Romneycare’s Fine Print
By Besty McCaughery
Wall Street Journal 5/5/06
Republicans and Democrats are hailing Massachusetts’s new universal health coverage law as a model for what other states should do. Before you conclude that your state should enact a similar law, you might want to know how it would affect you. A careful reading of the Massachusetts law turns up surprises.
Everyone should have access to health care. Massachusetts aims to achieve this goal with a double mandate: All residents must have health coverage (Section 12) and all employers with more than 10 workers must assume ultimate financial responsibility if employees or their immediate family members need expensive medical care and can’t pay for it (Sections 32, 44).
What is the impact on individuals? The state will offer subsidies to help low income residents pay for coverage (Section 19), but most of the uninsured earn too much to be eligible. An individual making $29,000 or more would probably have to pay the full cost or find a job that provides health insurance. Individual coverage costs about $3,600 in Massachusetts — a hefty bill. Moreover, under the new law, individuals purchasing their own insurance must buy HMO policies. Preferred provider plans (PPOs) — which give you more ability to choose your own doctors and treatments — are not allowed (Section 65).
The impact of this law on employers is substantial. The original bill required employers with more than 10 full-time workers to provide all of them (and their families) with health insurance or to opt out of that requirement by paying a $295 annual tax per worker into a state fund. This modest penalty was highly publicized by the bill’s supporters as proof that the bill would not be a heavy burden on businesses. Nevertheless, Gov. Romney vetoed it, perhaps to display his Republican credentials as a tax-cutter.
The Massachusetts House of Representatives overrode the veto — but the reality is that the $295 penalty is small potatoes compared with the other obligations in the law. Say, for example, you open a restaurant and don’t provide health coverage. If the chef’s spouse or child is rushed to the hospital and can’t pay because they don’t have insurance, you — the employer — are responsible for up to 100% of the cost of that medical care. There is no cap on your obligation. Once the costs reach $50,000, the state will start billing you and fine you $5,000 a week for every week you are late in filling out the paperwork on your uncovered employees (Section 44). These provisions are onerous enough to motivate the owners of small businesses to limit their full-time workforce to 10 people, or even to lay employees off.
What else is surprising about this new law? Union shops are exempt (Section 32).
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It’s one thing to criticize. There are alternatives to make health insurance more affordable. State legislators have pushed up prices by requiring policies to cover chiropractics, acupuncture and other services that are worthwhile — if you can afford them. But mandating them is like passing a law that the only car you can buy is a Lexus, when all you can afford is a Ford Focus. People should be allowed to buy basic, high deductible insurance without costly extras. The new Massachusetts law allows only people under age 27 to buy such policies (Section 90). Lawmakers could also devise incentives for hospitals to prevent the needless costs (and deaths) resulting from hospital infections. These infections are adding $30.5 billion to the nation’s hospital costs, according to a new report. They are almost all preventable through better hygiene, and doing so will make hospitals more profitable and reduce health costs. Let’s hope other states consider these alternatives, rather than duplicating the new Massachusetts law.
Ms. McCaughey, a former lieutenant governor of New York, is chairman of the Committee to Reduce Infection Deaths.
Does this mean that young Union workers can stil blow off purchasing the health plans that all the unions offer, and go to the emergency room on our free-care pool dime?
I’m no expert on union-managed health plans, but I assume part of a member’s compulsory dues fund the union-run health welfare program. Can members opt out? I don’t know.
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If individual union members are allowed to freeload on the state program, that would be the penultimate irony … the union keeps the dues but offloads the financial responsibility onto the taxpayers’ tab. Think of the outrage if Wal Mart deducted for health insurance, then didn’t provide any.
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And unions are exempt from the legislation’s “tax” and liability provisions! A double bonus!
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It’s in the interest of the unions to destroy jobs in the efficient private sector. Second best is making private sector jobs more expensive thus minimizing the union’s wage disadvantage.
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Health insurance “reform,” as written, is a good way of doing some of both.
there are some actual teeth
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Good. A lot of sharp business owners already provide health insurance, this is a nod to them, b/c they’ve been subsidizing the Wal-Marts who don’t provide health insurance plenty long. And if you think Wal-Mart’s going to lay off its work force down to 10 people per store, to dodge this law, you’re nuts. (If anything they’d probably reclassify all their workers as “contractors”, and stop paying taxes on them completely. But we have ways of dealing with that crap, too.)
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I’m glad govt is speaking up for the people who support family values (business owners who already provide health insurance, for example.)
Drgonzo, please realize that not every business can afford to pay for health insurance. These typically are small outfits like plumbing firms, car lube centers, restaurant franchises, and so on. They provide the vast majority of jobs in the US, and in MA.
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It’s not Wal Mart. It’s small business. You have to drop the Wal Mart mantra as a reason to pass every bit of social welfare legislation you can think of. It only hurts small business. Wal Mart will get by whatever dopey law we pass … it’s Joe Auto and Tire that’s going to take it in the neck.
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And a lot of Owner Joes are likely to say “screw it, I can’t afford health insurance and also pay myself a salary,” and will close up or, if he can, move to CT or NH.
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Or he’ll fire 2 guys to dip below the 10-employee mark.
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Is this what we wanted: fewer jobs and more unemployment? It’s certainly not what was pitched in the media. I’d usually categorize these effects as “unintended consequences,” but in this case, I’m not so sure it wasn’t intended.
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And just watch. The union hacks seated on the “Connector” will define upwards what constitutes “affordable,” politicians will broaden eligibility, and activists will agitate for, and get, richer benefits. You can kiss the $350 premium “estimate” goodbye. (Current Harvard HMO individual coverage for a single male, age 51 to 55, is now over $800 per month, with Rx.)
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I haven’t had a chance to read the acutal law, so maybe the WSJ writer got some of it wrong. But I doubt it. The Journal is usually thorough.
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Train wreck.
Most of the businesses you listed can’t move. Plumbers, mechanics, and other service companies are not portable. The people who own them can move to another state, but they will just be replaced by somebody else. Restaurants are particularly vulnerable to losing all of their regular customers if they relocate by more than a few blocks. Moving to another state is effectively closing the restaurant and opening a new one.
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The only businesses that are mobile are the more profitable things like manufacturing and research. Those jobs mostly already have health insurance, so they won’t be affected. They are here because the people who work in those jobs want to live here, not because it is the cheapest place for them to be.
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What this will do is force businesses to raise prices. The question is would you rather pay more for health care to cover the uninsured or would you rather pay more for everything you buy so that everyone has insurance? In principle, getting health insurance for everybody should be cheaper because with insurance people are more likely to handle problems when they are still minor, inexpensive things instead of waiting for them to become huge, expensive problems.
Am I dreaming? BMG is relying on the Wall Street Journal for information about the new Massachusetts health legislation? What planet am I on?
do you see anything inaccurate in the article? It is mostly a recitation of several provisions that received less attention than the headline-grabbers did. My brief review of the actual bill suggests that the articles characterizations are pretty accurate. Sometimes the WSJ gets its facts right, you know!
. . . between the WSJ news department and the editorial department. This is an op-ed WSJ opinion piece, not a news article. This is the same WSJ that, on its opinion pieces not so long ago, accused President Clinton of being a drug-smuggling murderer. Myself, if I want to know something about the Mass. health legislation, I’ll go to Health Care for All’s website. The last place I’ll look is on the WSJ op-ed pages.
are there inaccuracies in the article?
… to planet Earth. You cannot escape the laws of gravity and microeconomics.
right after the legislation passed, several editorials around the country came out with headlines declaring the commonwealths new health plan as ‘the road to single payer’, or something to that effect. yippee, i thought. maybe there’s more vision written into this legislation that i had realized.
as it turns out, every single-payer prognostication was written as a looming doomsday scenario. rather than with hope that this would lead real reform, it was the single-payer led downfall of the american way that all of these people were anticipating.
so it seems that the end of one mans drought is the beginning of someone else’s rainy day.
A Wall Street Journal columnist, a partisan writer for a paper that is clearly leaning toward the right. Sorry for my lack of enthusiasm in this ‘important’ article.
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Even if the worst of the accusations are true, an employer mandate isn’t draconian. I’d prefer a national healthcare system, but somehow everyone has to health insurance and in America we get it through employers. If that’s how the voters want it, then that’s how we’ll have to make sure everyone gets it.
Who cares if it comes from the neolithic op-ed page of the WSJ. If you can’t find fault with its statement of facts, you don’t have much of an argumentative leg to stand on. If you want an easier target, go after some of the blanket assertions in BS’s comments.
Under the circumstance the author describes, let’s not forget that under the current system, the employee is SOL, perhaps goes bankrupt, impoverished for life; or, at best, the state pays for it with the Free Care Pool. In other words, it’s socialized medicine — only a really crappy, last-ditch variety. And everyone else’s taxes and insurance premiums go up to pay for it.
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So, is the future going to be small business (and heck, big business) pushing for single-payer?
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It’s correct to worry about the effect on business. It’s also correct to worry about the effect on individuals, both now and under the future system.
I’m all for a federalist laboratory experiment, “federalist” in the historical sense of the word, so let’s try some sort of hybrid between a socialist single-payer plan and a heavily regulated but still private delivery system.
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We’ll see how long our current “reform” remains in place before it blows up and is either repealed, as happened with the Dukakis plan (am I the only one old enough to remember what that fiasco?) or further mutated into a state-run health care Big Dig.
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In the meantime, most of the BMG responses avoid answering any of my concerns about the just-passed “reform.” Instead, all we get is:
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In the meantime, I look forward to 2010 when Massachusetts loses another congressional seat, possibly two! Yipeee!
i, the yipster, believe that charley remains a respectful skeptic on this issue.
Thanks, fairdeal. Yes, I am agnostic on whether single-payer or multiple-payer is best. I want folks to be able to see doctors when they’re sick, and prevent illness as far as possible. That’s my bottom line. I’ll take any vehicle that gets us there.
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Defending my own cred on this issue is boring; but this has been brought up before, and this is what I wrote on this exact issue:
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That being said, let’s discuss further… Health care is good for the economy. According to the Blue Cross Blue Shield Foundation (pdf, pg. 5):
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Shep seems to imagine that under the new law, the costs to be borne by the employer come out of nowhere — that they’re new costs. They’re not. Under our current system these costs are borne by the patient, or by the taxpayers (Free Care Pool), or by premium-payers (such as employers who offer insurance), or some combination thereof. So yeah, it is an employer mandate of sorts, but right now it comes out — in a strange way — as a social mandate.
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Now, do these costs, even spread around, have an effect on business in MA? Do they kill jobs? Have health care costs been going up by 10-14% a year, with an according economic effect? Has money that otherwise could have gone into take-home pay instead been plowed into higher health insurance premiums? Are healthier people more productive, and earn higher wages, with an according economic effect? The answer to all of this is yes.
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So the question is whether it’s best that the employer take care of the employee, or whether it’s best that everyone else do so. To my mind, either answer is acceptable. Hey, maybe small employers need subsidies, too. But let’s be rational about implementing it. Shep, if the employer isn’t paying for those costs, who is? And why?
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Let’s also remember that under the new law, there will be new pooling mechanisms for small employers, making coverage more affordable.
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The big issue is cost. I made a number of suggestions to deal with the outrageous cost of care. Shep thought it was silly to even discuss that. I leave it to the reader to decide who’s being constructive and realistic in this debate.
I only checked on the key assertion, that employers with ten or more employees, whose employees use the pool, will be liable for 100% of the costs of care for uninsured employees once the costs exceed $50,000. That’s not exactly what the law says.
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The legislature authorized the agency to assess a free rider penalty of up to not less than 10% and not more than 100% of the state’s contribution to the unpaid care, based on regulations to be written. The legislature also directed that the agency consider a number of factors in writing the regulations, including the size of the employer, among other factors. You can be sure that AIM, the retailers and others will be in there pitching on this issue. And who writes these regulations? The Romney administration, not the legislature. Many of the “horribles” in the article can easily be avoided in the regulatory drafting process.
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The WSJ editorial writers also seem to think that repealing guaranteed issue regulations will help small business. We are lucky that Gov. Romney and his advisors know better than to fall for that one.
You can find it at: http://www.citizenactionny.org/healthcare/healthnewestreports.html
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Every author puts his/her own mark on a piece but especially in a WSJ Op-Ed the reader would need to have that fact in mind and use it as a filter when reading, right? (pun intended).
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Richard Hirsch’s piece for Citizen Action NY includes a useful Appendix “Major Provisions of the MA Legislation”. And on page 4 you’ll find info about the “free rider” charges on employers who do not provide insurance and whose workers use the state’s free care pool. The implications for this are ridiculous, and scary too (as the author points out). Just how is the state going to monitor and enforce these provisions? And is this really how we want our health system structured?
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Being a nurse health reform activist myself, I have read through many critiques and articles about the MA legislation (see 4 of them on our homepage at http:www.DefendHealth.org). Hirsch’s article in particular impresses me with its strong content on many dimensions inherent in this topic: health care policy, economics, the reform process, movement building, social justice, framing, and more.
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I’m with Charley in staying focused on the goal of getting people the health care they need in a way we all can afford.
AnnieM, I can’t tell from your post whether you think the “reform” is good, bad or neutral. I read Kirsch’s piece over a couple of times, and his opinion is the same as mine although for different (and wrong) reasons.
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Among his major points on the effects of the “reform”, he sees:
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While much of Kirsch’s white paper is devoted to explaining why health care is immune from the laws of economics, and how individuals cannot be trusted to make health care decisions for themselves, his economic analysis of our recently passed “reform” is pretty tight, and I say that even though I have a different policy position on the matter. The analysis is rigorous.
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I believe he correctly looks at the legilsation, and, applying some microeconomic theory, understands and explains how the various incentives (subsidies) and disincentives (taxes, fees and “contributions”) will affect behavior (mainly patients and employers.)
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And his analysis is what I would call scathing and alarm-ringing.
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But there’s some good news, too. Of the 215,000 uninsured in Massachusetts above the free-pool-income threshold mandated to purchase health insurance for themselves, let’s say 10% decide to leave the state for jobs in NH, or SC, or FL to escape the $10,000 or $12,000 tax they just got hit with.
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Add 20,000+ people fleeing MA next year, along with 2 more congressional seats in 2010. That’s reform I can really get behind.
I support reforms that will assist people who have urgent unmet health needs to get their needs met as soon as possible. This is smart economically as well as being the humane thing to do (early intervention care is usually cheaper). So the Chapter 58 law’s resoration of dental and eyeglass coverage for MassHealth recipients and providing MassHealth insurance for families who are struggling to live a decent life while in poverty are good things in my opinion–both as a citizen-taxpayer and as a nurse. I am very alarmed about treating healthcare as a commercial product instead of as a public good.
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From my 12 years working as a nurse I know the current system is very broken and that many people are sufferring because of it, all while we spend HUGE sums of money in “the healthcare system”. As Charely pointed out the disaster is happening now. So what we need, and what we all deserve, is for fundamental reforms to be enacted that will address the core inter-related problems in cost, access and quality. These must be protected over time which is why I support the Health Care Constitutional Amendment that will set standards for our state’s health care system.
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I believe reforms must be built upon
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–fair and equitable funding mechanisms and responsible stewardship of resources (39% of our healthcare spending in the state is on non-care expenditures, e.g marketing, administration, according to a legislative analysis by LECG Consulting in 2002),
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–the commitment to create a system that GUARANTEES coverage for all (not by mandating a commercial purchase from a corporation that makes a profit from selling insurance to you). As part of our social contract to eachother we must recognize healthcare as a public good, as we currently do fire services and public safety such as police. We do not mandate that each person purchase their own basic fire insurance (as was the case in the 1800’s until it was deemed uncivilized, and not very smart for communities either)
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–designing and implementing an actual integrated system of healthcare that utilizes regional and demographic planning and that promotes and rewards quality of care, especially primary care and health promotion/ disease prevention. All of these are sorely lacking in our current system and we all pay more as a result–in economic and human costs.
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The National Institute of Medicine (IOM) completed a rigorous 3-year study on the “Consequences of Uninsurance” that is excellent, and quite disturbing. The IOM called for creation of a national health insurance program and identified 5 Principles to guide health reform efforts–these can be used to measure state efforts. I’m on dial-up so can’t get links for these now to post here but they’re easily found and worth a read.