Romney’s Folly
Health-care mandates are a middle-class tax.


Michael F. Cannon

Amid negotiations with leading Democrats over health-care reform, Iowa senator Chuck Grassley, ranking Republican on the Senate Finance Committee, commented, “The federal government is in the process of nationalizing banks, nationalizing General Motors — I’m going to make sure we don’t nationalize health insurance, and the ‘public option’ is the first step to doing that.”

Grassley is correct, and conservatives are right to oppose Pres. Barack Obama’s proposal to create a “Fannie Med.” But when it comes to nationalizing health insurance, there is more than one way to skin the patient. Indeed, there is talk on Capitol Hill that Grassley and other Senate Republicans may be close to a deal that would nationalize health care smack dab in the middle of the private sector. For an example of how that can be done, look to Massachusetts.

In 2006, Gov. Mitt Romney teamed up with Beacon Hill Democrats and the Heritage Foundation to enact the most sweeping health-care reform in the nation. Governor Romney made Massachusetts the first state to require that its residents purchase health insurance under penalty of law (the “individual mandate”) and the second state (after Hawaii) to require that employers make a minimum level of health insurance part of employee compensation (the “employer mandate”). Romney created new government subsidies and expanded Medicaid to help residents comply with those mandates. He also created a health-insurance “exchange” — a government-managed marketplace — called the Commonwealth Connector.

Although Romneycare included no insurance program explicitly run by the government, it gave Beacon Hill politicians so much power over the health care of Massachusetts residents that it might as well have. The individual and employer mandates, operating entirely within the private sector, imposed what amount to new tax burdens, gave government the power to regulate all aspects of health insurance and medical practice, and subjected residents’ access to medical care to political calculation. Moreover, the fruits of Romneycare have been exactly what you’d expect from a government program. Before reform, Massachusetts’s health-care sector was rigid and expensive, with some of the longest waiting times in the nation. Since reform, it has grown even more rigid and expensive — though the politicians have managed to hide more than half of its $2 billion cost. Waits are longer as well, though they hardly merit a mention compared with the more odious forms of rationing involved.

All of this makes Massachusetts a case study in the reforms that President Obama and congressional Democrats are trying to ram through Congress. Both the House and Senate health-care plans include individual and employer mandates, new government subsidies, a broader Medicaid program, and a new government-managed health-insurance exchange — as might a deal betwen Grassley and Finance Committee chairman Max Baucus (D., Mont.). As goes Massachusetts, so would go the nation.

Like any government health-care program, Romneycare has spurred its share of garden-variety “send a check to Uncle Sam” tax increases. Yet those taxes don’t account for even half of Romneycare’s costs. Individual and employer mandates are the taxes that politicians prefer when they don’t want you to realize they’re taxing you. As President Obama’s National Economic Council chairman, Larry Summers, wrote in 1989, employer mandates “are like public programs financed by benefit taxes. . . . There is no sense in which benefits become ‘free’ just because the government mandates that employers offer them to workers.” The same is true of an individual mandate: To the extent that government forces people to purchase something they do not value, it is a tax, even if the money never enters the treasury.

That means that Romneycare achieves near-universal coverage mostly by taxing middle-class earners. Massachusetts forces employers to offer workers a minimum level of health benefits or pay an annual $295-per-worker penalty, while individuals who do not obtain coverage face annual penalties as high as $1,068. Since employers pay for employment taxes and employee benefits by reducing wages, Massachusetts residents can face a tax of nearly $1,400. Depending on their income, married couples pay up to twice that.

Obama is hardly oblivious to the coercive nature of mandates. Take him at his own word: During the presidential campaign, he attacked Hillary Clinton’s proposal for an individual mandate by likening it to Romney’s Massachusetts model. Under an individual mandate, Obama explained, “you can have a situation, which we are seeing right now in the state of Massachusetts, where people are being fined for not having purchased health care but choose to accept the fine because they still can’t afford it, even with the subsidies. And they are then worse off. They then have no health care and are paying a fine above and beyond that.”