<<  <  >  >>

ums because it is insuring families with high-

a person was unemployed last year but finds

er risks, because it is inefficient, or simply

a job this year, he would be eligible for a sub-

because it is attempting to maximize its profit

sidy level that he would no longer need.

margin.

Conversely, a person who was employed last

However subsidies are ultimately calculat-

year but lost his job this year would need the

ed, they are apt to be expensive for taxpayers.

subsidy but might not be eligible.

By some estimates, the initial cost of subsidies

Most traditional welfare programs deal

nationally would top $75 billion per year.34

with this problem by basing eligibility on

weekly or monthly reporting. That provides

The subsidies under Governor Romney's plan

for flexibility in dealing with income fluctua-

for Massachusetts would cost between $700

million and $1.2 billion.35 To some degree sav-

tions and changes in circumstance. However,

verification of such frequent reports is costly

ings from uncompensated care would offset

and manpower intensive, resulting in poor

those costs. On the other hand, increased cov-

monitoring and widespread inaccuracy, not to

erage would almost certainly lead to increased

mention outright fraud. There is also the

usage, driving up overall health care costs and

question of who would be responsible for

necessitating increased subsidies.

monitoring eligibility on a short-term basis.

However

The IRS is not set up to deal with weekly or

Mandate Creep

subsidies are

monthly income reports. State welfare agen-

cies do so now in the case of Temporary

ultimately

Assistance to Needy Families, Medicaid, and

To implement an insurance mandate, leg-

calculated, they

similar programs, but those agencies have

islators and administrators will have to

are apt to be

nowhere near the manpower or infrastructure

define what sort of insurance fulfills that

it would take to collect and verify income

mandate. Not surprisingly, given the early

expensive for

information from every household in the state

stage of the debate, most proposals have been

taxpayers. By

every week or month. Such a requirement

vague about what sort of benefit package

would quickly bankrupt most states, to say

would meet the minimum requirements for

some estimates,

nothing of the difficulties involved in coordi-

the mandate. But there are a few proposals

the initial cost

nating the information, once collected, with

that contain enough detail to let us assess

of subsidies

the federal subsidizer.

what a mandated package might look like.

For example, the New America Foundation

nationally would

Risk Rated?

suggests that the Blue Cross Blue Shield

top $75 billion

Should the subsidies be risk rated or other-

Standard Benefit offered under the Federal

per year.

wise take into account the higher insurance

Employee Health Benefits Program provides a

premiums that are charged to families or indi-

good model for the minimum benefits pack-

age.36

viduals with preexisting conditions or other

high-risk factors?

A plan developed by Blue Cross Blue

High-risk individuals cost more to insure

Shield of California calls for "independent

than do individuals who are young and

medical professionals" to develop the mini-

healthy. If their subsidy is not adjusted, they

mum benefit package, but specifies that it

will face higher out-of-pocket costs, in some

should include preventive care, physician ser-

vices, hospital care, and prescription drugs.37

cases, prohibitive ones.

If people receive a higher subsidy simply

Governor Romney would give people a

because they are paying higher premiums,

choice of plans offered by two government-cre-

there is no burden on either the consumer to

ated purchasing pools. Insurers participating

be a wise consumer or on the insurance plan

in the pools would be able to offer what the

to be efficient. Without intrusive government

governor has described as low-cost, no-frills

plans, including plans with high deductibles.38

oversight, there is no reasonable way to deter-

mine whether a plan is charging higher premi-

Governor Romney has estimated that those

6