Monday, February 04, 2008

Why government-run health care costs more 

The Boston Globe reports that the cost of Commonwealth Care in Massachusetts is much higher than expected.
...the governor's spokesman, Joseph Landolfi, said, "It is clear that paying for healthcare reform will pose a much greater fiscal challenge than was anticipated by the previous administration. We are committed to making health reform a success by aggressively pursuing cost savings and efficiencies in the healthcare system, as well as working with legislative leaders to review options for additional state revenues so that we can continue to afford this important initiative."

The expanding need for new state and federal money is in sharp contrast to the statements made by former governor Mitt Romney, when he proposed the initiative in 2004 and as he campaigns for president. He has repeatedly suggested that the state could insure low-income residents largely by reallocating money paid to hospitals and health centers that serve the uninsured.

"The bill that I submitted to the Legislature didn't cost $1 more than what we were already spending," he said Wednesday night during a GOP debate. "However, the Legislature and now the new Democratic governor have added some bells and whistles."

In fact, Romney signed the law in 2006 as modified by the Legislature, approving most of the changes, but vetoing a few provisions that were overridden. Lawmakers then estimated that the initiative would cost the state only a small amount of new money in the first few years. It is now apparent that both Romney and lawmakers underestimated the cost of insurance subsidies as well as other parts of the initiative, largely because they based their projections on low estimates of the number of uninsured and the rising price of insurance. When the law was passed, neither Romney nor the Legislature estimated the costs beyond next year because they believed the enrollment growth would be all but complete.
Arnold Kling examines this problem from whether Massachusetts understood how many people would hop over to subsidized care from paying for it themselves. Moreover, forcing people to buy insurance imposes a cost on them, which the Globe article misses (there'd be no easy way to measure them.) But "health insurance is good for them and/or society needs them to buy health insurance. So who cares about their individual preferences?" Indeed.

"Everybody must insure" is a form of government coercion. Here's another, regarding recycling in Sweden. In both cases, the costs of coercion are simply set to zero.