No, that's the thing, it wouldn't work like that. The high levels are compressed more than the low levels. This is what would happen if they put it in the way you are imagining it:

Level 85 character with 120,000 health becomes level 85 character with 4,000 health.

Level 1 character with 42 health becomes level 1 character with 1.4 health.

See the problem? They will never implement that because it would just be bad. What they mean by "squish" is not squish as in squish from the top down, but squish the top and the bottom together.

They wouldn't be reducing health by 30 times, they'd be reducing the rate of power gain as you level by 30 times. This would destroy soloing, and make leveling a character to max level much less satisfying.

All they need to do to make the mega damage system work is not have 1.2, 12, 120, or even 1200 mega damage but have it start the way K and M start with health numbers. There's nothing at all ridiculous about 99,999K damage, the number looks reasonably large already. And then when it moves to M, it's starting at 100M. They could even make it start at 1000M, that works just as well. And the math problem could be sorted (I assume, I know nothing about programming so forgive me if I'm wrong here) by keeping all numbers at 5 or 6 significant figures, and then adding the zeros back on at the end.

I'm saddened to see how many people find the big squish to be a good idea, if they do end up implemented it I'll be a sad pandaren. :(