The Wrong Road to Reforming Health Care

While paved with good intentions, Romney's road to reform should not be model for the nation

June 6, 2006

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WASHINGTON – As a key element in Massachusetts Governor Mitt Romney’s expected 2008 presidential run, his health care reform plan is seen by many observers as a model for the nation. However, a new Cato Institute briefing paper takes a closer look at the plan and finds ample reasons to be skeptical.

In “No Miracle in Massachusetts: Why Governor Romney’s Health Care Reform Won’t Work,” Michael Tanner, director of health and welfare studies at the Cato Institute, argues that the reform goes “far beyond an individual mandate to radically change the way health insurance is bought and sold in the state.” 

Tanner finds that one of the most significant aspects of the law, the Massachusetts Health Care Connector, leads down the road to managed competition. “In that way [Romney’s plan] resembles the Clinton health care plan,” Tanner states. The Connector, which restructures the individual and small business insurance markets under a single unified set of regulations, creates “an artificial marketplace that will severely limit consumer choice and freedom,” according to Tanner.

More problems stem from the plan’s poorly targeted and overly generous subsidies. The act extends subsidies well into the middle class — to many workers who already have health insurance. “Expanding subsidies will greatly increase the number of people dependent on the government,” Tanner explains, “and will likely crowd out unsubsidized coverage, encouraging businesses to cease offering employer-provided plans and thus shifting the cost of insurance to tax-payers.”

Expanding coverage also sets up a series of cascading dominoes, attracting special interests to lobby for more subsidies and consequently driving up the cost of insurance. Tanner notes that “lobbyists spent roughly $7.5 million attempting to influence the design of the new Massachusetts plan.” The required insurance currently includes all of the state’s 40 mandated benefits, including hair transplants.

Additionally, the act imposes modest, yet potentially dangerous burdens on businesses and creates a host of new government bureaucracies. “With current funding expected to be short of what is required within a few years,” Tanner warns, “there will be a strong legislative temptation to see businesses as a potential funding source.”

Ultimately, Tanner concludes that “health care needs more consumer control and freer markets, not more government regulation, controls, and subsidies.” 

Briefing Paper #97