Insanity in health-care legislation
As if to prove that its state’s democracy is just as authoritarian as New York’s or Minnesota’s, the Massachusetts legislature has passed a health care bill that establishes a democratic dictatorship over health care. Democrats, Republicans, and the Republican governor, Mitt Romney, alike support the bill. Bi-partisanship signals that the legislation achieves a new bear market low in the replacement of free markets for health care with health care by government fiat.
Governor Romney will sign the bill (or most of it). He pushed for it. He contributed to it. He called it "exactly what we’d hoped for." What he hoped for is a vile and morally reprehensible piece of legislation. As a rule, is legislation ever anything else?
House Act No. 4850 begins with a preamble that an "emergency law" is "necessary for the immediate preservation of the public health and convenience." This is a lie. The same sentence says that the "purpose" is not an emergency but to "expand access to health care…increase the affordability of health care products, and enhance accountability of our state’s health system…" This is a second lie. Funneling health care through new state bureaucracies will diminish access, raise costs, and make health care less responsive and accountable to its customers.
Let us not forget that Massachusetts was the first state to enact no-fault auto insurance, to which mandated health care insurance has been likened by Governor Romney: "We insist that everybody who drives a car has insurance. And cars are a lot less expensive than people.” One study puts the costs of no-fault auto insurance in Massachusetts at 28 percent above the national average, accompanied by much higher fraud. Another study says that auto insurance "premiums are 19% higher in no-fault states than in personal responsibility states." Romney wants to be President so badly that he has already learned how to ignore salient facts that are widely available at the click of a mouse. More likely he has learned the major political skill of how to lie to oneself so convincingly that it becomes easy to lie to others and forget that one is lying.
It does not take the whips of experience to know that health care laws can only inflict damage upon most people. If you are made to buy something you don’t want or agree to, how can you be anything but worse off? If you are taxed to subsidize strangers, how can you be better off? If your doctor gives you second-class treatment because he can’t charge you for first-class treatment, how can you be better off? If hospitals and health-care providers are under mandated price and quality controls, how can the outcomes be anything but bad for consumers?
Once upon a time, before government ruined free markets in health care services, courteous doctors made house calls. I have not forgotten either Dr. O’Keefe’s or Dr. Eigner’s visits. Once upon a time, a 3-day stay in a hospital to birth a baby boy, including the doctor bill and the anaesthetist, cost $49 or so. My mother saved the bill.
North of Boston lies the Danvers State Mental Institution (now closed), which perfected the lobotomy and housed a Ward A snakepit. It is only fitting that the Massachusetts legislature be relocated there to hold its sessions. Maybe the walls will speak to them of the isolation, sedation, straitjackets, bars, and electric shock previously imposed by the state in the name of health.
Lying and lunacy are now so public and so intertwined in American political life that they must be afflicting the sanity of rational Americans. This is the real health care emergency. Here’s a solution. Let us turn the legislators out to pasture and auction off the 50 State Capitols. Then we can do Washington. I am sure there will be ready bidders for such tourist attractions as the Lincoln Memorial, the Washington Monument, the Supreme Court Building, Capitol Hill, etc. The Mall will no longer be in demand for mass demonstrations, but it should fetch a good price for some unexpected use, perhaps a branch of Madame Tussaud’s Wax Museum. We have a plethora of candidates for her political chambers of horrors. We have an abundance of modern-day madmen, murderers, and thieves who now inhabit the marbled halls of law-making.
If none of this is feasible, then I have another suggestion. The signing of this health care bill should be the occasion for transporting the legislators, the governor, and other responsible parties for a willy-nilly frolic in Boston Harbor, a harmless dip in the frigid Atlantic, three-piece suits and all. The throng of Bay staters in need of an icy wake-up call might stop harbor traffic for a week. It would be worth it. The spectacle of a mass baptism for liberty would gladden the heart of Faneuil Hall, the Cradle of Liberty, as it looks down upon the cleansing waters. Like a father who has lost its child of liberty, it knows now and has known for far too long that this Boston is no longer the Boston of Samuel Adams.
Dictatorship — Massachusetts style
Health-care dictatorship, Massachusetts style, looks like something that a budding Politburo would dream up. Building upon previous federal and state medical monstrosities, Massachusetts rounds out the coercive construction, for the time being, by forcing everyone into its programs.
Do our legislators know that they are building monuments to their once arch-enemy, the Union of Soviet Socialist Republics? Dictatorship American style is authoritarian democracy. This is not the harmless vote of a club to hold a picnic on the Boston Common. This is the cancerous proliferation of suffocating laws, regulations, bureaus, and councils. There is no cancer on the presidency as John Dean thought. There is a cancer on society, spread from the federal and state governments. Government is the cancer.
Section 111M (Individual Health Coverage) of Massachusetts House Act 4850 requires every person over 18 to maintain "creditable coverage in force," that is, buy health insurance if he is uninsured. If not, he loses a portion of his personal tax exemption and becomes subject to tax penalties that can add up to $1,200 a year or so. Poorer people not on Medicaid will be able to get policies subsidized by the state, that is, by other people’s taxes.
You will have health insurance or the state will punish you! So much for the "freedom" and "democracy" that Americans supposedly revere. Our doctors of law-making have slowly but surely injected the bodies of Americans with all manner of bureaucratic poisons from no-fault auto insurance to Medicaid. The body builds up a tolerance to repeated small doses while turning into a malleable zombie. After awhile, the body welcomes even more fixes. This is today’s fix.
My parents never had health insurance. They paid for operations and hospitalizations, of which they had several, out of savings. They self-insured. Those were the days before government involvement in health care. Those were the days when hospitals were affordable and doctors came to the house. Those were the days when a family looked after itself.
There’s an escape hatch in the Massachusetts bill, namely, a religious exception. A person can file "a sworn affidavit with his income tax return stating that he did not have creditable coverage and that his sincerely held religious beliefs are the basis of his refusal to obtain and maintain creditable coverage during the 12 months of the taxable year for which the return was filed." What an opportunity to gum up the works! In fact, starting your own unincorporated church and religion might be an excellent all-around method of seceding from the state.
Of course, if the state receives masses of religious affidavits, it will make examples of some in state courts. The courts will support the state. Faced with legal fees, most people will throw in the towel.
Massachusetts might then require that people prove their religious sincerity or be subject to perjury. Membership in the Church of Christ, Scientist might automatically exempt a person, but membership in other churches might make one less credible.
Chapter 176Q creates an "Authority" known as the "commonwealth health insurance connector authority" or connector. Massachusetts likes authorities and roads, connector and otherwise. Perhaps this explains the origin of this strange term.
In fact, the connector is a powerful health bureau staffed and run by bureaucrats. This body will have a board. The state here mimics the institutions of business with a board, but a board that lacks the many accessories that make boards effective. The connector board members do not hold stock in a corporation that they are managing. They do not face a market for their services. They are not elected by shareholders. They are not open to proxy contests or takeovers. They are not at the mercy of market forces. They are only appointed bureaucrats given arbitrary power. This board is a shell, giving enough of the appearance of a market institution to satisfy vacuous Republican posturing.
The board has 11 members. Its composition worships at the usual American altars of professionalism and political forces: an actuary, a health economist, a small businessman, a specialist in health plans, a consumer organization person, an organized labor person, plus government officials such as the head of Medicaid and the insurance commissioner. In contrast with boards of companies that include knowledgeable company executives, this board excludes "an employee of any licensed carrier authorized to do business in the commonwealth."
The board will have a "seal of approval" that will "indicate that a health care benefit plan meets certain standards regarding quality and value." The law’s guidelines are that an eligible plan "provides good value to consumer…offers high quality…and is offered through the bureau." How this miracle is to be achieved by regulation is a deep mystery. The board can also decertify health care plans. The board will collect all health care premiums of those who obtain health care plans through the board, that is, those who seek and obtain public assistance. It remits the funds to insurers via a "system" to be established. It allocates its costs to participating insurers.
The board (connector) has many powers. It controls prices or premiums. It certifies "sub-connectors" which are local health care businesses. It authorizes all health plans. It forbids any plans that exclude an individual for any reason, including health, age, or any other variables such as race, sex, sexual orientation, source of income, etc. that might provide information about actuarial experience. If businesses participate with the bureau, then they cannot offer competing plans and they must meet other standards. The board has the power to obtain personal financial information from the taxing authority so as to check on the income of those applying for assistance. The board sets commission rates paid by health plans to producers who steer customers to health plans. The board can tax health care plans ("apply a surcharge") for expenses.
This board has a number of ways to go, all of them bad. It can drive a good many insurers out of the state. It can keep a few favorites around who grow fat and lazy while delivering low-quality insurance under the guise of high quality at low prices. It can regulate badly and then complain at the lack of cooperation of the industry while demanding enhanced powers. It can abdicate and accept industry guidelines that cartelize the health care business.
Customers who deal directly with providers, consumer choice, business innovation, and business competition in terms of price, quality, and service have no place in this quadruple market-bypass operation. Expect costs to rise and quality to decline.
Price and other controls
There will be a "health care and quality council" to "establish health care quality and cost containment goals." These goals are "to promote high-quality, safe, effective, timely, efficient, equitable and patient-centered health care." Ordinarily, businesses in the normal course of supplying customers would be achieving the latter goals. But they can’t, not under the current regulatory regimes. The health bill authors ignore this. They act as if the existing federal and state health care regulations have played no role at all in preventing the private sector from achieving these goals.
The goals of the council include "reducing racial and ethnic health disparities." What American law with any self-respect does not kneel at this particular altar? The state forbid that there be any inequalities anywhere in any avenue of human endeavor.
This cost control council will not actually work these matters out itself. It will "contract with an independent health care organization to provide the council with technical assistance" in every facet of health care one can think of. Some consulting organizations somewhere are salivating now at this juicy prospect.
Insurers and health care providers must provide data to the council or face stiff fines. The council has the power to "promulgate additional rules and regulations relative to the type of information that reasonably may be required." There will be no business secrets and no incentive to develop them. If one company has lower costs, other companies will be browbeaten about their costs. And the company with lower costs will be asked to lower its prices accordingly, so as to reduce its profits. This will be a lose-lose proposition for business and the consumer.
It is impossible to fathom how this council will be run because it will have an advisory board consisting of at least 28 members drawn from every organization under the sun: a member each from AARP, the Massachusetts Biotechnology Council, the Massachusetts Council of Taft Hartley Trust Funds, Blue Cross Blue Shield Foundation, the Massachusetts AFL-CIO, etc., etc.
Extending a prior program, there shall be a "MassHealth payment policy advisory board" with 14 members. There shall be a "health disparities council." It will have 34 members. There shall be a "public health council to advise the commissioner of public health." Another 18 members. There shall be "in the division of insurance a health care access bureau overseen by a deputy commissioner for health care access…" The bill establishes four different trust funds to accept and distribute money.
The bill provides for price controls on hospitals: "Hospital rate increases shall be made contingent upon hospital adherence to quality standards and achievement of performance benchmarks, including the reduction of racial and ethnic disparities in the provision of health care." There shall be a "wellness program for MassHealth enrollees to encourage activities that lead to desired health outcomes…"
Each of these boards and councils shall have various powers and duties. For example, the division of insurance will set "minimum standards and guidelines" for health care plans.
There is established "a health safety net office within the office of Medicaid." This office has detailed powers over hospitals. It controls the prices paid to hospitals, called reimbursements. It also imposes some costs. For example, acute care hospitals must pay in money according to a formula, namely, their private sector charges as a fraction of all private sector charges times $160,000,000 subject to surcharge adjustments if the total falls below $150,000,000 or above $170,000,000.
If an employee obtains health insurance through the state, then the state will charge the employer if the total costs for that employer over all employees exceeds $50,000. This provision basically forces all companies with more than 10—20 employees to offer heath care insurance to their employees. But there is also a provision that states directly that employers with 11 or more employees and no health care plans will be made to contribute to the health care of the uninsured up to a maximum of $295 per employee.
The latest Massachusetts health care bill well illustrates much that is wrong with government. If government claims to provide a service, it cannot. Bureaucrats don’t nurse or doctor people. Bureaucrats don’t know how to run an insurance company. Bureaucrats don’t know how to improve quality while cutting costs. Politicians and bureaucrats know how to undermine markets. They know how to pile up regulations, taxes, price controls, and bureaucracies. They know how to kowtow to political pressures. They know how to create a mess, an insane mess, and then proclaim that it is a great advance for the human race. This is what Governor Romney and the Massachusetts state legislators have done this week in Boston.
Michael S. Rozeff [send him mail] is the Louis M. Jacobs Professor of Finance at University at Buffalo.