American Alliance Training Network Corp., July 27, 2008
MASSACHUSETTS’S UNIVERSAL health care law turned one in April. To survive, its guardians have had to make many changes, each of which has increased current and future government spending, increased the government’s role in regulating the healthcare market, decreased individual responsibility to purchase insurance, and made certain that the plan will fall far short of achieving universal coverage.
The promise of the law was simple and seductive: Require people to purchase health insurance, make the insurance affordable, or at least tax-deductible, and then fine those who don’t comply. Subsidies could come from the current money devoted to the Uncompensated Care Pool and the federal taxpayers. Universal coverage, then, would be achieved with little new spending.
Numerous problems existed with this plan, but the fairy tale quality appealed to politicians and the national media, so it passed to much fanfare.
Interestingly, the Commonwealth Health Insurance Connector Authority, the bureaucrats in charge of implementing the plan, decided that the universal individual mandate does not apply to everyone, but rather only those who can afford the premiums. Therefore, nearly one in five of the currently uninsured will be exempt from the law.
The Connector Board also bowed to pressure and reduced the monthly premiums on the subsidized-but-not-entirely-free healthcare plans. This will increase the program’s costs by $13 million.
Even at these reduced rates, the plans will still not be attractive to many. People earning between 151 percent and 300 percent of the federal poverty limit — $25,000 to $110,000 for families and $15,316 to $50,000 for individuals — are expected to pay up to 9.6 percent of their income on insurance premiums, or pay fines. (This 9.6 percent is before any co pays and cost sharing.) Meanwhile, taxpayers are still subsidizing them by as much as 94 percent of total costs.
The structure is a gourmet recipe for runaway spending. With this level of premium, those who don’t value insurance enough to make financial sacrifice to purchase it will neglect to do so. The fine — set at $216 — will be more attractive than the premium. Politicians will be under strong pressure to not enforce the mandate once the fines increase to meaningful levels. Indeed, they have already shown their willingness to back away from it for the 20 percent of people, and have set up a waiver process to exempt others on a case-by-case basis.
At the same time, the massive premium subsidy will make these plans extremely attractive to individuals who expect to use large quantities of healthcare. The population paying the premiums will be older and sicker than the general population. Spending will explode. It will come from somewhere, most likely the taxpayer.
Early data already provide evidence of this dynamic. As of April 1, 62,979 individuals had signed up for Commonwealth Care, the subsidized plans. Of these, 52,500 were enrolled in the totally free option. Give something for nothing, and people sign up. The plans in which people have to pay are a different story. Sign-ups have been slow, and the people who have enrolled are older and sicker than those signing up for the free plan.
The average age of a person in the free plan is 36, while the average age in the paid plans is 47. Of the free plans, there have been 214 specialty referrals per 1,000 enrollees. Of the paid plans, there have been 416 specialty referrals per 1,000 enrollees.
The system is set up to tax the young and healthy — who typically have both less income and less wealth — to subsidize those who are older and less healthy. One goal, according to the organization Health Care For All, is “to create a statewide credible risk pool, so healthy people ‘prepay’ toward their medical care.”
The problem with this is that the young and healthy, who are already prepaying for Medicare out of every paycheck, may object to this new form of taxation. According to the state’s own data, it’s not the young and healthy who use the Uncompensated Care Pool or who abuse emergency rooms, so the real point is the prepay or taxation and subsidization of a so-called risk pool.
So one year in, we have a plan that, even if no more concessions to liberal advocates are made, falls 20 percent short of its stated goal. Its costs have already increased by at least $13 million and are on track to skyrocket by some multiple of this once the doctors’ bills start coming in. Happy Birthday.
Sally C. Pipes is president and CEO of the Pacific Research Institute.