Business must help solve the health-care crisis: can the Massachusetts model work in Michigan?

Detroit Regional Chamber members identify health care as their No. 1 concern--and with good reason. As premiums continue to grow four to five times faster than the rate of inflation, the business community is shouldering the bulk of the burden.

Furthermore, rising costs and lack of standardization are creating a growing gap between the insured and uninsured. The United States spends twice as much on health care than any other country, yet we have 40 million uninsured.

The message from the business community is clear: We need to get serious about developing workable solutions at the state and federal levels. That's why the Chamber invited Massachusetts Gov. Mitt Romney to be a keynote speaker at the 2006 Small Business Conference.

In this first-person report, Romney explains the revolutionary plan he developed for his state that provides affordable health insurance to every resident while reducing the costs of health care.

Only weeks after I was elected governor, Tom Stemberg, the founder and former CEO of Staples, stopped by my office. He told me, "If you really want to help people, find a way to get everyone health insurance." I replied that would mean raising taxes and a Clinton-style government takeover of health care. He insisted: "You can find a way." I believe that we have. Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced. And we will need no new taxes, no employer mandate and no government takeover to make this happen.

When I took up Tom's challenge, I assembled a team from business, academia and government and asked them first to find out who was uninsured, and why. What they found was surprising. Some 20 percent of the state's uninsured population qualified for Medicaid but had never signed up. So we built and installed an Internet portal for our hospitals and clinics: When uninsured individuals show up for treatment, we enter their data online. If they qualify for Medicaid, they're enrolled.

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Another 40 percent of the uninsured were earning enough to buy insurance but had chosen not to do so. Why? Because it is expensive, and because they know that if they become seriously ill, they will get free or subsidized treatment at the hospital. By law, emergency care cannot be withheld. Why pay for something you can get free? Of course, while it may be free for them, everyone else ends up paying the bill, either in higher insurance premiums or taxes. The solution we came up with was to make private health insurance much more affordable. Insurance reforms now permit policies with higher deductibles, higher co-payments, coinsurance, provider networks and fewer mandated benefits like in vitro fertilization--and our insurers have committed to offer products nearly 50 percent less expensive. With private insurance finally affordable, I proposed that everyone must either purchase a product of their choice or demonstrate that they can pay for their own health care. It's a personal responsibility principle. Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on government is not libertarian.

Another group of uninsured citizens in Massachusetts consisted of working people who make too much to qualify for Medicaid, but not enough to afford health-care insurance. Here the answer is to provide a subsidy so they can purchase a private policy. The premium is based on ability to pay: One pays a higher amount, along a sliding scale, as one's income is higher. The big question we faced, however, was where the money for the subsidy would come from. We didn't want higher taxes; but we did have about $1 billion already in the system through a long-established uninsured-care fund that partially reimburses hospitals for free care. The fund is raised through an annual assessment on insurance providers and hospitals, plus contributions from the state and federal governments.

To determine if the $1 billion would be enough, Jonathan Gruber of MIT built an econometric model of the population, and with input from insurers, my in-house team crunched the numbers. Again, the result surprised us: We needed far less than the $1 billion for the subsidies. One reason is that this population is healthier than we had imagined. Instead of single parents, most were young single males, educated and in good health. And again, because health insurance will now be affordable and subsidized, we insist that everyone purchase health insurance from one of our private insurance companies.

We have received some helpful enhancements. The Heritage Foundation helped craft a mechanism, a "connector," allowing citizens to purchase health insurance with pretax dollars, even if their employer makes no contribution. The connector enables pretax payments, simplifies payroll deduction, permits pro-rated employer contributions for part-time employees, reduces insurer marketing costs, and makes it efficient for policies to be entirely portable. Because small businesses may use the connector, it gives them even greater bargaining power than large companies. Finally, health insurance is on a level playing field.

Two other features of the plan reduce the rate of health-care inflation. Medical transparency provisions will allow consumers to compare the quality, track record and cost of hospitals and providers; given deductibles and coinsurance, these consumers will have the incentive and the information for market forces to influence behavior. Also, electronic health records are in the works, which will reduce medical errors and lower costs.

My Democratic counterparts have added an annual $295 per-person fee charged to employers that do not contribute toward insurance premiums for any of their employees. The fee is unnecessary and probably counterproductive, and so I will take corrective action.

How much of our health-care plan applies to other states? A lot. Instead of thinking that the best way to cover the uninsured is by expanding Medicaid, they can instead reform insurance.

Will it work? I'm optimistic, but time will tell. A great deal will depend on the people who implement the program. Legislative adjustments will surely be needed along the way. One great thing about federalism is that states can innovate, demonstrate and incorporate ideas from one another. Other states will learn from our experience and improve on what we've done. That's the way we'll make health care work for everyone.

Reprinted from The Wall Street Journal [c] 2006 Dow Jones & Company. All rights reserved.

RELATED ARTICLE

A number of cutting edge health-care initiatives are under way in Southeast Michigan:

1 A broad-based collaboration to introduce incentives to promote the use of evidence-based medicine in the diagnosis, treatment and prevention of common illnesses.

2 Non-traditional wellness incentives for the fully insured, including the Health First America program available to Chamber members through Blue Care Network.

3 A proposal by the state of Michigan to provide universal access to affordable insurance products for individuals and businesses as well as a plan to provide coverage for the state's 1 million uninsured residents.

4 A growing emphasis on Health Information Technology (Health IT) as a cost-cutting opportunity.

5 The Chamber's Health First America program to provide working Americans access to affordable basic health insurance.

For more information on the Chamber's health-care initiatives and other collaborative efforts, contact Ed Wolking at [phone] or e-mail: [e-mail]. Also visit the Health Care Central section of our Website at www.detroitchamber.com.