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The Wall Street Journal

Saying No to CoerciveCare

Obama's plan isn't perfect, but it is much better than HillaryCare and Schwarzenneger's GovernatorCare

Shikha Dalmia
January 31, 2008

On Monday, California Gov. Arnold Schwarzenegger's "universal" health-care plan was shot down by a committee in the state's Senate, 7-1. The most vociferous opponents were not fiscal conservatives, but labor unions that launched a last-minute revolt against its most crucial feature: an individual mandate that would have forced everyone to buy coverage.

This defeat has national political implications. Hillary Clinton, for example, has denounced Barack Obama for refusing to include an individual mandate in his health-care plan. Yet many California unions argued that a mandate would force uninsured, middle-income working families to divert money from more pressing needs toward coverage whose price and quality they cannot control.

The unions are correct: This is exactly what is happening in Massachusetts, where Mitt Romney enacted a similar plan two years ago as governor. (And Mr. Romney's plan is the inspiration for both the Schwarzenegger and Clinton plans.) The experience in the Bay State deserves a lot more scrutiny than it has been getting.

Massachusetts uses a sliding income scale to subsidize coverage for everyone up to 300% of the poverty level -- or a family of four making around $60,000. Everyone over that limit is required to pay for their own coverage if their employers don't provide it. All this has inflated demand, which, combined with onerous regulations on insurance suppliers, has triggered premium increases of 12% for this year -- double last year's national average.

No one is escaping the financial sting. The state health-care bill for fiscal 2008-2009 is expected to touch $400 million -- 85% more than originally projected. Still the state won't be able to fully shield those it subsidizes from the premium increases. But uninsured folks who don't qualify for government help really get pounded. Before the hike, the cheapest plan for uninsured couples in their 50s cost $8,200 annually. Now, unless government bureaucrats hand them an exemption, they might well find it cheaper to pay the penalty -- up to half the price of a standard policy -- than purchase insurance. That is, pay to remain uninsured. This is legalized extortion: TonySopranoCare.

The government response to rising premiums is, unsurprisingly, price controls. The Commonwealth Health Insurance Connector Authority -- the bureaucracy created to oversee RomneyCare -- is considering prohibiting underwriters from raising premiums more than 5% for unsubsidized plans, meanwhile requiring them to cover 40-odd benefits from hair prostheses to chiropractic services. If companies can't scale back coverage, they'll have to compromise care; and the Connector is perfectly willing to assist.

As reported in the Boston Globe, the Connector is encouraging insurance companies to include only a limited network of cheaper physicians and facilities in some plans to hold down premiums. Patients who wish to see more expensive providers will have to dig into their own pockets. Dr. Steffie Wollhandler, a professor of medicine at Harvard University, worries that the Connector will revive Gov. Romney's original idea of enrolling poor people in plans that only offer access to neighborhood health centers ill-equipped to treat anything beyond routine ailments. Forcing people to buy substandard care they cannot afford is not universal care, she says. "It is a hoax." And so Massachusetts is marching toward a system of two-tiered medicine -- the alleged market inequity that universal care is supposed to cure.

How about enforcing the mandate? In Massachusetts, non-compliers lose their personal tax exemption -- about $220 -- the first year, followed by fines in subsequent years. California was planning to garnish the wages or impose liens on the mortgages of the uninsured to pay for coverage. "This bill was like telling someone who is in need of help, 'I'm going to give you food, but I'm going to take away your clothes," Leland Yee, a Democratic senator from San Francisco, told the California Chronicle.

The problems with RomneyCare have prompted Mr. Romney himself to abandon it. And Mr. Obama is surely correct that part of the reason 45 million Americans are uninsured is not that no one is forcing them to buy it, but that they can't afford it. It may be too much to hope that Mr. Obama would embrace market-oriented measures -- such as deregulating insurance markets, giving patients more control over their health care dollars, and fixing the federal tax code to let individuals, like employers, buy health coverage with pre-tax dollars -- to bring down insurance costs. But unlike Mrs. Clinton, he at least seems to understand the perverse side effects of an individual mandate.

Should Hillary Clinton ever be in a position to bully people into buying coverage, a coalition of labor and fiscal conservatives might well do to HillaryCare what it just did to GovernatorCare.


Shikha Dalmia is Senior Analyst


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