Romneycare Bent the Cost Curve

January 5th, 2012 at 8:53 am | 44 Comments |

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Via an interesting post by Chris Conover, I came across this recently released National Health Expenditure report, which has data on health-care spending up through 2009.  This data includes a state-by-state breakdown of personal health-care spending (a number that includes direct expenditures on health-care but does not include administrative costs).

Digging into these numbers allows one to calculate (roughly) the growth of health-care spending in each state from 1991 to 2007.  This data set tells an interesting story for Massachusetts after the passage of health-care reform there: after the passage of Romney’s reforms, the rate of per capita health-care spending growth slowed in Massachusetts both in absolute terms and relative to the national average.

Here’s a chart I put together looking at the cumulative growth over two periods: from 2004 to 2006 (prior to Romneycare) and from 2007 to 2009 (after the measure was applied).  I’ve included the US national average as a whole as well as the New England average in order to situate Massachusetts in its local context.  New Hampshire offers the example of a New England state which did not engage in Romney-style reforms, and Ohio offers a counterexample of a Midwestern state with relatively slower-growing health-care costs.  Texas, often touted as an alternative model for the nation, also helpfully sets up a contrast with Massachusetts.  This chart looks at the cumulative percentage change in per capita personal health-care spending over the 2004-2006 and 2007-2009 periods.


Spending Growth 2004-2006

Spending Growth 2007-2009

US National Avg

11.40%

7.86%

New England

9.23%

9.15%

MA

14.51%

8.28%

NH

16.69%

10.10%

NY

10.55%

8.02%

OH

9.56%

7.89%

TX

12.14%

9.05%

Perhaps in part due to the recession, the rate of growth for health-care spending dropped for the nation as a whole (though spending did still grow).  However, it’s worth noting that, in the years after Romney’s reforms went into effect, the rate of growth for health-care spending in Massachusetts dropped even faster than the national average did.  Between 2004 and 2006, health-care spending in Massachusetts grew almost 27% faster than it did for the nation as a whole; between 2007 and 2009, it grew only 5% faster.  After Romney’s reforms, Massachusetts went from having a health-care spending growth rate well above the national average to one just a little bit above.  For example, between 2008 and 2009, personal health-care spending increased at a rate of 3.8% in the US, while Massachusetts saw its spending increase by 3.9%.  Compare that to the changes between 2005 and 2006: US spending grew at 5.3%, but Massachusetts spending grew at 7.6%.  Situating Massachusetts in the context of the rest of New England makes the change in spending rates even starker: prior to Romney’s reforms, Massachusetts personal health-care spending grew faster than the New England average most years.  After his reforms, it grew slower than the New England average (often having one of the lowest rates of health-care spending growth in the region).  These numbers suggest that Texas is doing a worse job at taming the rate of health-care spending growth than Massachusetts (though, for the moment, per capita health-care spending in Texas is lower than that of Massachusetts).

Massachusetts seems to have especially slowed down the rate of growth in hospital spending.  Between 2004 and 2006, Massachusetts hospital spending jumped 16.5%; between 2007 and 2009, it only climbed 5.5% (a 67% reduction in the rate of growth).  US spending on hospital care grew 12.7% between 2004 and 2006; between 2007 and 2009, it grew 8.6% (a 33% reduction in the rate of growth).  Spending in Massachusetts hospitals rose much more slowly than the national average.  One of the key premises of Romneycare was that bringing all of the commonwealth into the health-care system would lower the need of hospital use (especially the use of emergency room care) and thereby lower spending at the hospital level.  These numbers seem to suggest that something like that may be happening.

In many areas of health-care spending, the rate of growth for spending in Massachusetts either fell more than it did for the nation as a whole or fell at roughly the same rate.  This data would seem to muddy the waters for the claim that Romney’s reforms caused health-care spending in Massachusetts to skyrocket.  Since Romneycare, health-care spending in Massachusetts (at least until 2009) grew more slowly than it did in many other states and also grew much more slowly compared to the rate of spending growth in Massachusetts before Romneycare took effect.

Health-care spending depends upon a variety of factors (including population aging and economic growth), so this data set does not tell the whole story regarding the effect of the 2006 reforms on health-care spending.  It does, however, pose a challenge to the argument that Romney’s reforms uniquely inflated health-care spending in Massachusetts.  In terms of raw health-care spending, Massachusetts seems to have bent slightly down the curve of growth—compared to many other states and, in many respects, the nation as a whole.

(Of course, the rate of growth in health-care spending is not the sole deciding issue for Romneycare: other questions about long-term sustainability, the role of government coercion and spending, and other topics are also very important.  Nor is there a direct correlation between health-care spending and private insurance premiums, which seem to have increased in recent years.  Moreover, data for years after 2009 might tell a more complicated story.)

Originally Posted at A Certain Enthusiasm.

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Recent Posts by Fred Bauer



44 Comments so far ↓

  • PracticalGirl

    So RomneyCare helped curb spending in MA. So what? If he were running for Governor, I might care about that, but since he’s running for a Federal position, and since as President he’s stated that he’d repeal ObamaCare- our only national hope right now- I fail to see the relevance of this post.

    • Xunzi Washington

      +1

      Romney has repudiated (or refudiated) his own health care program and argued that it is irrelevant to the national level issue. So it doesn’t matter that it bent the curve. His crazy base demanded that he disown it, and he followed his marching orders.

      Also, it seems clear to me that FF is about to turn into the Fox News of promoting Romney. Total propoganda from here to Nov, I suppose.

      • armstp

        The absolutely only reason Republicans are against Obama healthcare reforms is because it was Obama’s reforms. If those reforms came from a Republican (actually many did; mandate, Romneycare, etc.), they would be very positive about them.

        After 2-3 years I still have not heard a good argument against Obama healthcare reforms, other than he did not go far enough with a public option or single-payer.

        • Reflection Ephemeral

          The individual mandate was Republican boilerplate for about two decades. http://www.thedailybeast.com/newsweek/2011/02/06/the-justice-will-see-you-now.html

          conservatives aren’t big fans of replacing private industries with government monopolies. So in 1991, a group of conservative academics proposed an alternative: the individual mandate, which says that everyone who can afford health-care insurance has to buy it. That means no free riders, no healthy people waiting until they get sick to buy insurance or stick the rest of us with the costs of their care. … For the next 18 years or so, that’s the role the individual mandate played. It was what Republicans proposed as a smaller-government alternative to the health-care plans favored by liberals. … The legislation became the GOP’s semiofficial response to President Bill Clinton’s health-care bill, and it was eventually co-sponsored by such influential Republicans as Bob Dole, Richard Lugar, Chuck Grassley, and Orrin Hatch. The other major Republican alternative, the Consumer Choice Health Security Act, included Jesse Helms and Trent Lott as cosponsors, and also included an individual mandate. … As recently as June 2009, Grassley was telling Fox News that there was a “bipartisan consensus” in favor of the individual mandate. “That’s individual responsibility,” he said, “and even Republicans believe in individual responsibility.”

          Republicans, of course, universally opposed the ACA with maximalist rhetoric and tactics. David Frum was excommunicated from movement conservatism for opposing the ACA with insufficient venom.

          More precisely, Frum was excommunicated for arguing that Republicans should have talked about policy during the health care reform debate, rather than opting for the emotional projection of chanting about “socialism” and “death panels”. That’s because Republicans don’t care about policy. That’s rather unfortunate, because the reason we care about the government is because it implements policies that affect people’s lives.

          At the end of the day, Republicans just plain don’t care about America.

      • Clayman

        Half of Fox News viewers are the “conservative ignoramus”.

  • Nanotek

    “I fail to see the relevance of this post.”

    FF: promote Mitt Romney 24/7

    FF: denigrate his opponents and critics 24/7

    • Graychin

      This post goes against the narrative that we expect to find here – that we MUST elect a president and a Congress that will repeal Obamneycare, because that repeal is vital to the very survival of our nation.

      Except that when you examine the, you know, FACTS, and ignore the dogma for a while, we find that Obamneycare DOES reduce cost while giving millions access to health care that they don’t presently enjoy.

      And this is bad because… mandates, or socialism, or something. Something…

      Obama… Kenya… Reparationist…. Something…

  • gmat

    Not surprising. It costs less, case by case, for the state to subsidize mandatory insurance than it used to for the state to reimburse hospitals for treating the uninsured.

    It used to be that when an uninsured person walked into an ER, even if he was an obvious candidate for Medicaid (and enrolling in Medicaid was easy), nobody in the hospital would breathe a word about Medicaid to that patient. That’s because the hospital got more money from the Uninsured Patient Reimbursement Fund (or whatever it was called) than it got from Medicaid.

  • valkayec

    Au contraire, Practical Girl, this blog post is extremely relevant: it shows that ACA will bend the cost curve. As a result of these stats, anyone who says they are a fiscal conservative and chooses to return to the previous health care system – the one we’ve had for the last 50 years – is either a liar or a hypocrite; anyone who screams about the deficit and debt and still wants to overturn ACA is ignorant or foolish.

    So, while Frum Forum is making the case for electing Romney, they’ve incidentally made the exact case that Obama and the Dems make for maintaining ACA.

    • PracticalGirl

      You couldn’t be more right, and I also think Bauer incidentally makes the case against Romney or any “Repeal ObamaCare” GOPer for President.

  • Reflection Ephemeral

    The ACA has a series of robust provisions designed to reduce costs: http://www.tnr.com/blog/jonathan-chait/86447/the-affordable-care-act-did-happen

    The Affordable Care Act’s central hope is that Medicare can lead the health-care system to pay for value, cut down on overtreatment, and cut out treatments that simply don’t work. The law develops Accountable Care Organizations, in which Medicare pays one provider to coordinate all of your care successfully, rather than paying many doctors and providers to add to your care no matter the cost or outcome, as is the current practice. It also begins experimenting with bundled payments, in which Medicare pays one lump-sum for all care related to the successful treatment of a condition rather than paying for every piece of care separately. To help these reforms succeed, and to help all doctors make more cost-effective treatment decisions, the law accelerates research on which drugs and treatments are most effective, and creates and funds the Patient-Centered Outcomes Research Institute to disseminate the data. If those initiatives work, they head over to the Independent Payment Advisory Board (IPAB), which can implement cost-controlling reforms across Medicare without congressional approval — an effort to make continuous reform the default for Medicare, even if Congress is gridlocked or focused on other matters. And if they don’t work, then it’s up to the Center for Medicare and Medicaid Innovation, a funded body that will be continually testing payment and practice reforms … The law also goes after bad and wasted care … Keep in mind that the Congressional Budget Office made the very conservative decision not to assign savings to these measures, on the assumption that since they had never been tried before, there was no way of measuring how well they would work, so it gave them no financial savings value. And the Affordable Care Act also included a limit on the tax deduction for expensive health insurance, a powerful cost-saving tool that the CBO did score.

    Mitt Romney says he wants to repeal the ACA. So, if you care about health care costs– the main cause of our long-term deficit problem– be sure not to vote for him for president.

  • armstp

    It has long been know that the MA healthcare reforms only added about 1% to the state budget. However, MA reforms put in place a template which has helped the State begin to push costs down. Many of the cost improvements have come since Romney was in office, but we can give him credit for putting in place the basic structure of reform. We can also given him credit for putting in place near universal coverage in the State. Things to actually be proud of.

    In terms of the federal ACA healthcare reforms, many have said for years now that those reforms will do exactly the same. The framework has been put in place through the ACA to eventually begin to put downward pressure on costs. This is in additional to universal coverage.

  • balconesfault

    So the curve deflected downward in Mass after Romneycare was passed …

    And upward in Texas after tort reform was passed.

    Can we just start assuming that everything the GOP says is wrong yet?

    • dante

      Can we just start assuming that everything the GOP says is wrong yet?

      Way ahead of you, buddy…

  • Stan

    If you make an internet search for “It’s the prices, stupid” you’ll be directed to articles based on a 2004 study in the journal Health Affairs that explains why American health care is so much more expensive than in Canada and western Europe. It’s not that Americans get more health care – it’s the prices. Medical procedures, hospitalization, and outpatient care cost less in in other OECD countries because the organizations that pay for health care in these countries have more bargaining power than our insurance companies. Within the US medical care for former and active duty members of the military costs less than Medicare and Medicaid, which pay lower prices than private insurance, which in turn costs less than paying for medical care out of pocket. It’s not hard to understand. In my community we have a Walmart, a few regional grocery chains, and several family owned grocery stores. I’d be willing to bet that Walmart pays less to its wholesalers than the regional chains and the regional chains pay less than the mom and pop stores. It’s called monopsony, or, if you hail from Chicago, clout.

    Obviously, every presidential candidate with halfway decent economic advisors knows that “ObamaCare” will save money. Romney certainly knows it, and so does Gingrich. But the Republicans deny it or avoid the subject, and so do the news outlets they control. It’s scandalous, but that’s life in America.

    • balconesfault

      Medical procedures, hospitalization, and outpatient care cost less in in other OECD countries because the organizations that pay for health care in these countries have more bargaining power than our insurance companies.

      Not only that – but let’s face it – the insurance industry actually has an incentive to encourage the costs of medical coverage to increase over time.

      Why? Because they take a percentage of the costs of coverage. In a macro sense, the value of that percentage goes up industry-wide as the cost of coverage goes up.

      • wileedog

        “Not only that – but let’s face it – the insurance industry actually has an incentive to encourage the costs of medical coverage to increase over time.

        Why? Because they take a percentage of the costs of coverage. In a macro sense, the value of that percentage goes up industry-wide as the cost of coverage goes up.”

        Not necessarily. Higher costs mean higher premiums without higher profit margins. All higher costs and premiums do is drive more people out of the market for health insurance, or into lesser coverage they can afford. The ACA may remedy that some, but again if costs get too high people will simply elect to pay the government fine and forgo health insurance.

        The big HC companies are spending considerable dollars in consumer driven health care, provider transparency and other prevention methods to help keep costs down. They wouldn’t be doing that if higher costs meant more $$$.

  • Traveler

    What ever happened to Waterloo? That was the reason I paid attention to this site in the first place. Poor DF is now floundering around speaking out of both sides of his mouth just like his favorite candidate. Pity. For such an incisive guy, to be so disingenuous is disappointing, to put it mildly.

    • balconesfault

      To a certain extent, FrumForum being willing to publish an article which suggests that socializing healthcare costs is an effective solution puts it way out of line with the rest of the right wing media. They seem to take the wrong takeaway message – but still put data out there that the rest of the GOP tries to deny.

  • icarusr

    I think, with due respect all the commenters have it wrong.

    Frum is on the record as saying that Romney is not stupid, just cynical, and this character trait, more than anything, accounts for the counterintuitive and stupid positions and arguments Romney adopts in the primaries. This cycnism, incidentally, is there because, presumably, the Republican Party is composed by either stupid or cynical people: those who don’t understand that Romney lies, and those who do and don’t give a sh*t.

    Starting from this basic premise, the Bauer article makes sense. Of course Romney knows that the only way to contain health care costs is to control them centrally. And Of course the evidence – you know, the facts – actually bear this out. You don’t need Massachesetts, by the way, as evidence; the experience of every other country in the industrialised world bears this out – and the fact that Bauer has now found the MA religion speaks to the general mypoia of conservative commentariat than anything.

    So yes, Romneycare contains costs. “Socialised” medicine contains costs. Obamacare will contain costs. And so, if cost containment is the object (let us give the Republicans that), then the ACA is the way to go. But Romney, the admitted cynic, can’t quite say that. He has to pretend that Obama is the apologist Kenyan anti-American socialist so that he, the White Knight, can rescue America and, well, continue Obama’s policies, because those are the only policies that make sense in any event.

    The post, therefore, is yet another demonstration of the utter cynicism of Republicanism and its enablers. Nothing new; and positively helpful in building the case for, er, four more years of the Kenyan socialist.

    • valkayec

      Icarusr, there’s one thing you miss in your argument. By and large, the Republican base and thus it’s politicians don’t care about what other countries do. In other words, results from elsewhere in the world don’t really matter. American policies have to be strictly American concepts because we can’t learn or take anything from another country. Why that form of mental isolationism, I don’t know. Maybe that American Exceptionalism thing?

      • icarusr

        Valk, as I noted, “the fact that Bauer has now found the MA religion speaks to the general mypoia of conservative commentariat than anything.”

        As I was saying, if they were really interested in cost-containment, you don’t need MA; there is a wealth of evidence out there. If you go after the MA evidence, it has nothing to go with cost containment as such; it is simply a way of trying to rehabilitate Romney without talking about Obama.

      • sweatyb

        In other words, results from elsewhere in the world don’t really matter.

        Most of them don’t care what Massachusetts does either.

        I think we can safely say that the only facts that the Republicans believe in are the ones that confirm their gut feeling. And since their gut feelings change all the time, so too must the facts.

        • PracticalGirl

          Should I bolt every time I get that feeling in my gut when I meet someone new? Well, I’ve been listening to my gut since I was 14 years old, and frankly speaking, I’ve come to the conclusion that my guts have sh*t for brains.
          from movie “High Fidelity”

  • think4yourself

    3 cheers for Romney for being first in the nation to simoultaneously lower the cost curve and provide almost universal coverage for citizens he was responsible for.

    Too bad he doesn’t want us to cheer about that.

    It will be really interesting assuming he wins the nomination, how will he run? He’s spent 6 years as a GOP candidate running from his only significant achievement, how does he deal with that when trying to run to the center?

  • dante

    I’ve said it before, and I’ll say it again: I’d vote for Romney v.2002 in a HEARTBEAT. Romney v.2008 was a lot different, and Romney v.2012 is unrecognizable when viewing the original.

    Sorry, I’m not going to vote for the “least bad” Republican, or for someone who has recanted (and begged forgiveness for) every single positive position that he took years ago.

    • LFC

      Ditto. I felt the same way about Dole in 1996 when his campaign rhetoric didn’t match his record. Mitt is Dole on massive doses of steroids, bitten by a radioactive spider, and dipped in toxic waste. To paraphrase Two and a Half Men, he’s the Super Duper Uber Pander Bear! He is completely untrustworthy.

      I’ll be voting for Obama again. The Dems are now the party of sanity and fiscal conservatism (if not always or even often of strength, confidence, and competence) and the Repubs are just bats*** crazy.

  • Holmes

    Have you seen Frum on television lately? He’s completely crazed in his unqualified support for Romney, so much so that even his interviewers are now responding to him with a mix of curiosity and contempt … as if to say, how much is he paying you?

    Some weeks ago, one of our posters, Emma, had theorized that what drives Frum is a palpable need to be invited to White House functions, to be on the inside. Nothing else matters. Many of our posters, including me, thought Emma was overstating the case. Now I’m not so sure.

    • Xunzi Washington

      Emma is entirely correct. The strategy is simple. Here are the options:

      1. Support Romney, the only shot at the WH – Frum is back in the inner sanctum.
      2. Don’t support Romney, which leaves him with no route back to the inner sanctum at all, and a permanent gig running Frum Forum.

      Hmmm…which do you think the career tribalist picks?

      • Graychin

        In addition to unqualified support for Romney, Mr. Frum also toes the Republican line with respect to disdain for the administration of the Hated Kenyan. (Although he never quite articulates WHY we shouldn’t re-elect the Hated Kenyan, who governs a lot like Ronald Reagan without the raw meat of “welfare queen” rhetoric.)

        Being on the inside may be one of Mr. Frum’s motivations, but dollars and cents are also involved.

        If Mr. Frum didn’t get behind SOME Republican candidate and the support him in the general election – no matter how odious that candidate happens to be – then Mr. Frum would lose his livelihood as a Professional Republican and be drummed out of the Corps.

  • nuser

    Guaranteed if Willard flipped flopped on Israel, Frum would drop him, like a hot potato!

  • TerryF98

    Romney is done for. The dogs have struck back!

    About time the dog abuser met his comeuppance.

  • M.Hat

    I’m pretty sure Romney will win the nomination if the ultra-conservatives will only come to their senses.

    When they scream: “Anyone but Romney!”, someone in the distance joins their chorus of shouts, and he’s shouting it louder than anyone there…

    Who is it? It’s President Obama.

    And every night the President keels by his bedside to pray, just as a million or more ultra-conservatives are doing, and he is praying for the same thing they are…

    ‘Please Lord,”he murmurs, “grant your darling ultra-conservatives their wish. Let them have their way. Let it be anyone but Romney. Please. Pretty please. Pretty please with sugar on it.”

    • balconesfault

      You think? Romney brings his own special peril to the GOP – when only 25% of your party has any real enthusiasm for your nominee, you risk your partisans staying away from the polls in droves. McCain solved this by nominating Palin as Veep to bring out the hard right. Who does Romney nominate as VP who might give Repubs something to vote for … instead of just hoping they’ll come out to vote against the Kenyan?

      • M.Hat

        If they stay home, they’re voting for Obama. I doubt they would make that choice.

        I don’t think Romney will chose a VP running mate to please ultra-conservatives. Again, as I just said, he’ll already have their vote if he’s the Republican nominee. No, if he wants to win the election, he’ll choose a running mate who will also appeal to the majority of Independents. It will be a very high-profile, well-respected person whom most people will agree would make a good president and hopefully, in the future, a Republican successor to Romney.

  • jakester

    Controlling costs via government fiat is a short term solution but a long term disaster. We need to get to the root of why the costs were rising in the first place and try to implement new methods and technology that can lower cost while bringing better medicine

  • chrisconover

    As a practical matter, it is quite difficult to distinguish the effects of the recession from the effects of “Romneycare” in the 2007-2009 period. So in general, Fred Bauer gives more credit to Romneycare than I myself would.

    That said, in assessing gubernatorial performance, it seems a little odd to ignore the fact that health spending was going up MUCH faster than the national average while Governor Romney was in office but then give him great credit for the purported slowdown in spending after he left office. If the argument is that governors really can’t do that much about health spending anyway, then it renders all these cross-state comparisons moot. One can’t (or shouldn’t) cherry-pick the data to highlight a comparison that looks favorable and ignore ones that are not.

    The best analogy I can give is this. Imagine someone who is very obese getting a diet pill. Prior to taking the pill, this individual’s weight relative to the national average was rising 27% every 2 years. After the pill, their weight is still rising relative to the national average, but “only” 5% faster. The individual taking the diet pill is still gaining weight faster than those who don’t. Would you take that pill?

    Until Mr. Bauer can explain what it is about Massachusetts health care that should lead us to “expect” 27% faster-than-average growth in its spending, pointing to only 5% faster-than-average growth seems problematic. Especially since the one thing we know for certain happened between 2004-2006 and 2007-2009: Governor Romney left office! If we give Governor Romney “credit” for the ballooning of MA health spending during his administration, then his apparent ability to lower this excess to “only” 5% seems far less impressive.

  • mannie

    If Romney was a man of more integrity he would be proud of what he did in Mass, instead of trying to wish it away.

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