January 27, 2006,
In "Unhealthy in Massachusetts" (NRO, 1/26) Sally Pipes roundly trashes Massachusetts Governor Mitt Romney's health plan. However, her "just say no" critique reveals a near complete misunderstanding of the governor's innovative approach.
Costing Taxpayers LessWhere Romney really builds on the concept of a state-insurance exchange is in the Medicaid reforms he included his proposal. His administration found that the reason some 100,000 Medicaid eligible residents were not enrolled wasn't because they "simply hadn't made the effort." Rather, it was because hospitals often got paid better rates by the state's uncompensated care pool than by Medicaid for treating those patients. Thus they had an incentive not to enroll those individuals in Medicaid when they showed up in emergency rooms. Of course, the total cost to taxpayers would actually be much less if they were enrolled in Medicaid, and thus getting most of their care in clinics and doctors offices instead of hospitals.
The Romney administration fixed that by putting Medicaid eligibility determinations back in the hands of the state Medicaid program. Then they seized on the opportunity presented by the impending (June 2006) expiration of the state's Medicaid waiver, to tackle covering uninsured individuals who are ineligible for Medicaid. That waiver currently pumps $385 million a year in Federal Medicaid money into the state's uncompensated care pool, which in turn pays it out to hospitals treating the uninsured. But the Feds told the state that they wouldn't approve a waiver extension absent a state plan to achieve better results with the money.
Romney's solution was to propose converting what is really a "hospital safety net" into premium assistance for the low-income (but not Medicaid eligible) uninsured. Of course, if you're going to now subsidize thousands of people, instead of just a handful of hospitals, having a one-stop-shop health-insurance exchange sure makes for an administratively simpler and cheaper way to match up all the various combinations of people, plans and payments. It also means that as those folks work their way up the income ladder and lose the subsidies, they still have portable health insurance coverage. Federal Medicaid officials liked the approach.
As Tip O'Neill used to say, "All politics is local," and faced with the choice of Romney's plan versus losing a big chunk of federal money, savvier Massachusetts Democrats lined up behind their Republican governor's proposal albeit, with varying degrees of enthusiasm.
Flirting with Libertarians in MassachusettsFinally, there is the element of Romney's proposal that gives Pipes's and many other conservatives the most trouble the "personal responsibility" provisions, or what could be called an individual mandate to buy health insurance. Romney's argument is that mandating coverage in the currently fragmented and overly expensive insurance market would be wrong and counterproductive. But, if the market is reorganized to make coverage universally available and portable, deregulated at least enough to make it affordable for the middle class, and subsidized enough to make it affordable for the low-income, then there are no more reasonable excuses for anyone not buying health insurance.
Furthermore, to allow people to go without health insurance, and then when they do fall ill expect someone else to pay the tab for their treatment is a de facto mandate on providers and taxpayers. Romney proposes to take that option off the table, leaving only two choices: Either buy insurance or pay for your own care. Not an unreasonable position, and one that is clearly consistent with conservative values.
But beyond that, the Romney administration got downright Libertarian in figuring how to make it work. Under Romney's plan anyone opting to not buy insurance would be required to deposit $10,000 in an (interest-bearing) escrow account with the state. If they didn't pay their medical bills, the providers stuck with their bad debts could apply for that money. But what if they won't buy insurance and refuse to put $10,000 in escrow with the state? The answer is that they aren't allowed to claim the personal exemption tax-break on their state income tax, and any tax refunds due them are deposited into the escrow account until the $10,000 limit is reached.
Having first proposed the creation of more and better health-insurance choices and more rational and efficient subsidies, Romney essentially says, "You will be free to choose, but your choices will have consequences."
A conference committee of the Massachusetts legislature is now hammering out the details of the final legislation. Given that Massachusetts has a legislature in which Democrats outnumber Republicans by about five to one, the fact that Romney's proposal has gotten this far is itself a testament to the power of good ideas as well as to the political skills of one particular governor and his team.
Edmund Haislmaier is a research fellow in the Center for Health Policy Studies at the Heritage Foundation.