health insurance coverage, was signed April 12 by Gov. Mitt Romney (R). He was flanked at the by-invitation-only signing ceremony by the Democratic leaders of the Massachusetts legislature and by U.S. Sen. Ted Kennedy (D-MA), a longtime advocate of universal health coverage.
The biggest concern among conservatives is the requirement that every individual in the state must purchase health insurance or face financial penalties.
Such mandates are almost impossible to enforce, even with the fines and other enforcement provisions in the law. Further, the state must specify what kind of insurance people are required to buy and how much they should pay, taking away the ability of markets to compete freely and for people to purchase the coverage of their choice.
Market-oriented analysts are also concerned about the back-door employer mandate. The Massachusetts legislature wanted to force employers with 11 or more employees to pay a $295 annual fine for each employee without health insurance. The governor vetoed the provision, but leaders of the heavily Democratic House and Senate have said they will override.
House Speaker Salvatore DiMasi (D-Suffolk) called the veto disingenuous, saying the law was crafted with concessions and compromise. "To change anything will disturb the delicate balance that made this law possible," DiMasi said. Note to employers: $295 is only the beginning.
While many free-market groups - such as the Pacific Research Institute, Cato Institute, and Council for Affordable Health Insurance - have been highly critical of the Massachusetts plan, the conservative bellwether Heritage Foundation was very involved in helping the governor craft the legislation. The governor credits Heritage with creating the new Federal Employees Health Benefits Program-like insurance connector to offer insurance options and collect and distribute premiums. Bob Moffit of Heritage stood behind the governor at the signing ceremony.
An integral provision in the new plan is the requirement that every employer with more than 10 employees, such as your local automotive garage, must offer a Section 125 cafeteria plan so employees can use pre-tax money for their insurance premium contributions.
And that's only the beginning of the reporting requirement, mandates, penalties, and other enforcement provisions in the new law. For example:
- The law requires every employer and employee in the state to sign "under oath" a Health Insurance Responsibility Disclosure form, testifying to whether the employer has offered insurance and whether the employee has accepted or declined.
- It creates at least 10 new boards and commissions to create and run the new health system, such as the Health Care Quality and Cost Council, Payment Policy Advisory Board, and Health Access Bureau.
- New and existing state agencies will be checking on individuals' insurance status, monitoring their income to see whether they qualify for subsidies, and tracking individual health habits (such as smoking and wellness activities) to determine their insurance rating category.
The plan also includes a major expansion of Medicaid and the State Children's Health Insurance Program to cover children in families with incomes up to 300 percent of the poverty level. The state has made it clear it is doing all it can to maximize collection of federal matching funds to help finance the new plan.
Cash Flow Problems
My biggest concern is over the financing. The state says it is just moving money around - redirecting about $1 billion in uncompensated care money to subsidize health insurance for those under 300 percent of the poverty level (about $50,000 a year for a family of four).
But there is nothing in the law to keep health insurance costs from soaring. Policies offered through the new health insurance connector must have first-dollar coverage and include all of the 40 coverage mandates on the books, with none of the provisions that are working in the private sector to engage consumers as partners in managing health costs. Estimated premiums are unrealistically low and will quickly lead to higher taxes and "assessments" on individuals and employers.
Nonetheless, newspapers around the country are falling over each other in their effusive praise of a Blue state, led by a Republican governor, building a bridge across the political chasm to go where no state has gone before.
Romney's term ends this year, and he is likely to be spending a lot more time in Iowa and New Hampshire than in Massachusetts as this plan gets up and running. The worry is that he has laid the foundation for what can become a very intrusive, onerous, and expensive health plan for Massachusetts. Other states, which are firing up their photocopiers now, should wait to see how this works out before rushing to follow the Bay State's lead.
Grace-Marie Turner is president of the Galen Institute, a nonprofit free-market organization in Alexandria, Virginia devoted to researching health policy.