In today’s Wall Street Journal, the author of a new book on health care policy writes (subscription required–free version here),

The elected leaders of Massachusetts have come up with a novel solution for the vexing problem of paying for health care: abolish the laws of arithmetic…

The Massachusetts health plan promises to provide health-insurance companies with subsidies in order to induce them to offer these low-deductible insurance plans. The arithmetic suggests that these subsidies will have to be large — thousands of dollars larger than the $295 per worker that the state plans to collect from employers that do not provide health insurance.

The problem of paying for health-care coverage, which politicians are declaring they have “solved,” is really just beginning. The only way to make zero-deductible health insurance available at low cost is with a large subsidy; how much will depend on negotiations with insurance companies.

The Massachusetts plan makes a large, open-ended spending commitment, while raising no new taxes, apart from a tiny $295 annual fee to be charged businesses for each worker they have for whom they fail to provide health insurance. Governor Romney (R) has threatened to line-item veto even that fee. Both he and the legislature (D) are acting like honor graduates of the George Bush school of fiscal responsibility.

A single-payer system, with the state directly providing insurance to modest-income residents, would have been less costly and more transparent. Instead, the politicians’ plan will force insurance companies to offer no-deductible health insurance to people on modest incomes, at premiums ranging from $1000 to $2000 per year. My guess is that the insurance companies will not be willing to pay for more than about $2000 per person per year in claims, and they will demand that the state provide reinsurance for the rest. Given average health care spending in Massachusetts of $6000, “the rest” could be a big number.

Even though private insurance companies will participate, I do not see this as a market-oriented approach. The insurance companies will not be providing market discipline. They are only there to stick their snouts in the trough.