3 Lessons from Romneycare

06/14/2011 10:04 am EST

Focus: MARKETS

Igor Greenwald

Chief Investment Strategist, MLP Profits

Almost everyone in Massachusetts now has health coverage, and the state has done relatively well despite the extra costs, writes MoneyShow senior editor Igor Greenwald.

There are lots of scary statistics chronicling the US economy’s slow suffocation by health-care inflation:

  • The average annual family premium for employer-sponsored health insurance has more than doubled between 2000 and 2010, to $13,770, according to the Kaiser Family Foundation.
  • The average employee premium contribution was up 147% over the same span, to nearly $4,000 per family.
  • In 2008, the US spent 16% of its GDP on health care, nearly double the proportion in Japan, Australia, and Norway, according to the Organization for Economic Cooperation and Development. US health-care spending is expected to reach 17.7% of GDP next year.
  • Medicaid spending is projected by the government to grow nearly 8% a year through 2019.

It’s hard to know whether to be more alarmed by the failure of last year’s health reform to stem the tide, or by Republicans’ insistence that “Obamacare” is the only problem that needs solving.

Rep. Michele Bachmann (R-MN) and the six GOP dwarves participating in the 2012 presidential election’s first debate might have really spooked New Hampshire last night, were the natives not distracted by the Stanley Cup playoffs.

The debaters were so busy denouncing the incumbent, no one even bothered baiting putative front-runner Mitt Romney over his role (as governor of Massachusetts) in introducing that state's health-care mandates.

You might recall that my home state’s 2006 health-care reform, an early model for the national law approved last year, was supposed to have bankrupted us by now, forcing private insurers to flee the state.

Not quite. Fewer than 2% of my home state’s residents now lack health insurance, versus 15% of all Americans. The annual cost to the state budget runs about $1.2 billion, or about $181 per Massachusetts resident, as legislated by democratically elected representatives.

As for the burden on businesses, one study estimated that the Massachusetts reform hiked individual health premiums by $262 over the plan’s first two years. In other words, after two years it might have cost employers as much as an extra dollar per employee per business day.

Despite this less-than-crushing burden, the state grew faster than all but three others last year. The unemployment rate in April stood at 7.8%, more than a percentage point below the national average.

Still, there’s no denying that health-care spending here in Massachusetts is now growing faster than it is nationwide, forcing the state to slash health funding for legal immigrants and others.

As a cost-saver, the Massachusetts plan has been a dud because, like ObamaCare, it does nothing to foster a truly free market for medical services. It’s impossible to build this free market without giving insured Americans control over the funds employers now spend on their behalf.

My three-point health-care panacea:

  • Give everyone with an employer-purchased plan the right to save that money tax-free instead.
  • Make everyone buy a cheap policy covering catastrophic care, so that the neglectful few aren’t subsidized by the rest.
  • Make every medical provider post their own single rate sheet on the office wall and stick to it, no matter how big or small the client.

That’s it. Problem solved. To check health care costs, give people the chance to save their own money.

Related Articles on MARKETS