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Intensive Care for RomneyCare
Health Care Op-Ed
By: Sally C. Pipes
2.26.2007
The Wall Street Journal, February 26, 2007; Page A19
Presidential hopeful John Edwards recently unveiled a plan for universal health care, proving that the bad idea of raising taxes on employers and forcing individuals to purchase insurance holds bipartisan appeal. Before others get carried away with this model, they should take a look at its most recent manifestation in Massachusetts. When then-Gov. Mitt Romney, a Republican, introduced a universal health-insurance plan in the Bay State early last year, it was widely acclaimed. But less than a year after passage, RomneyCare is in the intensive care unit, soon to be wheeled into hospice. The first signs of trouble appeared last August. In a filing to support general obligation bonds, officials projected that the new plan would increase state government health-care spending by $276.4 million in 2007. That's $151 million more than what the public had been told the plan would cost. Meanwhile, the state's new bureaucracy, busily signing up people for free care, has run into trouble finding affordable plans for those who have to pay. The premiums for subsidized plans would consume up to 6% of a person's income -- prompting calls from activists and echoes from politicians that they should be exempted from the individual mandate. So much for universal coverage. Reality fully hit in late January of this year, when private insurers submitted bids to the bureaucracy that would administer the new program. The average premium for the unsubsidized plans was not $200 per month -- as Mr. Romney promised from the stump -- but rather $380. That's more than 15% of the target audiences' income -- and for a plan with a $2,000 deductible and a total cost sharing of $5,000. People were stunned, outraged. Naturally, "greedy" private insurers were blamed. Politicians called for price controls. Interestingly, monthly premiums of $325 were forecast by insurers cited in an April 6, 2006 article in the Boston Globe entitled "Health Bill Premiums May Exceed Prediction." At the time, Romney administration consultant and MIT economist Jonathan Gruber, who helped design the plan and now advises the bureaucracy, dismissed the predictions. There's a slim chance that the new Democratic governor Deval Patrick and the Democratic legislature will implement this plan and enforce the mandate. But if they do, an individual with a $30,000 income would be on the hook for 32% of his or her income before being fully covered by insurance. Yet there is an equally small chance that the politicians will deregulate the state's insurance market. Regulators are however settling in comfortably to their jobs, dictating health-insurance design by creating the standards for Minimum Creditable Coverage (MCC) that individuals must meet to avoid paying the fine. If these standards are implemented, they would render illegal roughly 200,000 high-deductible policies currently in force -- exactly the sort of insurance that makes sense for the self-employed and young individuals. Meanwhile, California Gov. Arnold Schwarzenegger has introduced an even more comprehensive plan to guarantee universal coverage. The $12 billion plan includes individual and employer mandates, expansion of Medi-Cal and Healthy Families, and a tax on doctors and hospitals. If enacted, Californians will face higher taxes, a much larger bureaucracy and increased spending. And I predict the problem of the uninsured will not be solved.
Ms. Pipes is president and CEO of the Pacific Research Institute.
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