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Mommy State Dearest

Last week, the Massachusetts legislature passed a landmark bill. By votes of 154-2 in the House and 37-0 in the Senate, the state will require all Massachusetts residents to purchase health insurance, or pay a special tax for the privilege of going uncovered. And Governor Mitt Romney has stated his intent to sign it.

I'm not quite clear on the details, but here are a few of the things I've picked up. The bill requires all businesses with ten or more employees to offer insurance to their employees. Those that don't will have to pay $295 per employee per year. And individuals that don't buy insurance will have to pay a penalty -- in the first year, losing their personal state income-tax deduction ($150); after that, tax penalties will rise to equal half the cost of the cheapest insurance plan.

This is exactly why I created a category called "Mass. Insanity."

I describe myself politically as a "militant moderate, with libertarian and contrarian leanings." This is one of the cases where my libertarian tendencies rise to the forefront, and Thomas Paine's quote that "that government is best which governs least" seems especially applicable here.

It's a tenet of libertarian belief that any time the government does, it does in the most inefficient and expensive way, and it's one I tend to share. And this insurance fiasco is utterly exemplary of that principle. The goal of the bill is laudable, but I sincerely doubt this would achieve them.

Let's look at some of these measures. Any employer with more than ten employees will HAVE to contribute towards their workers' insurance. With that threshold, how many businesses will find it extremely difficult to justify expanding beyond that ninth employee, triggering a huge per-worker expense? The growth of small businesses will be severely crippled.

Next, what about small businesses that are just over that threshold? The temptation to cut back to duck under the wire will be tremendous.

Then, there are those businesses that hire a lot of part-time, unskilled employees. For them, the idea of cutting down on the total number of employees by increasing their hours might make a lot of economic sense.

Finally, in that last category, we have the subset of those with a very small profit margin. Wal-Mart, as I understand it, doesn't make very much on items they sell -- it's the price of keeping their prices so low. They balance that out by hiring large numbers of unskilled workers, keeping their labor costs low, and sheer volume. A radical increase in their labor costs would slash hard into their profits, perhaps even wiping them out altogether. If they can't make any money, why the hell would they keep their stores open and all those people on their payroll?

I really think that this measure is going to be a disaster for Massachusetts. It's going to hit hardest those it is intended to help most.

Finally, I have to challenge the basic philosophical basis of the bill. Having insurance is a good thing. Having a major medical condition, and having had it both with and without insurance, I can safely say that it is vastly better to have the coverage. But that's why I chose a job that offers decent insurance, and partly why I stay with my job -- I have had my share of problems with them, and I've watched over the past couple of years as my premiums rise while the actual coverage decreases, but it beats the hell out of the alternative.

There are people who, for whatever reason, don't want insurance. And there are companies that cannot financially justify offering insurance. Most do, as it helps them attract good workers, but some don't. I don't think that it is the mandate of government to override those decisions by individuals and companies and force a cumbersome, expensive, inefficient, and ultimately destructive "solution" down their throats.

On the plus side, though, I'm willing to bet at least some of those companies that get chased out of Massachusetts end up hopping over the northern border and setting up shop here in New Hampshire, especially in the southern tier of the state, so this could be another case of their loss is our gain. I just don't like that option, though -- I prefer that we in New Hampshire succeed because we're doing things right, not just because Massachusetts once again does something wrong.

But we'll take what we can get.

(Some pretty good stories from the Boston Herald over the last week can be found here. Other articles, from the Boston Globe, can be found here.)


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Comments (20)

We're closing our 250 perso... (Below threshold)
Faith+1:

We're closing our 250 person shop in Waltham and moving it to Virginia preceisely over the insane business tax structure of Mass.

In fact, the money savings will likely mean we can hire an additional 75-125 people MORE in Virginia for about the same labor costs. We plan on opening 40 of those new positions in the first year alone.

Far as I'm concerned Mass. can just keep doing what they are doing. It's been a boon for the rest of us.

You left out the fact the i... (Below threshold)
B Moe:

You left out the fact the increasing insurance coverage increases healthcare cost. But overall, excellent post.

I've seen a lot of people c... (Below threshold)
wolfwalker:

I've seen a lot of people comment on this bill. Some think it will be a disaster, others think it's actually a workable plan. But I've yet to see anyone raise this point:

[[ Those that don't will have to pay $295 per employee per year. ]]

How likely is it that $295 per employee per year is cheaper for the company than buying a package health insurance plan is? For a business with ten employees, the "penalty" is $2950 per year. What's the cost of buying health insurance for ten employees?

It would be a glorious, schadenfreudesque irony if this law results in fewer companies buying health insurance because it's cheaper for them to pay the penalty.

Hmmmm.1. I think t... (Below threshold)
ed:

Hmmmm.

1. I think that's completely insane.

In essence this "tax" is a punishment for companies that succeed.

2. I'll posit that a very effective means of reducing healthcare costs is to expel all illegal immigrants.

Why do you think it costs so much for people to go to hospitals or for medical procedures? To cover the costs of 20 million illegals that don't, and won't, pay.

3. Another effective solution is to significantly cap all medical malpractice civil lawsuits *unless* the doctor has been convicted in a criminal court of law for a crime related to that malpractice.

When I go under the knife or take new medication I know implicitly that it's a gamble. I take that gamble becuase the alternative is a wooden box without much of a view.

This is the difference between making a mistake, which all humans do, and being an incompetent jackass that deserves to be stripped of his license and jailed.

4. Another significant source of savings is to create a national database of medical doctors and specialists and update it with listings of all events that impact his or her practice.

Any lawsuits, allegations made to medical boards, etc. If I find out my vascular surgeon has a few things on his record that looks iffy, then I'll ask him about it and let him explain it. But I MUST HAVE THAT INFORMATION!

I have a series of 14 seriously nasty scars on my left arm from a MRSA infection that required excising a golf ball sized piece of flesh to eliminate. I got that from a jackass surgeon who is well known in the local medical profession as a "high-flyer", i.e. someone who is regularly and constantly sued for malpractice. If I had known this beforehand, I wouldn't have let him come within 20 miles of me.

It's this consumer knowledge that will drive the incompetents out of the medical profession and thus relieve the financial pressure on good doctors.

...

There are many reasons why costs continue to spiral out of control and most of them are due to market pressures. Higher malpractice premiums and lawsuits are forcing some doctors to raise prices and other doctors to simply retire early and get out. Having to cover potential and real lawsuits are why medical manufacturers need to charge so much. Bad doctors are causing havoc in the medical system, and they're being protected in large part because of a combination of "old boy" network that doesn't like to see expensive medical degrees "go to waste" and because there's a shortage of experienced doctors.

It's all intertwined.

Hmmmm.It ... (Below threshold)
ed:

Hmmmm.

It would be a glorious, schadenfreudesque irony if this law results in fewer companies buying health insurance because it's cheaper for them to pay the penalty.

That's an extremely good point.

I would have made that point myself, except I'm still groggy this morning. Of course, had I finished my morning coffee, I would have made this excellent point because, well, I'm *ed*.

:):)

All kidding aside this is an extremely good point. I live in NJ and work for a small research company with around 50 employees. I think the average monthly cost for health insurance is around $200 a month per employee. So that's about $10k per month or about $120k per year.

Under this plan my company, were it located in Taxchusetts, would pay about $14,750 per year.

So yes it would be a very good deal.

...

Yeah. It's a dumb idea that's probably bound to fail a la TennCare.

wolfwalker - you hit the na... (Below threshold)
plum:

wolfwalker - you hit the nail on the head. I'm a self-employed citizen of the commonwealth and joined the local CoC to get the group rate on health insurance. My monthly premium is up to $618.00 a month. I expect companies to be dropping insurance in favor of the penalties in massive numbers. And, regarding the illegals, why can't their country of origin be billed for their care?

Ah, I was wondering when yo... (Below threshold)
Jay:

Ah, I was wondering when you'd get to this. There was a fascinating discussion over at Dean Esmay's, in which it got a surprising degree of favorable response.

We've been watching in horror as the proposal came up in various forms, Romney showed his true stripes (you want the Presidential ticket from Hell? McCain/Romney), and they finally passed it.

It opens the door to total intrusiveness, on top of everything else bad about it, and all the negative consequences there will be. Single payer uniformly universal coverage would be far more straightforward and honest.

A radical increase in th... (Below threshold)
J:

A radical increase in their labor costs would slash hard into their profits, perhaps even wiping them out altogether. If they can't make any money, why the hell would they keep their stores open and all those people on their payroll?

Jay, this has to be the weakest argument in your post. Seriously, it's silly. So silly in fact, it distracts from your stronger arguments about the burden on small businesses.

Heh, you are worried about ... (Below threshold)
kamatu:

Heh, you are worried about something from the People's Commonwealth of Mass, but not worried about something the Feds are shoving through? Take a look at NAIS, if it wasn't for the source, it sounds like a conspiracy wingnut theory.

http://animalid.aphis.usda.gov/nais/about/pdf/NAIS_Draft_Strategic_Plan_42505.pdf
http://animalid.aphis.usda.gov/nais/about/pdf/NAIS_Draft_Program_Standards_42505.pdf
http://animalid.aphis.usda.gov/nais/about/pdf/NAIS_Technical_Supplement_072605.pdf

Notice that these regulations come from the National Institute for Animal Agriculture (NIAA), a lobbyist group for agribiz. In fact, you can look at the group who wrote this on the last page here, a who's who of agribiz and RFID chip corps: http://www.nppc.org/public_policy/USAIPHandout012504Version31.pdf

Think that might play into the "culture of corruption" meme?

Justification supposedly to secure the food chain and defend against bioterrorism. It does neither. What it will do is drive out small farmers who cannot afford the costs or the potential draconian penalties, which results in concentrating targets for terrorists. Alternatively, it will drive them to raise "outlaw" animals who aren't vaccinated, which is how we trivially control the majority of diseases. In the meantime, the big "scary" diseases in the news, BSE (mad cow) resulted from agribiz feeding practices and H5N1 avian flu is spreading along poultry trade routes with outbreaks linking to poultry factory farms. Go see for yourself, note the anomalies like Laos: http://www.grain.org/briefings/?id=194

For a breakdown of some of the problems you can read Dr. Zanoni's (not medical) letter here: http://www.organicconsumers.org/ofgu/ID060202.cfm

It might even be a better place to start since she references the USDA documents linked above. However, Dr. Zanoni's training has allowed her to miss a few items, like the capability to insert electronic viruses into RFID chips and how with malicious compliance by ranchers, thousands of legit reports (perhaps purposefully generated) using mass reporting "helper" programs can generate what would be defacto DoS attacks on every database website.

I haven't even scratched the surface on this one. If you want the overview: http://www.nonais.org/


Great points ed ... (Below threshold)
virgo:

Great points ed
this is socialism on its face and it will be pushed more and more until people stand up to it and vote these idiots out. if you dont you live with it or move as many are, if this phony Romney ever got into the white house look out !

The sad thing is, I can sor... (Below threshold)
Cousin Dave:

The sad thing is, I can sort of see what the original motivation might have been, and there's a good reason for it: one of the drivers behind inflation in medical costs is doctors and hospitals having to eat the cost of treating uninsureds. The problem is that this isn't anything that a state government can fix; the crux of the problem resides in the federal tax code. Yes, it's a typically Massachusetts "punishment tax" approach to the problem. But at least it's a tacit admission of the problem of people who willfully go without insurance and just rely on being able to get a free ride at the hospital emergency room.

As a small employer I would... (Below threshold)
Casual Dropper-In:

As a small employer I would be thrilled to drop a $3500/month for 7 employees insurance bill in favor of a $290/year charge. Whoever thinks their employer is paying around $200/month per employee for decent health coverage needs to head over to the accounting department for a reality check. Way back when HillaryCare was proposed I ran the numbers for our company and thought it was great. We would be able to drop our private insurance, sign up for the government plan and make huge savings. I'm pretty sure no one in any government position has a clue as to the actual cost of medical insurance for small and medium size companies, and I know that employees don't. I can also tell you that yearly double digit increases in medical insurance premiums result in job losses. Where did this idea of employer provided medical insurance come from?

One of the questions I have... (Below threshold)
Gem:

One of the questions I have that has not been addressed by any commentary I've seen so far is -- What about people who get refused by insurance? My sister weighs about 215, is about 5'5" tall. She has been refused twice now, once by Blue Cross and once by another insurance company, for an individual policy because she was "outside their height and weight guidelines" -- in other words, she was too damn fat! She has normal blood pressure, normal blood sugar, no pressing health issues related to her weight. She is a nanny, thus is not self-employed. Her employers are willing to pay for her insurance -- but she cannot get accepted, even for a higher premium or with caveats! She's not eligible to be on their insurance b/c she's not family. They don't run their own business, she's just a household employee. Financially, she makes great money (for a nanny), so doesn't qualify for medicaid or other state-funded healthcare. If this required health insurance becomes the norm, will insurance companies be required to accept even the obese and those with past mental health issues?

Employer provided medical i... (Below threshold)
Jay:

Employer provided medical insurance dates back to wage restrictions imposed by the Roosevelt administration during the war. Employers needed ways to "pay" extra, differentiate themselves, and attract people in a tight market, so enter benefits. Ultimately the government supported health insurance as an untaxed benefit, encouraging the practice.

The government caused the two to become tied together by messing with the market. Pretty much the whole mess stems from economic meddling by FDR. It distorted demand for services, it changed how and what doctors are paid, it created expectations of plentiful coverage at a cost hidden to most people - similar to the way taxes withheld from payroll obfuscate the enormity of the income tax cost, and fueled (not always for the bad) growth in the medical industry.

THE best thing that could happen would be for ALL transactions between medical providers and their customers to return to being paid BY the customers. Take away all insurance, Medicare, Medicaid, kill it all, and make it a market. If you are poor you make the minimal usage of doctors necessary, as we always did, rely on doctors who sometimes "forget" to bill you, as ours did, and rely on charity, which would flourish in a less constrained economy.

This is an attempt to pile another insane government action on top of a crazy situation caused by a series of insane government actions. How far does it have to go before people notice what has happened and how it came to this?

Hmmmm.Who... (Below threshold)
ed:

Hmmmm.

Whoever thinks their employer is paying around $200/month per employee for decent health coverage needs to head over to the accounting department for a reality check.

I'll fully admit that I was guessing. My company was recently bought by another one and I frankly don't know the internal financials of the current health plan. Since I was guessing I wanted to use as conservatively low as number as possible so as to not overstate the case. Even with a $200/month cost per employee it still makes more sense to abandon the private plan in favor of the public one.

IMHO this will probably go the way of TennCare as it seem to emulate it to some degree.

Just my point. You, a gene... (Below threshold)
Casual Dropper_in:

Just my point. You, a generally well informed person, don't know how much your medical insurance costs. Only a tiny percentage of people in this country have any idea about actual medical insurance costs, yet so many people are wading into the discussion. Most, including politicians and social activitists, have no idea of the truly horrendous costs American employers have been absorbing for years. What do you suppose the Massachusetts legislature believes that $295/year is going to buy? I don't believe we can achieve a good, or equitable, solution to this problem until our whole country understands just how expensive health care is. No matter whether employers, individuals or the government pays the price, everyone needs to know that it will be very expensive.

I like the idea posted before where individuals pay medical providers directly, like the old days. However, I also know that very few people have any rainy day reserve to cover even basic medical needs. Sadly, a lot of people are living paycheck to paycheck, and any kind of emergency is too much for them to handle financially.

Glad you finally got to thi... (Below threshold)

Glad you finally got to this one JT.

1) Note Mass was "forced" into doing something by Federal law threatening to remove entitlements if they did not reduce the amount of uninsured. Very important to remember that this the governor's and legislature's motivation.

2) Good to see so many folks realize the history and problems in health care here related to loss of normal market forces. If we ever get out act together, the private sector physicians, and all the economy they support (from employees, allied professionals, the consumer services they fund from golf courses and second homes, etc.) will feel much pain, but not as much as the hospitals and specialty clinics that depend upon big insurance bucks to keep them going.

3) As part of this effect, certain very expensive relative to benefit specialties (cancer and cardiovascular surgery come to mind) will become treatments for only the wealthy; and the current penchant for utilizing the newest and most expensive drugs to treat common ailments (fungus toenails, reflux esophagitis, hypertension and diabetes) will undoubtedly wane. A tiering of medical services greater than we currently experience will occur.

Are we ready to accept this? The "equal health care for all" approach is an expensive social addiction that may be blunted by a resurgence of altruism in healthcare providers. The alternative is nationalization of the health care system, which has been a disaster everywhere else it has been tried other than very small and self-contained economies and societies.

Here's stuff from a NYT article:

http://www.nytimes.com/2006/04/05/us/05mass.html?th&emc=th

"It is not a typical Massachusetts-Taxachusetts, oh-just-crazy-liberal plan," said Stuart H. Altman, a professor of health policy at Brandeis University. "It isn't that at all. It is a pretty moderate approach, and that's what's impressive about it. It tried to borrow and blend a lot of different pieces."

[FRANKENSTEIN was this constructed]

The program, which was approved 154 to 2 in the House and 37 to 0 in the Senate, will cost $1.2 billion over three years, but only $125 million of that will be new state money. The rest will come from federal money and existing state money. After three years, lawmakers say, no new state money will be required. A new agency will administer the system.

[Oh BOY a NEW STATE SYSTEM! I can't wait to see the real price tag in three years]

Joseph Landais, 64, could use insurance for himself, his wife and three children. Mr. Landais, a retired hospital custodian, said his wife, a nurse's aide, makes too much for the family to be eligible for Medicaid but not enough to afford insurance. He had a hernia operation four months ago that he did not have to pay for under the free-care pool, but he had not been able to see a doctor since then, even though he is still not feeling well.

"After years that you've been working that hard," Mr. Landais said, "I think you deserve something back."

[As long as health care is something your "deserve" that someone else has to pay for, that is. I've worked for 30 years, 21 in the private and 9 in the military, and I don't think there's anyone not a communist or socialist who thinks I "deserve" free health insurance, at least until I retire in another 13 to 15 years. If you retire before Medicare eligibility and you are not disabled, then why should the public foot your health insurance bill?]

The danger to small Mass. b... (Below threshold)
John S:

The danger to small Mass. business that are not close enough to the NH or RI border to move is that the $295 per employee per year tax to opt out of Commie Care will change as politicians there realized they f*cked up. So they'll fix it in year 2 or 3 when the program is $5 billion in the red. Then a family owned Chinese restaurant with 11 employees overnight will face a $900 a month per employee tax to stay in business. Unless of course a few of those employee are suddenly working under the table and paying NO taxes.

While Commie Care is catchy... (Below threshold)

While Commie Care is catchy, I prefer Tax Care, or TaxusCare.

How about Extortio... (Below threshold)
virgo:

How about
Extortion 101




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