Mitt Romney's Health Care Model

Mitt Romney's Health Care Model
September 28, 2011

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)

The big news yesterday on the health care policy front is that the 11th Circuit case against the individual mandate is headed to the Supreme Court before the 2012 election, not after. This means a decision about the constitutionality of the individual mandate is likely to come sooner than expected, which is good for just about everyone across the economy, where uncertainty continues to hinder growth and hiring on the part of firms. Everyone, that is, except perhaps former Massachusetts Gov. Mitt Romney.

Consider the response from Romney during the most recent Republican debate in response to a question from Chris Wallace:

“Let me tell you this about our system in Massachusetts: 92 percent of our people were insured before we put our plan in place. Nothing’s changed for them. The system is the same. They have private market-based insurance. We had 8 percent of our people that weren’t insured. And so what we did is we said let’s find a way to get them insurance, again, market-based private insurance. We didn’t come up with some new government insurance plan.”

There are a number of factual problems regarding the latter part of Romney's comments, and his description of the way people get that insurance under his plan – namely, the overwhelming number of those newly covered are subsidized by other taxpayers, and are on Medicaid, not private market-based insurance. This is directly the opposite of Romney’s case for his plan in 2007 and 2008, where he explicitly framed the matter not as a Massachusetts-specific solution, but as he said on the day he signed the bill into law, “solving a problem which we face as a nation.” He’s continued to maintain his approach is a “Republican way to reform the marketplace” which ensured personal responsibility, as opposed to “expecting someone else to pay” for your own care.

This is ironic, given that the effect of his plan has been to shift health care costs for the newly covered (reducing the number of uninsured from a little over 9% to 4.4%) to the taxpayers. Of the 412,000 people added to the insurance rolls in Massachusetts since 2006, 47% are on Medicaid, and only 7,000 of them have coverage not subsidized by other taxpayers.

The same subsidy-driven flaw is at the heart of Obama’s federal law and Romney’s Massachusetts law – a profound disincentive to increase your self-sufficiency, to work more and to earn more, given that you stand to lose out on significant taxpayer funded subsidies:

“For example, a family earning $33,000 pays no premium at all under Commonwealth Care. But if their pay goes to $46,000, they’re obligated to contribute about $2,400. That’s an effective tax rate of 18.5% on that $13,000 raise.”

As you can tell, Romney’s policy is inherently redistributive, disincentivizing success and placing the overwhelming burden for the newly insured onto other taxpayers while doing little or nothing to leverage market forces to drive competitive costs. As Cato’s Michael Tanner pointed out in that piece: “It’s a situation where the entire escalation in costs is paid by the government, not the people receiving the care.”

But let’s put all that aside, because that’s not really the line that irks me from Romney’s statement. It’s the “nothing’s changed for them” line, which evokes so much of the misplaced optimism on Obama’s part that his national reform wouldn’t change things for the majority of Americans who like their insurance plans. Because things have changed for the 92% of insured people in Massachusetts in the five years since Romney’s reform passed. Namely: everything costs more.

Since Romney’s law went into effect, the cost of Massachusetts premiums have increased dramatically, at a much faster rate than the rest of the country. Today, the health insurance premium cost for the average family in Massachusetts is the highest in the nation. It is double the national average.

This gets us back to SCOTUS and the individual mandate which is the focus of the 11th Circuit case. When Romney originally passed his reform, he maintained that it – and the individual mandate within it – would become in time a model for the country. His first line in the 2010 edition of his book on this point was thus consistent with his past remarks of his solutions in Massachusetts becoming the basis for a nationwide approach. While he has expressed opposition to Obama's health care law, Romney's attitude toward the federal individual mandate. When Romney was asked on his book tour in 2010 about whether he’d repeal the individual mandate, he apparently said “No.” No journalist has apparently followed up on this point since he officially began his 2012 campaign, which is a shame - it seems like a rather relevant question. But the other evidence we have all indicates Romney's continued support for his approach to reform. Here’s an interview he gave while on that book tour:

NEWSWEEK: Back in February 2007, you said you hoped the Massachusetts plan would “become a model for the nation.” Would you agree that it has?

ROMNEY: I don’t … You’re going to have to get that quote. That’s not exactly accurate, I don’t believe.

NEWSWEEK: I can tell you exactly what it says: “I’m proud of what we’ve done. If Massachusetts succeeds in implementing it, then that will be a model for the nation.”

ROMNEY: It is a model for the states to be able to learn from. During the campaign, I was asked if I was proposing that what I did in Massachusetts I would do for the nation. And the answer was absolutely not. Our plan is a state plan. It is a model for other states—if you will, the nation—it is a model for them to look at what we’ve accomplished and to better it or to create their own plans.

One wonders what elements of this “model for other states – if you will, the nation” Romney is referring to. Is it the redistribution of costs? Is it the costly subsidies? Is it the skyrocketing premiums? Is it the price controls? Is it the individual mandate? What elements, as president, would he emphasize?

If the activity of Romney’s campaign is any indication, it seems unlikely that Romney’s view has shifted on any of these points. Just last week, they took time to bash yet another health care study illustrating how his reforms in Massachusetts raised premium costs and cost the state jobs, the second negative study in as many weeks. Rather than laying out Romney’s plan for health reform as president, they give all the indications of still defending his Massachusetts' policies - and in the absence of some new approach, we have to assume they would remain his approach in a hypothetical Romney White House.

In debates, Romney always cites his intention to grant waivers to all the states from Obamacare upon assuming the presidency. But waivers are temporary, and do nothing to solve the long term problems of health care. In fact, given that Romney is essentially using the waivers as a substitute for proposing an actual reform, should SCOTUS rule against the individual mandate but leave the balance of Obamacare intact (as I and many legal scholars expect), his utility in namechecking waivers will quickly dissipate.

What really matters – and this is true of all the candidates – is what Romney would do next to fix the system. Whether he intended his plan in Massachusetts as a model for the nation or not, it is what we have to go on when it comes to evaluating his model for reform as president. And that makes for a very disconcerting model.

Benjamin Domenech

Benjamin Domenech (bdomenech@heartland.org) is a senior fellow at The Heartland Institute. Domenech... (read full bio)