Health care for everyone

Apr 6th 2006 WASHINGTON, DC
From The Economist print edition

Hillary Clinton couldn't do it. Can Mitt Romney?

AS WAS discovered by Hillary Clinton a decade ago, it is politically impossible to fix America's health-care system all at once. Congress is too angrily divided, and the federal government lacks the muscle to impose a grand vision on unwilling states. The riddle of how to provide health insurance for the 46m Americans who lack it will have to be solved by trial and error in the states. This week, Massachusetts offered an intriguing proposal.

The state legislature passed a bill that would make health insurance compulsory. Just as everyone who drives a car must insure it, so everyone with a body must insure that, too. The only exceptions are those who can prove they are so rich that they can pay for major surgery themselves. The bill had near-universal support. Governor Mitt Romney, on whose proposal it is based, says he will sign it.

To make the plan work, Massachusetts will offer a mix of penalties and subsidies. Individuals will be allowed to buy health insurance with pre-tax dollars, just as firms currently can. Those who don't will be penalised through the tax code, and then fined. At the same time, private insurers will receive subsidies to offer bare-bones insurance to those who cannot afford fancier packages.

Of the 6.2m people in Massachusetts, about 500,000 lack insurance. They fall into three overlapping groups. Some are poor enough to qualify for Medicaid, but have not enrolled. Some are not quite poor enough for Medicaid, but get no insurance from their employers and cannot afford to buy it themselves. Others could afford it, but just don't buy it, perhaps because they are young and healthy.

Massachusetts has already done a good job of reducing the size of the first group. A new computer system uses the Social Security numbers of those who show up at hospital to see if they qualify for Medicaid, and automatically enrolls them if they do. The other two groups will be shrunk by imposing a levy on firms with more than ten employees that do not offer health insurance, and by forcing everyone who still lacks insurance after that to get some.

With more healthy people in the pool, average premiums should fall, or at least rise less quickly. The burden on emergency rooms should be reduced, because insured people are more likely to go to a doctor before a problem becomes critical. Overall, the plan will cost no more than the state currently spends on the uninsured—about $1 billion a year, says an optimistic Mr Romney.

A novel aspect of the plan is the creation of a health insurance "exchange", to relieve small firms of the need to conduct complex negotiations with insurers. Employees will be able to choose any plan approved by the state-backed exchange, and their premiums will be deducted from their pay cheques.

If the scheme works, other states will copy it. But that will depend on how much it ends up costing. No one wants to use the word "rationing", but this is what happens in every country with universal health coverage. That said, Mr Romney's plan has more chance of success than Hillarycare ever did—which could help Mr Romney in 2008, when he will be seeking the Republican presidential nomination and then, perhaps, facing Senator Clinton.