• This is a partial transcript from "The Journal Editorial Report," June 3, 2006, that has been edited for clarity.

    PAUL GIGOT, HOST: In a groundbreaking ruling, Massachusetts adopted a law in April that requires all state residents to obtain medical insurance by July 1, 2007.

    Starting next year, those who don't have coverage will lose their state income tax deduction and face a monthly fee, while low-income residents will have access to state subsidized insurance policies.

    Although the plan has been praised by many, it has some conservatives chaffing at the prospect of new government mandates.

    Massachusetts Governor Mitt Romney joins me now from Boston.

    Welcome, Governor.

    MITT ROMNEY, GOVERNOR OF MASSACHUSETTS: Thanks, Paul. Good to be with you.

    GIGOT: One of the criticisms of your plan, I have heard from several people, is that you require people to offer health insurance but without first deregulating the insurance market. How do you respond to that?

    ROMNEY: Well, our system does allow for people to be able to buy private health insurance policies.And what we've done is we have made our policies have a great deal more flexibility than ever before in our state, for much more substantial deductibles and co-payments.

    We're going to have policies, which, instead of costing $350 a month for individuals, will now be priced at about $200 a month. That kind of change allows people to be able to afford policies that couldn't afford them in the past.

    And right now, we've got hundreds of thousands of people in our state that are getting free health care, paid for by taxpayers, because they show up at hospitals without insurance, even though they could afford to buy a policy if it were reasonably priced.

    GIGOT: Well, that free-rider problem, as it is sometimes called, is a real problem. But some people say it's not as big a problem as the mandates that are passed by politicians in the state that require certain kinds of coverages and so on.

    Do you think that the mandate problem is the real problem in driving up the cost of health insurance in Massachusetts? And your bill really didn't do much to change that.

    ROMNEY: Well, actually my bill asked for all of the mandates to be stripped out of the policies but the legislature turned that down, as you might imagine.

    We've worked with the insurance companies here, all the private companies, and said, look, how do you get our premiums down to a level where people can afford them, people who are not now insured?

    And they said, look, the big drivers of cost of an insurance policy are, number one, the size of the deductible; number two, the co-pays; and number three, whether you can direct the beneficiary to go to a certain network, a directed network, if you will, of suppliers. And if you do those things, those are what are critical for getting the price down.

    Whether you have mandates on mental health coverage and so forth is less important to them. Although we do have some flexibility in the law that got passed by the legislature, I'd like more.

    But what we have is what we need in order to have policies people can afford.

    And frankly, the cost of free-riders — and that's hundreds of thousands of people, who can afford to buy health insurance but choose not to buy it because they get health care free by the taxpayers' picking up their bill — that's something which is a huge burden on our system.

    It's driving up costs of health care across the country. And that's what we're taking aim at.