April 11, 2006, 7:50 a.m.
An Imperfect Model
Gov. Mitt Romney’s health plan.

Right off the bat, Mitt Romney chose the wrong goal. The Republican governor of Massachusetts, like many other health-care reformers, wants to achieve "universal coverage." Unfortunately, universal coverage is impossible. That goal is the motive for the feature of the commonwealth's plan that is most controversial on the Right — which is to say, its most controversial feature, the plan having inspired opposition from much of the Right while mostly winning support from the Left: the mandate that all individuals purchase health insurance.

Gov. Romney defends that mandate in two ways: first by analogy to auto insurance, which all car owners are obligated to purchase, and second by arguing that people who lack insurance impose costs on everyone else, which is hardly libertarian.

But as Michael Tanner points out in a new paper on individual health-insurance mandates for the Cato Institute, the car-insurance mandate has not resulted in universal coverage. In the 47 states with that mandate, 14.5 percent of drivers remain uninsured. Nor have health-insurance mandates led to universal coverage. Hawaii mandates that all employers provide health insurance; yet 10 percent of workers there have no insurance. Even countries with socialized medicine — often held up as a foolproof method for achieving universal coverage — have trouble registering, and getting premiums from, everyone they are supposed to. (There is another respect in which countries with socialized medicine do not achieve universal coverage. If you die because you were on a waiting list for an operation, in what sense did you have "coverage"?)

Within the limits of its unwise goal, however, the Romney plan is pretty good. It is not reducible to its controversial elements. For example, it redirects some government spending to achieve increased efficiency. Conservatives have no objection in principle to replacing subsidies for hospitals with premium support for individuals.

Another element of the plan, called the "health insurance exchange" or "connector" or "conduit," seems like a creative way to get around a problem caused by misguided federal policies. If you have read this far, you probably already know that the federal government provides a tax break for employer-provided health insurance. Many economists, and conservatives especially, have inveighed against this tax favoritism as the root of all evil in health-care markets.

Under Romney's plan, employers would be able to give workers money they could use to shop for health-insurance plans. They would buy those plans through the connector. The great advantage of this procedure is that the plans would qualify for the federal tax break. It also reduces transaction costs. While there are too many regulations on the plans that qualify for sale through the connector, the connector itself seems like a fairly light and defensible government intervention. This idea, the brainchild of Edmund Haislmaier of the Heritage Foundation, seems worthy of export — although a federal tax reform that made it unnecessary would be better.

Less congenial to conservatives are the various business taxes in the bill, which Gov. Romney concedes serve no useful purpose. They wouldn't raise much revenue.

As those taxes suggest, Romney's vision was better than what the legislature produced. "In our state and most other states, the advocates are saying, Look at all the people who are uninsured," he says. "States are adding more and more of these populations to Medicaid. Medicaid is not a very good insurance plan. There are no co-pays and no deductibles. It's a terrible insurance product. We instead want to move toward insurance."

To that end, Romney proposed eliminating laws that made it hard to sell cheap, no-frills, high-deductible catastrophic insurance policies. (Make insurance more attractive to healthy young people, and you might not need to force them to buy it.) But the legislature refused to eliminate mandates on coverage, and required zero deductibles for the new plans for low-income people.

The governor has the ability to make modifications to this legislation through a line-item veto. He should use it to eliminate the mandates on coverage, strike the business taxes, and get rid of the individual mandate to buy insurance. (Or at least soften that mandate: His original proposal gave individuals more options in insuring themselves — some of them pretty creative — and did not rely on fines for enforcement.) Even if the overwhelmingly Democratic legislature rejects his changes, conservatives will appreciate his having made the effort.

Romney knows that one danger of an individual mandate to buy insurance is that it increases the government's temptation to set forth what insurance must include, and to expand its definition over time. "There are all kinds of dangers [in this field]. Public pressure and legislators can turn any health insurance into Medicaid."

Especially if Romney uses his veto to nudge the legislation rightward, it will probably be an improvement over the status quo. A model for the country? Maybe not. But it's pretty good for Massachusetts, and that's to Romney's credit.

— Ramesh Ponnuru, an NR senior editor, is author of the soon-to-be-released Party of Death.

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