Saturday, November 4, 2006

How to know when a politician is lying, asks an old joke. The answer: his lips are moving. There were plenty of loose lips leading to last spring’s passage of the Massachusetts health reform that instituted an individual mandate, placed fees on employers, and offered increased subsidies to low income residents.

Led by Republican Gov. Mitt Romney, supporters promised that health insurance could be provided with only a slight increase in expenditures. Skeptics at the time pointed out that this would not be possible, but were dismissed. Mr. Romney was celebrated as a bold innovator in the national press. Many governors have taken note and are reportedly looking at adopting similar plans. California is no exception. If re-elected, Gov. Schwarzenegger has said that health care reform will be the main platform in the 2007 State of the State address. It is likely that a Romney-style plan will be the cornerstone of his reform agenda.

The klieg lights are now off and the press has moved on to other stories. It’s time to bring heaven to earth and make this thing work. What’s the story?

Administration officials are now telling Wall Street they expect the plan to be quite expensive. In an Aug. 17 filing to support general obligation bonds, officials project that the new plan will increase Massachusetts government health spending by $276.4 million in 2007. That’s a $151 million boost over what the public was told the plan would cost as recently as April. “Somebody once told me: if you want to know what is really going on in state government, look at the bond documents,” the writers at HealthyBlog, who are tracking the details of the implementation process, pointed out, when posting the filings. “They can say whatever they want to the public, but they can go to jail for fibbing to Wall Street.”

The filing reveals why Mr. Romney and friends had no problem getting consensus from the health community, legislative Democrats, and even Sen. Ted Kennedy, Massachusetts Democrat.

The plan provides $386 million in rate increases for “hospitals, physicians and managed care organizations.” Current government programs get a boost of $85.2 million, restoring the gold-plating to Mass Medicaid benefits, that is, including dental and eye care, costing $51.7 million, and expanding MassHealth to families living at three times the poverty level added another $38 million.

Although federal taxpayers are expected to pick up some of this tab, the majority of it will fall on Bay State taxpayers. And the real bill will certainly be higher. The filing discloses that the plans being discussed by the panel for low income people will cost $25 million more than originally projected. This would put total first year costs north of $300 million.

The plan is premised on the belief that cost-shifting by the uninsured and inefficient usage of the current system is driving costs. Full coverage is the lynchpin of the plan. Yet it’s hard to see how the state will get even close to 100 percent participation, the whole point of the expensive exercise. On the subsidized plans, families will be expected to spend up to 7.7 percent of their income on health coverage. If eligible residents say “no thanks” to this new monthly bill, people are supposed to pay penalties under the individual mandate. This could lead to the absurd result of confiscating a person’s earned income tax credit — a government handout — because one refused to accept a health care subsidy.

Officials haven’t even started designing the private plans — the plans that non-poor individuals must purchase by July of 2007 or face fines. Today, the average health plan for an individual in Massachusetts costs more than $5,000, thanks to state regulations that prohibit sensible underwriting and load plans up with mandated benefits. The new, supposedly unsubsidized plans are promised to come in at $300 a month with all current and future mandates intact. The CEO of Harvard Pilgrim Health Care, a large insurer, recently told the Boston Business Journal that this would only be possible “with a lot of cost sharing [and] limits on certain kinds of services on a covered basis and the co-insurance after that.” Cost sharing is simply code for taxpayer subsidy. As for mandate relief, don’t count on it. Mr. Romney recently added another mandate to Massachusetts’ already long list when he signed a bill prescribing how insurance companies must reimburse for prosthetic devices.

The extra money must come from somewhere, and the state’s employers will be in the crosshairs. Mr. Romney is on his way out and the new governor, as well as the people he appoints to the new health care bureaucracies, will have not been party to any deal limiting business contributions to $295 a head. Conservative supporters of the plan claimed that the $295 would be the ceiling of a possible payroll tax, but it will more likely prove to be a floor. State activists, legislatures and the Democratic gubernatorial hopeful are already grumbling that businesses need to pay more. “I don’t think it’s the final word,” Democratic gubernatorial nominee Deval Patrick told CommonWealth magazine when queried on the new health care law. “I think what we have is a framework for debate.”

Given the trajectory and timeline of the process, what Massachusetts might have is a framework for a debate over which presidential hopefuls’ health care reform was a bigger boondoggle, Mr. Romney’s or former Massachusetts Gov. Michael Dukakis’. That is something other governors might take note of before they jump on the mandate express.

Sally C. Pipes is president & CEO of the Pacific Research Institute. She is author of “Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada is not the Answer.”

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