No free riders

April 06, 2006

America's quest to find a successful formula for universal health insurance took a giant leap forward this week in Massachusetts. With overwhelming support from all quarters, the legislature adopted a plan that requires individuals and employers to share with taxpayers the burden of health care costs.

The Bay State plan doubtless contains many flaws, and is certainly not yet the perfect solution to one of the country's most vexing problems. Yet this product of painstaking negotiations between the state's Republican governor and mostly Democratic legislature represents the first substantial progress - after decades of attempts - in marrying the concerns of the business community with those of health care advocates.

Maryland and other states that have failed so far to produce such a consensus should monitor the Massachusetts experiment closely and copy whatever works.

Most novel in the Massachusetts plan is its requirement that all adults have health insurance, directing those who can't get coverage through an employer to buy it on their own or face tax penalties.

Social advocates often react viscerally to this so-called individual mandate, thinking of the single mother with a low-paying job who is barely making ends meet. But the Massachusetts plan provides subsidies to reduce costs for those with low incomes.

Census figures reveal that a large portion of the uninsured - 25 percent to 30 percent in Maryland - are young, unencumbered adults earning good salaries who think they are healthy enough to go without coverage. Such "free riders" raise the cost of health care for everyone else in two ways: by failing to broaden the risk pool and by relying on free services in hospital emergency rooms if they are sick or injured.

While requiring individuals to take more responsibility for their health care, the Massachusetts plan also imposes a "play or pay" requirement on employers, imposing fees on those who don't offer medical benefits to their workers. The $295-per-worker fee is probably much too low to finance the subsidy program, but the precedent may be more important at this juncture.

The business community has traditionally resisted such proposals, which helped to doom President Bill Clinton's ambitious attempt at overhauling the health insurance system a dozen years ago. But there's a growing recognition that employers who fail to provide health benefits are also free riders, leeching off premiums and taxes paid by everybody else. Worker rights advocates are betting that, especially in a tight labor market, employers now voluntarily providing coverage won't undermine their work force by dumping it in favor of the $295 fee.

Actually, the Massachusetts plan is all kind of a gamble, especially in the broad latitude left up to government regulators. But the payoff could be huge - for everybody.

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