Why the Mandate Fight Won’t Sink Romney

December 16th, 2010 at 2:07 pm | 13 Comments |

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Mitt Romney’s support for Judge Henry Hudson’s ruling against the Obamacare insurance mandate has led to predictable howls over Romney’s previous efforts to create a statewide healthcare insurance plan in Massachusetts (which also featured a mandate). Is Romney simply a flip-flopper and a political opportunist?

Actually, Romney is being quite consistent with his previous comments on this issue.  For Romney, insurance is an issue for the state and not the federal government (as is the case with Obamacare).

Here is his statement on the issue from a presidential primary debate back in 2007:

For Democrats, they want to have government take it over. The right answer is to get all of our citizens insured so they don’t have to worry about losing their insurance if they change jobs or have a preexisting condition. But Hillary says the federal government’s going to tell you what kind of insurance, and it’s all government insurance. And I say no, let the states create their own plans, and instead of government insurance, [have] private, market-based insurance.

Romney’s position on Judge Hudson’s ruling is altogether in line with his previous views.

The mandate may become the mechanism for the legal overturning of Obamacare but from a healthcare system perspective it’s not the central problem. The reason Obamacare should be replaced is its inability to confront the problem over the cost of care. The purpose of the mandate is simply to force the uninsured to help fund the entire insurance plan. Without that, covering the uninsured will require a specific tax, and a pretty hefty one at that.

Of course, health insurance really does not function like insurance at all. Insurance is designed to cover rare events that are very costly or will have profound economic effect. Life insurance, flood insurance, collision insurance are typical examples of the proper uses of insurance. Using insurance to cover frequently occurring activities like visits to primary care physicians is one of the reasons insurance is so expensive. The success of the Indiana health plan created by Governor Mitch Daniels is mostly attributable to a much more rational insurance model that focuses on the proper structure for insurance.

As detailed in an article in Health Affairs:

Following the HSA {Health Savings Account} model, the Personal Wellness and Responsibility (POWER) Account is used to fund the deductible. Moving away from premiums and copays that are typically too low to incentivize collection by providers, HIP requires individuals to make mandatory monthly contributions – ranging from 2 percent to 5 percent of income, up to $92/month — to their POWER Account. To prevent participants from obtaining temporary coverage, penalties are stiff for payment lapses: Participants have up to 60 days to make their contribution and are then terminated and cannot reapply for twelve months if a payment is missed.

After their monthly contribution, participants have no other cost sharing requirement except for copays for non-emergency usage of the emergency room. While contributions are higher than traditional Medicaid premiums, participants have total control over how these dollars are spent. Members receive monthly statements detailing the use of the accounts and can apply year-end balances to offset future required contributions only if they have received requisite preventive services. This transforms Medicaid beneficiaries into consumers with an incentive to demand price transparency, make decisions about how to obtain the best value for their purchase, as well as to seek necessary preventive services and maintain a healthy lifestyle.

This model gives patients a real incentive to think about the economic consequences of their seeking healthcare. However, until physicians as well as patients have an economic interest to consider the cost of care in the utilization of health services, the system will remain on an unsustainable trajectory. Obamacare does not allow this dynamic except in a few demonstration projects.

No doubt Romney will have plenty of opportunities to lay out his vision for healthcare in the upcoming presidential election season. He can defend the consistency of his position vis a vis the Obamacare mandate. He will though have to explain how he plans to control the costs of care in our national healthcare system.

Recent Posts by Stanley Goldfarb



13 Comments so far ↓

  • armstp

    “reason Obamacare should be replaced is its inability to confront the problem over the cost of care. ”

    If that is what Romney believes than that is truly rich coming from a guy who put zero cost controls or cost emphasis in his own mandated plan for MASS. In fact, two things that the federal plan has that are not in Romney’s MASS plan are that it is paid for and there are plenty of things in there that will help drive costs down.

  • mlindroo

    Sorry Stanley, but this is a very weak excuse indeed. Here is what Romney said about his own plan in Massachusetts, while right wingers still supported the idea(!)

    “Because right now _in this country_ [emphasis added], people that don’t have health insurance go to the hospital if they get a serious illness, and they get treated for free by government. My plan says no, they can’t do that. No more free riders. People have to take personal responsibility. I consider it a conservative plan.”

    But Obama’s ACA adheres to the same conservative principles! No more free riders!
    So the big, fundamental difference is supposed to be that state governments can infringe upon personal liberty “in this country” but the federal government cannot? Please! Does Romney’s track record really suggest he cares deeply about federalism, as opposed to telling voters that they want to hear?

    The answer should be obvious to anybody who is not named Kathryn Jean Lopez.

    MARCU$

  • politicalfan

    “In fact, two things that the federal plan has that are not in Romney’s MASS plan are that it is paid for and there are plenty of things in there that will help drive costs down.”

    Good point armstp, don’t agree with the paid for part though. Why can’t we “replace” stronger and better pieces to help cost controls. Healthcare is an issue anyone who does not think it is read your next explanation of benefits. Doctors who want to get in the field need to have beeter support as well. We don’t expect (and we can’t) years of schooling for our politicians, why should they get the short end of the stick for wanting to work in a helping field?

  • WaStateUrbanGOPer

    The fact that Romney is going to be in the position of having the “explain” his health care record, whatever its pluses and minuses, is bad news for him. Candidates who get tied up in having to “explain” anything eventually become perceived as pedantic and hence unlikeable.

    As Goldfarb points out, Romney’s record on healthcare is far more complex and nuanced than the world of political journalism has made it out to be. But this won’t make any difference with the GOP base, who are, alas, not exactly suited to complexity and nuanced policy discussions.

  • armstp

    Romney should just say that his healthcare bill was a very good one and is working very well, as it is, in MASS. Step up and be a man and take credit for the success of his own bill. He should not be back-peddling whatsoever on his decisions on healthcare and the success of his own plan. Makes no sense.

  • sinz54

    armstp: there are plenty of things in there that will help drive costs down.
    No there isn’t.

    None of those little experimental unproven ideas is going to make a dent in the retirement of the baby-boomers and their huge health care costs.

  • sinz54

    armstp: Romney should just say that his healthcare bill was a very good one and is working very well, as it is, in MASS.
    You were right the first time: It doesn’t control costs.

    I live in MA, remember?

    My premiums have risen 60% in the last three years.

    The reaction from Governor Patrick? Price controls. He is just asking for legislative authority to just ban future premium increases.

    That is the same sort of nonsense that chased State Farm out of MA when it was applied to auto insurance.

    See, liberals don’t care about controlling costs. They view universal health care as a human right, cost be damned.

    I don’t remember the last time liberals demanded cost containment of any entitlement program. Never.

  • mikewaz

    sinz54:

    “None of those little experimental unproven ideas is going to make a dent in the retirement of the baby-boomers and their huge health care costs.”

    Bundling payments won’t do anything? Paying doctors based on the health outcomes of their patients won’t do anything? The Independent Payment Advisory Board, whose stated goal is reducing the growth of Medicare’s costs, won’t do anything? I can agree that they may not have a tremendous effect on cost containment, but I haven’t heard an argument for why these programs will not have any effect on health care inflation or may actually make health care inflation worse.

    “The reaction from Governor Patrick? Price controls. He is just asking for legislative authority to just ban future premium increases. See, liberals don’t care about controlling costs. They view universal health care as a human right, cost be damned. I don’t remember the last time liberals demanded cost containment of any entitlement program. Never.”

    I’m not a crazy lunatic liberal by any stretch, but I definitely lean towards efficient regulation as a viable tool. I want better cost controls in the health care system (and the plan that you said Gov. Patrick supports is a wretched attempt at controlling costs). I think it’s awful that there were so few cost controls in ACA. It’s moronic that we have a perfectly good program in Maryland, the Health Services Cost Review Commission, that has worked phenomenally for those with private insurance, Medicare, Medicaid, and even those with no insurance at controlling inflation and keeping health care markup at a minimum, and yet virtually nobody knows that this system even exists in this country! Why doesn’t the federal government tell the states to establish their own version of that commission and make Medicaid funds contingent on establishing it?

  • Joe In NH

    Regarding 2012 Romney likely would not have a problem with his record on healthcare in a general election but it is going to bite him over and over again in the primaries.

    Conservatives should be pressing for an expansion of the Maryland program mikewaz mentions. As I understand this program, hospitals can only charge one price for a procedure and no more crazy things like a charge of $2000 and payment of $900 by company A and $1200 by company B and the poor sap without insurance being chased for the full amount. Conservatives should back such a program because it will make it possible to purchase insurance out of state which is one of the main points in the GOP’s position on healthcare. The roadblock to out of state purchasing is not the license requirements in each state but the fact that it is uneconomical for an insurance company to go through negotiating rates throughout a state without a critical mass of insureds.

  • armstp

    Sinz54,

    As MikeWaz mentions above there are plenty of things in the healthcare bill that will impact cost. Many think the panel alone could help to have a dramatic impact on costs. It is the first time we have ever had anything like that at the federal level.

    As a more general point government does a far better job at managing healthcare costs than the private sector. You only have to look at every other industrialized country on the planet. In addition, I will point you to a new S&P healthcare report that just came out this week. It measures heatlhcare costs increases over the last year in both the private sector and with Medicare. It says that the private sector costs (as they have been for the last 10 years) rose about twice as much as Medicare costs in the last year.

    “The average per capita cost of healthcare services covered by commercial insurance and Medicare rose 7.08 percent over the past 12 months, according to data released this week by Standard & Poor’s.

    David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said claim costs associated with hospital and professional services for patients covered under commercial health plans rose 8.54 percent over the last year, as measured by the S&P Healthcare Economic Commercial Index.

    Medicare claim costs for services rendered by hospitals and physicians rose by a more modest 4.68 percent, as depicted by the S&P Healthcare Economic Medicare Index. The two indices also saw some growth deceleration versus their August reports of +8.64 percent and +5.07 percent, respectively.”

    Did you get that? Commercial plans rose 8.54% versus Medicare claim costs at 4.68%, so healthcare costs in the private sector are rising twice as fast as they are in the government run Medicare plan (and Medicare generally has the higher cost senior citizens).

    http://www.healthcarefinancenews.com/news/sp-healthcare-costs-continue-rise-slower-pace

    http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldocumentfile&blobtable=SPComSecureDocument&blobheadervalue2=inline%3B+filename%3Ddownload.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1245277182753&blobheadervalue3=abinary%3B+charset%3DUTF-8&blobnocache=true

    So your anti-government rant is complete bullshit.

    The only real solution to healthcare costs in this country is single-payer. We will eventually get there if these insurance companies continue to raise prices as they are doing. I think your 60% increase in your premium in MASS is a very good reason to move to single-payer.

  • mikewaz

    Joe in NH, you’re pretty spot-on with the description of the Maryland commission. They establish a price for every single service you can possibly get at any acute care hospital (with variations for prevailing wages, amount of charity care given, and number of very sick patients treated), and all hospitals and insurance plans are bound to use those prices no matter how a person is paying for the service. Honestly, I didn’t even think about it from the aspect of facilitating out-of-state insurance sales and use, but you’re definitely right that it is a big bonus. Along the same lines, without the need to negotiate a network, someone who wants to start a new insurance company needs a lot less capital and legwork to get off the ground. This could potentially bring a lot more options to the insurance market; isn’t that what free market people want?

  • armstp

    mikewaz,

    That Maryland commission, in terms of fixing prices, is exactly what they do in Canada. Every year the provincial insurance negotiates with the doctors and the hospitals any changes to prices, but they are then fixed and can be referenced in a phone book size book for ever single service that is covered. The system works out pretty well and brings some level of sanity to healthcare cost controls.

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