1. All but the very rich must buy health insurance.
2. Business that don’t offer health insurance to their employees will have to pay a tax.
3. Individuals can buy insurance with pre-tax dollars, eliminating the favoritism currently shown to employment-linked insurance.
4. Insurance companies will be subsidized to offer barebones policies to the current uninsured.
Arnold Kling is skeptical:
…the politicians’ plan will force insurance companies to offer
no-deductible health insurance to people on modest incomes, at premiums
ranging from $1000 to $2000 per year. My guess is that the insurance
companies will not be willing to pay for more than about $2000 per
person per year in claims, and they will demand that the state provide
reinsurance for the rest. Given average health care spending in
Massachusetts of $6000, "the rest" could be a big number.
Andrew Sullivan approves, mostly for general reasons — "let the states try."
My take: This kind of approach will prove increasingly popular. You claim to cover everybody. It doesn’t sound very socialistic and most of the costs are hidden. It appeals to voters’ sense of justice; there is a general belief that many individuals and businesses are free-riding upon the ready availability of hospital emergency rooms. It keeps private insurance rather than trying to eliminate it (single-payer plans) or eliminate its tax advantages (HSAs). This latter feature I find appealing, since I think the private insurance mode, for all its flaws, is or at least should be, the future of the sector. "Not enough private insurance" is the relevant externality relative to the social welfare function, not "too much private insurance." Of course various lobbies — most of all the insurance companies — also will like this feature of the program.
In a political debate, this will, for better or worse, probably crush the more ambitious Democratic plans for national health insurance.
The crunch comes, as Kling points out, when you pretend that covering the uninsured will be cheap or can happen under current levels of program budgeting. Can you imagine California or Texas, both of which have higher levels of uninsured than Massachusetts, trying such a plan? The long-run future of the idea replaces the insurance company subsidies with health insurance vouchers for the poor. They would be means-tested, of course, and the expense would require federal involvement.
To me the Massachusetts plan sounds messy and fragmented. It is a series of concessions rather than a set of solutions. It relies too heavily on unfunded mandates rather than improving incentives. I am not sure it will make anyone healthier. It does nothing to solve the number one problem of the sector, namely bringing competitive forces to bear on improving product quality, accessibility, and affordability. I just bought a new Toyota Corolla for a lower nominal (much less real) price than I paid nine years ago for the same but inferior make without side air bags. Why can’t we have more stories like that in health care? It is the person who figures out how to point health care competition in the right direction who will deserve the brass ring.
That all being said, the Massachusetts plan is better than I would have expected. I am not convinced that the plan will work out badly, at least relative to feasible alternatives.