TCS Daily


The Massachusetts Delusion

By Arnold Kling - April 12, 2006 12:00 AM

" Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced. And we will need no new taxes, no employer mandate and no government takeover to make this happen."
--Massachusetts Governor Mitt Romney, the Wall Street Journal

Imagine that Mitt Romney were about to sign legislation that said that from now on, all citizens of Massachusetts may leap from the edge of a cliff, flap their arms real hard, and fly. All I can say is, "Try it and see what happens."

The Massachusetts Health Care plan championed by Gov. Romney is wonkish legislation, covering more than 100 pages, with details left to be worked out. Roughly speaking, it seeks a three-pronged approach to bringing all residents of Massachusetts under an umbrella of health insurance of some sort:

  • Those below the poverty line will be provided with free health care coverage by the state. The only reason that they are not covered by Medicaid now is that they have failed to enroll.
  • The "near-poor" (with incomes up to 300 percent of the poverty line, which for a family of four in Massachusetts means an income up to about $45,000) would receive subsidized health insurance.
  • The "non-poor" who choose not to obtain health insurance would be penalized unless they purchase health insurance.

In his op-ed, Romney writes,

"Another group of uninsured citizens in Massachusetts consisted of working people who make too much to qualify for Medicaid, but not enough to afford health-care insurance."

These are the "near-poor," who are portrayed by the Governor as an oppressed class who badly needs support from the state.

"We needed far less than the $1 billion for the subsidies. One reason is that this population is healthier than we had imagined. Instead of single parents, most were young single males, educated and in good health."

Oddly enough, this oppressed class does not need much health care. A cheap date, so to speak.

"And so, all Massachusetts citizens will have health insurance."

How do you tell the difference between mandatory health insurance and universal health insurance? Suppose that health insurance for a family costs $10,000. If the state passes a law that says that you have to pay for your family's health insurance, that's mandatory health insurance. If the state passes a law that says that you have to pay for my family's health insurance, that's universal coverage. The Massachusetts law is a mixture, but it is mostly the latter. Some of the literature about the law speaks of relying in part on "federal money," which is Massachusetts' way of using people outside the state to pay for its families' health insurance.

"The Heritage Foundation helped craft a mechanism, a "connector," allowing citizens to purchase health insurance with pretax dollars, even if their employer makes no contribution. The connector enables pretax payments, simplifies payroll deduction, permits prorated employer contributions for part-time employees, reduces insurer marketing costs, and makes it efficient for policies to be entirely portable."

In other words, we got the state into the insurance brokerage business. The state is uniquely qualified to do this because we can override state regulations and make insurance tax deductible. But of course if private insurance brokers were not hamstrung by the state to begin with, the "connector" would be unnecessary.

"How much of our health-care plan applies to other states? A lot. Instead of thinking that the best way to cover the uninsured is by expanding Medicaid, they can instead reform insurance."

So we should declare the problem of the uninsured "solved," before the details of the plan are even worked out.

"Will it work? I'm optimistic, but time will tell. A great deal will depend on the people who implement the program. Legislative adjustments will surely be needed along the way. One great thing about federalism is that states can innovate, demonstrate and incorporate ideas from one another."

If it does not work, then someone else is to blame. And if other states copy our program and it does not work for them, either, after all that's their choice. It's a free country.

What is it about the Massachusetts health plan that has me outraged? Here are my objections:

1. Because it is a political compromise it is not a clean experiment. It is certainly not a market-oriented healthcare reform, but neither is it pure single-payer. I would like to see them try single-payer, since they are hot to do so. Instead, their experiment has been disowned by single-payer advocates, who will blame its failure on the fact that the private sector was left standing.

2. It completely denies that there is any need to re-consider the cost-effectiveness of health care procedures in order to address the issue of affordability of healthcare. All of the painstaking research I did for my book suggests that if there is anything to be done to significantly slow the growth in health care spending, it has to involve cutting back on discretionary spending, particularly on specialists and high-tech diagnostic procedures.

3. A market-oriented health care system would have health insurance policies with high deductibles. For the most part, this plan goes in the opposite direction.

4. It projects a myth that policy wonks can, with sheer cleverness, come up with a way to make health care affordable for everyone. It overstates the benefits of wonkish solutions like electronic medical records. Again, I take great pains in my book to point out that we will have to make difficult decisions to address health care, rather than use wonkish tricks.

Suppose that five years from now, everyone in Massachusetts has health insurance and the cost of the state subsidy is minimal. In that case, I am wrong about the program, and I will gladly admit it. Meanwhile, since none of the critical details have been implemented, I am in the awkward position of telling people who really want to fly that I think they will wind up smashed at the bottom of the cliff.

Arnold Kling is an adjunct scholar with the Cato Institute and the author of Crisis of Abundance: Rethinking How We Pay for Health Care.

Categories:

74 Comments

Wonkish ideas like computerized med records
Yeah, I have to totally agree with Arnold's take on this. An elderly friend of mine has an unmanageable amount of pills he has to take. He depends on his wife to get the cocktail right, and she's of a state of mind where I'd bet the error rate contributes significantly to ongoing health problems he has. He's probably been in the hospital 5 times over the last two years due to mistakes with his meds. Furthermore, his insurance coverage was cancelled recently because, according to them, he "died". But I swear I talked to him in person this morning. I often wonder if the wonks have family or friends with health problems. Low hanging fruit and all that.

Lots of State Attempts
There have been lots of states that have tried to fix the health care crisis over the years. Each time one of 2 dynamics come into play:

1> Adverse selection. The state forces insurance companies to give cut rate insurance to people with medical bills significantly in excess of what the premiums will cover. This drives insurance companies out of the state, forcing those losing patients to concentrate in fewer carriers. In the end the state has a budget crisis when it has to pick up the pieces.

2> If it ain't broke then fix it. If the healthcare reforms make it through the first couple of years without driving companies out of the state then there's an undeniable urge for legislators to change the program. Add benefits, add coverages, add subsidies; this is the politicians version of a victory lap. Soon this plan too collapses under its own weight.

I expect this to do the same. Romney will have his own "Massachusettes Miracle" to talk about in the Republican primaries. But then the unforseeable consequences of the plan will cause it to collapse.

The Road to Bondage
"The "non-poor" who choose not to obtain health insurance would be penalized unless they purchase health insurance."

If the state of Massachusetts can require citizens to purchase health care insurance, then any product or service the state deems as "necessary" can also become a mandated purchase subject to penalties. I hope this bill is challenged as unconstitutional. While states do mandate the purchase of auto insurance, a consumer still can legally avoid purchase of auto insurance (and not be subject to penalties) by not driving. With this legislation, a citizens option is: pay-up or get out. This may be fine for taxes, but not for private commercial activity. If I lived in Massachusetts, I would be looking to mount a legal challenge to the Massachusetts Health Care Plan. This kind of legislation is the road to bondage…citizens as puppets controlled by the state. I prefer to be free without health care insurance than a slave to the state.

I'm glad I don't live in Massachusetts
This is just more "feel good" legislation that will probably do nothing and cost a bunch.

I'm all for some form of Universal Health Care or a plan of some sort that makes health care affordable to everyone. This problem is going to get bigger if businesses continue to drop their health insurance programs and the working poor continue to find fewer options.

I don't know what the answers are, but this isn't it.

Mandated Insurance
The history of mandated insurance is not promising. Every place that mandates insurance has much higher insurance rates. This is what happens when government enforces a monopoloy or cartel. And that is what mandating insurance does: it sets up a government-enforced cartel. When that happens, prices go up. WIthout mandation, prices are lower because, among other reasons, they have to compete with having nothing. The company has to convince you that what they offer, at the price they offer, is better than not having the service at all, at no cost. Of course, the insurance companies love this sort of thing. WIth it, everyone is forced to be their customer. What company wouldn't want every person to be forced by law (which is always, by the point of a gun) to be their customer? Insurance then becomes a protection racket. "Unless you take our health insurance, we can cause you some health problems."

Even socialists cant make socialism work, why should we try?
For a Republican, this is an oddly statist attempt to solve a problem that is not the government's problem to solve. If in fact the citizens of Massachusetts decide it is the role of government to take from one and give to another, for any reason, then brother - I hope they get exactly what they want and deserve.

De-regulation, limited to no government involvement, and private investment in technology are the best, most efficient, and market-based solutions to the rising costs of health care.

Empowerment
The Massachusetts law mandating the purchase of health insurance is called "empowerment" by the government. It is indeed empowerment but it is empowerment of the government to force people to buy a product. According to the government, empowerment is economic slavery. How Hillaryesque.

Under the 14th Amendment, the law should be unconstitutional because the unenumerated right exists not to be forced to buy something. However, the Supremes classify unenumerated rights differently than enumerated rights, those in the first 8 Amendments. The Supremes easily accomodate state violation of unenumerated rights under the court-manufactured state "compelling interest" doctrine. That is, if a state legislature passes a law that appears to violate an unenumerated right, it is up to an individual to prove that the violation is somehow fundamental and not a violation of what the Supremes call a "mere liberty interest". Such proof is practically impossible because the Supremes almost always grant legislatures wide leeway in these cases. So the chance that the Massachusetts law will be declared unconstitutional is very small.

President Romney?
Mr. Romney hopes to be the Republican presidential nominee.

That cockamamie brainstorm on health care shows why he doesn't have a chance of getting the nomination.

Socialists, like Bullwinkle, still trying to pull the rabbit out of the hat.
To quote the great antlered cartoon deer: "This time for sure"

Oregon tried the Oreogn Medical Plan which ran out of money as the economy went south and people entered the state specifically because of the "free" coverage. And know the folks that brought on the medical plan are salivating over Massacusett's.

Ah TaBonfils, it does my heart good. . .
. . . to know that there are still romantics out there who don't realize that the fetters were installed on our grandparent's wrists and ankles 70 years ago when FDR threatened to pack the Supreme Court and thus got them to turn the commerce clause of the Constitution into an all purpose source of Federal government power.

Since then the only question has been how far and how often our masters let us rest from the wheel.

But it can be a "lief and death" issue
As I said, this plan should be thrown out with extreme prejudice.

Still, the idea that no government involvement is a solution ignores the lives of 50 million Americans. Read the statistics; the U.S. healthcare system is a mess and we do not have the best system in the world based on just about any statistic you want to use.

I keep thinking to a time 30-45 years ago when my father had no health insurance, was working poor and they managed to pay for the birth of four kids, three operations, numerous bums, cuts and breaks and all the medical needs of a Down's Syndrome daughter. This was without health insurance, no medicaid, nothing.

De-regulation, etc. are not the answer either.

Overall, however, I have to agree with your subject line. A straight socialist system isn't the answer.

collapsing
"But then the unforseeable consequences of the plan will cause it to collapse."

But not until Romney is long gone, so that the blame will fall on whatever poor sap was left holding the bag.

not just unenumerated rights
The Supremes recently decided that the govt can trample all over free speech rights, provided there is a "compelling state interest". Unfortunately they seem to be willing to let the govt decide what constitutes a "compelling state interest".

It's not a perfect solution
But one option is to allow people to buy health insurance from out of state suppliers. Much like auto insurance is provided.

Another option is for govt to stop mandating coverage for every procedure that has a vocal political action committee.

Government mission creep
I understand your point of view but I respectfully disagree. The government has been involved in health care for nearly 60 years now, and using other statistics, it could be proven that little improvement has occured regarding the state of the "working poor." Indeed, it seems the more the government involves itself, the more problems and cost arise.

De-regulation in the form of more consumer choice and increased provider freedom will introduce the much needed aspect of market-based competition to the problem. It wont solve all of our problems, but neither will it bankrupt the Federal Government in the process of providing a well-intentioned disaster.

A compromise system can only last for so long, before it begins to creep towards more and more government control, bringing with it higher taxes, less choice, and limited quality.

We agree that something should be done. However, I think the discussion we should probably be having is one regarding the proper role of government. And this medium certainly doesnt lend itself to that.

I appreciate your response to my post.

auto insurance
We don't expect auto insurance to pay for oil changes and other basic maintenance. Nor do we expect it to pay if we want to get a new paint job, or fancy accessories.

Yet we expect health care to pay for well visits for our kids, non-reconstructive plastic surgery, etc.

health insurance
It's only been in the last 60 years that people have gotten the notion that they can't live without health insurance.
As you point out, most people did quite well without it for generations.

All you really need is catestrophic coverage. Everything else should be covered out of your pocket.

Govts should also allow people to buy insurance from out of state companies. This would deeped the competition pool.

Touche
Certainly no arguement from me on this. I agree with a market based economy, but I also believe that natural human greed requires some oversight.

Still, point taken and I agree.

All good ideas…
But general healthcare has gotten so out of hand price-wise that I don't know how to limit the potentially devistating effects of going to a market based system. Right now, the averge working poor family can't afford an extra $500 in additional annual expenses; it costs two to five times that just to get a broken leg set these days.

Prices would come down to more affordable levels in that system, but it would take time for everything to stabilize.

Other than that, it is a good plan.

oversight exists
It exists in the form of consumers and competitors.

broken legs
Once again we run smack dab into govt interference with medical care.

Currently you pretty much have to go to the hospital to get your leg set. Most doctor's offices and all clinics could handle the work, at a much lower rate. But regulations (depending on state) either forbid the practice, or make it prohibitively risky from a lawsuit perspective. Setting broken legs is something just about any competent medical tech could handle, but govt regulations pretty much require either a nurse or a doctor to do it.

Ah SullyA....
“…there are still romantics out there who don't realize that the fetters were installed on our grandparent's wrists and ankles 70 years ago…”

Relatives and friends of mine have fought and died in WW2, Korea, Vietnam and Iraq. I choose to believe they were fighting for the fundamental freedoms enumerated in the Declaration of Independence and the US Constitution. I will never accept the “fettering” of US citizens. If we do not appreciate and fight for our freedom, the union President Lincoln died to maintain shall indeed perish from the face of the earth.

We are at an impass here
I don't need a hospital, but I would rather a doctor or a nurse set my leg (or my daughter's arm); preferable a doctor. It's a trust issue. Unless you had a hospital with a tech specifically trained in this procedure. There is more to it than I would have thought. When my daughter broke, nearly to compound, both bones in her arm, we had a specialist set it and it still wasn't exactly right.

But, basically, I agree with your point.

Corporate Health Care
How about corporate clinics, where the employee and his family receive their primary care. Smaller companies could band together and contract out to a particular clinic, this in lieu of health insurance. Keep catastrophic policies in being but get the mundane stuff done in-house under contract.

Now and Then
Now, let me ask you: what was the difference between now and then? Now we have medicare, medicaid, mandated health insurance of various kinds -- and the result has been that nobody can afford health care. Are we then really better off than we were 30-45 years ago? Why, then, isn't the answer deregulation and de-federalization?

Insuranceless Health Care
There have been a few clinics that have opened around the country that refuse to accept insurance. That has cut their costs astronomically. They charge patients on a per-minute basis, and it is affordable for anyone. THe vast majority of overhead turns out to be insurance. So the presence of insurance drives up the cost of health care, so we have to have insurance to be able to afford health care.

Here is where we really split ways
Without serious repercussions, the business side of medicine will take over and the mess will get bad. Really bad. Consumer's and competitors make horrible overseers. This is definately an area where some government regulation is necessary.

I do not want to go back to the days when barbers were surgeons.

That is true…
to some extent; and it might be a good idea for some clinics. How medical insurance is now where auto insurance is; have it and the charge you a lot more; don't have it and you can get a good price.
I had a windshield put in my car once. They told me on the phone it would cost $149 but somehow the wires got crossed and, when I got there, they wanted $499. I learned why the difference; the secretary thought I had auto insurance with glass replacement.

I happen to know the same is sometimes done with health insurance vs. uninsured.

That is part of the answer
But it probably isn't the entire answer. At least not without a carefully thought out phase in period.

no need to split ways, just understand
The days when barbers were surgeons, were also the days when those barbers were the absolute best surgeons on the planet.

You make the mistake that many of our socialist brethern. That is, you see how it was, see how it is, and assume that it is government that made the difference.

It wasn't govt regulations that turned the barbers of yesteryear into the surgeons of today. It was 200 years of learning, combined with better equipment, made possible by capitalism.

Consumers and competitors are the best possible overseers, because they have their own interests at stake. Govt makes a lousy overseer because it is always more interested in the politics, not in who is benefited. (Sometimes the two coincide, but only by accident.)

It is govt regulations that require doctors to set broken legs, when any competent med tech could handle it. Why? Because that's what the doctors wanted. They had a better lobby, so that's the way the govt ruled.

I'm sure you've read about how difficult it is to get the liscenses of bad doctors revoked. That's because the doctors union (also known as the AMA) controls the liscencing boards.

Consumers want the best product for the lowest price.
Competitors want the customers to come to them, not the other guy.

That's all the regulation that is ever needed.

you pay for what you want
If you want gold plated care. That is your right.
The problem is that under the current system, the doctor's union has convinced the govt to require everyone to get gold plated care.

A lot of what you say is right on
But some of it is a political problem, not an oversight problem. Yes, these two often merge when the government is the overseer. For instance, The easiest solution for the liscense issue is to take it out of the AMAs hands. This is just one of many.

Look, I can give several instances where industry does not perform "in the best interests of the consumer. Part of the problems is markets and publically owned companies; part of the problem is pure greed.

I will concede this: The present half-way medical system we now have is a joke. I would take a pure free-market system over the present system.

I've got you beat on one point
You wrote "Relatives and friends of mine have fought and died in WW2, Korea, Vietnam and Iraq. I choose to believe they were fighting for the fundamental freedoms enumerated in the Declaration of Independence and the US Constitution. I will never accept the “fettering” of US citizens. If we do not appreciate and fight for our freedom, the union President Lincoln died to maintain shall indeed perish from the face of the earth."

My grandfather fought for this country in World War I. It's true he enlisted in the US Army to dodge conscription in Italy, but fight for the US he nonetheless did. Father and many uncles fought (and one died) in WWII. Cousins did Korea. I did Nam, although the wimpy way mostly out of sight of land in Tonkin Gulf.

The fact that this country is still worth fighting for does not change the fact that on April 15 we will pay over half of our taxes for uses not permitted to the Federal government under a strict reading of the constitution.

I don't consider quality care "gold plated"
Want me to set your leg? I know the basics and it won't cost you much. I also know how to make a plaster cast. Of course there won't be any X-rays to see if I set it right, and you can't sue if you have to walk the rest of your life with a limp.

Come on, we are talking basic medical care, done right, at an affordable price. Gold plated by rear.

There are several ways to save costs by using different methods (technicians for one) to handle minor medical issues. But each technician needs to be something of a specialist or he has to be educated as a doctor. For large city clinics that could still be a cost saver, but for small town clinics/hospitals it would cost more to have 10 tech specialists on staff with 2 doctors than 5 doctors.

Also, make most common drugs (like antibiotics) over-the counter thus allowing people to treat their own infections (like strep or ear infections).

Reciprocity
Agreed as well.

Freedom's Advocate
“The fact that this country is still worth fighting for does not change the fact that on April 15 we will pay over half of our taxes for uses not permitted to the Federal government under a strict reading of the constitution. “

America is but a few decades from achieving the American Dream beyond the wildest imagination of its founders. The biggest threat we face as a free and great nation comes from within, from those who actively turn America towards socialism and tyranny. If we right-size our governments and allow our economy and technology to grow, we can achieve the prosperity that our founders dreamed of and all Americans covet. I will be freedom’s advocate to the end.

Media Darling Romney
If this is what the GOP serves up for '08, I know a lot of people that are going to say fine. You want socialism? We'll sit home and let Hillary serve it up, the way she wants it, fast and hard.

Then we can suffer for four years and remind people why the hell Carter was such a miserable failure. Where's the liberal indignation about government getting in the pocketbook?

Address costs…
….by removing excessive licensing, by deregulation and by allowing individuals to get medicine (prescription drugs) without seeing a doctor (like in some countries including Portugal).

Deregulate insurance so that people can get policies that do not cover certain high cost procedures with low rates of positive outcomes. Yes this would sometimes send people home to die who if treated some small percentage might be cured.



Excellent post Markthegreat
Excellent post Markthegreat I just saw on a TV show last night how uneducated people with a little training are becoming, basically doctors in Bangladesh and are have a huge positive impact on the heath of the people of that country. Most medicine does not require a top student with 8 years of medical school.

Also Pauled should remember that NGOs and not for profits can play a positive role. The AMA went after the mutual aid societies (who once had their own practitioners) and with the help of Government really reduced their impact. (Admittedly mutual aid societies where also impacted by changes in life styles.) In the area of home schooling there is starting to be an establishment of mutual aid societies through home schooling groups where parents help parents, per haps it would move into medicine if the Government would get out of the way.



'working poor family can't afford an extra $500 '
If someone makes $500 less than them I guess that they can.

That's bull
Sure, people cut corners all the time to make their dollar stretch. For a while, about 10 years ago, I had a wife and two kids and made just $7,000 a year. We lived in a run down old place, bought all our clothes from second-hand stores and rummage sales, drove a 30-year old car and didn't do doctors as we couldn't afford it. We lived that way for about a year before I got a different job and the wife went to work.

I'm guessing you have never been in the working poor situation or you would not say this. There were a lot of times where I to take some of the grocery money and put it in the gas tank to get to work. You can survive on flour and water pancakes, but it is no fun.

BTW, many people out there don't automatically go to welfare services just because their financial circumstances get worse. We finally did get medicaid and foodstamps because the wife needed an emergency appendectomy. Three months later we were off it as our financial circumstances improved.

The system could use a re-vamp. But this arguement is BS.

rightsizing govt
"If we right-size our governments "

Unfortunately that's a mighty big if. I don't see much evidence that either of the major parties has any interest in reducing the size and scope of govt.

Under Repbulican's govt has grown even faster than the previous Democratic administration.

There are days that I fear we are merely fighting a holding action. So that our children and grand-children, when the technology has advanced to that point, will still have the freedom to leave and start new colonies away from the crushing statism that is taking over this planet.

oversight
I will be the last to ever claim that private industry is perfect and always performs in the public interest.

The question is, what to do about the problem.
It's easy to say that we should set the govt to watch industry. But the problem is, why should anyone assume that govt regulation has fewer problems than the industry did without govt regulation.

The regulators rarely know as much about an industry, as those in the industry. So it's a good bet that their regulations will hamper the industry, without benefiting consumers.

The only solution to this problem is for the regulators to get cozy with industry insiders. Which then leads to the inevitable capture of the regulating agency by industry insiders, with the result that subsequent regulations are designed to benefit the large players in the industry at the expense of small players, and the public at large.

Pointing out that industry is not perfect, is not sufficient to justify govt intervention. You must also show that govt intervention will result in a situation that is better than what you are trying to fix.
That is a test that has never been passed.

gold plating
Immeadiately going to the most expensive solution is generally considered gold plating.

You guessed wrong.
'I'm guessing you have never been in the working poor situation or you would not say this. There were a lot of times where I to take some of the grocery money and put it in the gas tank to get to work. You can survive on flour and water pancakes, but it is no fun.'

You guessed wrong. I have been there and done that.




Then you should know how tough it can be
And that a family in that situation can not afford another bill or a major increase in a bill. They are already "robbing Peter to pay Paul" there just isn't anything left.

Good point
But one of the aspects usually assiciated (though not alwayws) with government regulation is transparancy. That is how people can often make an informed decision.

As I said earlier, we do need to move closer to a de-regulated free market in this arena and try to find a balance that will actually work. The present system doesn't for amny people.

I agree
But the local GP isn't the "most expensive solution". As I said, a tech system could become much cheaper, at big clinics and/or hospitals, but I want quality healthcare that everyone can afford; not gold plated, but not lead either.

transparency
You can get all the information you need to make an informed decision without government intervention. Just refuse to buy from companies that don't give out the information you want.

If there aren't enough people who want that information, the companies probably won't go to the effort of gathering and distributing the information. On the other hand, if few people want the info, then it's less likely that you can pressure govt into requiring it.

If the company puts out false information, then they are guilty of fraud. Pretty much as it is now.

As to who will watch the company, in addition to sleazy lawyers hoping to make money on class action suits, there will also be other companies, hoping to embarrass a competitor in order to steal customers.

Antibiotics must not be sold over-the-counter
Antibiotic resistant organisms are already a serious problem, partly because doctors over-prescribe them due to patient demand and patients also do not follow directions (not to mention feeding them to cows). When the doctor says to take them for ten days that means take them for ten days, not stop taking them when you start to feel better and save the rest for another time. Do we really want Joe Sixpack to be able to walk into a pharmacy and buy some antibiotics every time he gets a cold or flu? We really, really don't want to destroy the utility of the few broad-spectrum antibiotics that are still relatively effective faster than is already happening (can you say drug resistant TB?).

TCS Daily Archives