Monday, January 28, 2008

A Detailed Analysis of the Romney Health Care Reform Plan

A Detailed Analysis of the 2007 Romney Health Care Reform Plan

See an analysis of the 2012 Romney Health plan Here: A Detailed Analysis of Mitt Romney’s Health Care Reform Plan

This following is a repost from October 22, 2007.

Mitt Romney
puts his faith in a reinvigorated health care market—not unlike his Republican rivals. But Romney puts a bit of a different spin on that by focusing on giving states the incentives to craft the solution that works best for them.

The governor that signed the Massachusetts health reform law––that forms the basis of most Democratic presidential candidates health care plans including Clinton, Obama, and Edwards—distances himself from those policies. But he also he says he is “proud" of his role in that legislation.

Romney seems to rationalize being so closely involved in a plan that served as the example for Hillary Clinton’s health plan with his more recent “federalist” (states' rights) approach to health care by saying that the states should be encouraged and assisted in doing what works for them. So, if Massachusetts wants a Hillary Clinton-style plan, fine. If another state wants a more purely conservative approach that looks more like this Romney plan, that is fine too.

Frankly, I find his, “I’m OK if you’re OK,” position a little frustrating and said so in a recent post: Mitt Romney's Health Plan--A Foot in Each Canoe.

But, Romney is consistent with the Republican playbook on health reform by calling for a more robust private health insurance market, making changes to the tax treatment of insurance, and promoting state-based innovation.

Romney sees the federal government’s role as facilitating, not mandating, state reform so the states can be “laboratories of innovation.”

Let’s look at the four key elements of his plan as he has described them in the, “The Romney Vision”—a slide in a health care PowerPoint presentation on his website:

1. Make Health Insurance Affordable
  • State market reform
  • Full Tax deductibility
  • Medical liability reform
  • Technology and free market dynamics
He would make insurance affordable by giving the states incentives to deregulate their individual health insurance systems. He sees their many benefit mandates and regulations as adding too much wasted cost to the system.

He is right that many states have loaded up health insurance policies with benefit mandates. He needs to tell us which benefit mandates he considers frivolous and unnecessary in order to identify the potential savings. Would he have states cut requirements for regular mammograms from policies? Saying there are too many mandates is one thing but we should see the list of mandates he considers unnecessary.

It has been my experience that this is one that sounds good until you ask the politician to give you that list and then it shrinks considerably--as does the savings forecast.

The Kaiser Family Foundation summary of his proposal says that he has identified, "benefit mandates, guarantee issue, community rating, direct access to specialists and other features as over-regulation contributing to high cost insurance."

And what about medical underwriting rules, coverage of pre-existing conditions, and age rating? How would he expect the states to make the individual market more robust and cover everyone no matter their age or medical condition?

I have spent 35 years in the health insurance business and I am struggling to understand just how you throw the sick and the older to the market wolves and magically make the market more able to cover everyone? Given his "federalist" view, perhaps Romney expects the states to come up with innovative ways to cover the people the insurance underwriters don't want. But there is no free lunch--you end up with the old and the sick in a state pool and the young and healthy being insured by the private sector. How is that a better system?

It is ironic that on the one hand he says we need to give the states more flexibility toward making the health care system work but then says the states have gummed up the insurance system with too much regulation and the feds need to give them incentives to make it better.

He calls for “full tax deductibility” of health insurance rightly pointing out that individuals are at a disadvantage here. But just how would he get everyone covered with limited tax assistance? In Massachusetts, a family of three needs to be able to come up with $7,000 to $9,000 for a family health insurance policy—and that has a $2,000 per person deductible. If the family is in a 20% tax bracket, they still have to come up with the other 80%.

Governor Romney needs to be more specific on just how families earning more than the poverty level but less than a comfortable living, say between $25,000 a year and $75,000 a year, can afford the cost of health insurance, and if they are sick or older, how they can get a policy.

How many people earning even $75,000 a year have an extra $5,000, or more, in the budget for health insurance?

Republicans have been calling for medical liability reform (capping damages) since Lincoln was president with no success. As long as there are 60 Democrats in the Senate it won’t happen.

Governor Romney points to technology as a means to bring costs down—as do all of the other candidates, Republican and Democratic. But the market has been concentrating on this for years and only blunted health care costs. Just how will Romney force greater progress?

2. Provide Access to Quality Health Insurance for Every American
  • Affordable policies for middle-income Americans
  • Premium assistance to help low-income uninsured afford private health insurance.
Presumably, by reinvigorating the individual health insurance market he would make health insurance more affordable for middle-income Americans. Just as in the last section, he needs to tell us how he will do that. If he stripped every benefit mandate out of every state’s health insurance policies, he might decrease the cost 10% to 30%--but he would also strip out a lot of benefits. What does he anticipate the states will have to do here, will everyone, no matter their age or health, be covered for an affordable price?

Romney calls for premium assistance for those with a low-income. He expects the states to be more innovative in using block-grants of existing federal money (presumably SCHIP and Medicaid) to cover more people. He argues that there aren't 45 million uninsured but rather 12 to 19 million and that there is no need for more spending or taxes. But in his own state of Massachusetts, that has federal approval to use its federal money in more innovative ways, the system is coming up way short in being able to assist those doing better than the really poor but not well enough to be able to afford the cost of a policy--for example that family of three making $50,000 a year who is expected to pay all of the $7,000 to $9,000 for a policy with a $2,000 deductible.

3. Portability: End Risk of Losing Insurance
  • Develop and grow individual market
  • Premium assistance to help low-income uninsured afford private health insurance
Once again, just what changes is he suggesting for the individual health insurance market? The market is not currently able to cover all of the people that a Romney plan would send its way. Today, you have to pass medical underwriting, not have a serious pre-existing medical condition, and be subject to age-rating which makes policies relatively cheap for the young and expensive for the old.

If he expects states to dramatically cuts benefit mandates and turns the market loose, why won’t it gravitate in the direction that forced the creation of all of these state rules in the first place? On day one, there were no state regulators. They showed up when abuses began.

Presumably he expects the states to rejigger existing funds in innovative ways to come up with the money to be able to help low-income consumers buy health insurance. But, this is where Massachusetts is struggling today and California is bogged down in trying to figure out how to pay for a new health insurance bill. The experience in both of these states tells us that there simply isn’t enough money to create adequate subsidies from existing sources--state and federal.

In Massachusetts, the subsidies stop at 300% of poverty—just under $50,000 for a family of three. That family is expected to buy a policy that costs $7,000 to $9,000—with no support. With a Romney tax deduction, they might offset 20% of that cost. How does Governor Romney expect the states to be innovative in closing that gap? What does Romney expect other states do that he didn't do in Massachusetts?

4. Reduce Growth of U.S. Healthcare Spending
  • Full Tax Deductibility
  • State Insurance market reform
  • Medical liability reform
  • Everyone in the system
We keep seeing the same short list of policy bullets under each Romney heading; medical liability reform, state insurance market reform, and tax deductibility.

The same comments apply.

His final point is that he would have everyone in the system--but he wouldn’t spend more money believing there is enough already in the SCHIP and Medicaid program that could be more creatively spent.

He argues that by giving the states greater flexibility they will innovate--his "federalist approach to health care reform. But then he says the states have over-regulated the individual health insurance system and the feds need to straighten them out by giving states incentives to turn the carriers loose in a free market system.

Is this “a foot in each canoe” once again?

Additional post: Romney Says There Are Already "Pots of Money" in the States to Pay For Health Care Reform---Where?
Earlier post: Romney Wants to Reform State Health Insurance Regulation--Just What Does He Mean by That?


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