Big health in Massachusetts

Massachusetts Gov. Mitt Romney had a dream of universal consumer-driven health care. Then he met Beacon Hill and its Democratic legislators. Their plan, introduced this week, is a Frankenstein’s monster of tax penalties, expanded government-insurance programs and unfunded mandates. A presidential aspirant, which Mr. Romney certainly is, will decide what is the best he can do for his state. The rest of us, however, should not take this plan for a model.

The fault of this bill is that it really isn’t “consumer-driven” at all. The resource-wasting reliance on third-party payers and employers remains intact as existing government-insurance programs are expanded. So are insurance subsidies. Perhaps worst of all, the plan relies on threats of “fees” — that’s Mr. Romney’s euphemism for giving up existing tax breaks — in the amount of $295 for employers and $150 for individuals who fail to comply. Companies hapless enough to employ insurance-less “free riders” who run up big hospital bills must pay anywhere between 10 percent and 100 percent of bills over $50,000. These fees — sure to make people and employers take the law seriously — will distort the state’s economy and do little or nothing to harness market forces.

Equally bad, its unfunded mandate is large enough to make Michael Dukakis blush. One health specialist speaking to the Wall Street Journal predicted that the plan would require a subsidy of about $700 million — about four times what the plan provides.

We asked Regina Herzlinger, a professor at the Harvard Business School and a fellow at the Manhattan Institute what she thinks of the plan. A “half a loaf is half a loaf,” she says, but she is “very unhappy” with the half-loaf that emerged from the Romney-Beacon Hill oven. She predicts it will hurt businesses, especially small ones; it will force employers to favor capital improvements over labor, and compel outsourcing of jobs overseas. She points to the Hawaiian precedent, where a similar plan applying only to full- or near-full-time workers, set off a proliferation of part-time vs. full-time jobs. Maybe Massachusetts’ high-tech economy can withstand harming people on the lower rungs that way. The rest of us clearly shouldn’t.

Perhaps the biggest laugher here is that we’re somehow supposed to be impressed with Mr. Romney’s observation that the bill simply applies the state’s auto-insurance thinking to medical care. The state’s auto-insurance market is an overregulated nightmare. It’s so bad that even Geico and Progressive don’t offer plans in Massachusetts. A lizard would choke on it.

Clearly this is no model for the rest of the country, whatever it may do for Mr. Romney’s presidential aspirations or for the Bay State’s big-government lawmakers.