Sunday, October 18, 2009

The Continuing Debate Over "Romneycare"

As everyone following healthcare issues knows, Massachusetts enacted a health insurance plan in 2006, under the leadership of then-governor Mitt Romney. Today, 96 percent of Bay Staters are covered.

But that’s not the end of the story. As Los Angeles Times writers James Oliphant and Kim Geiger related on October 17, the fate of “Commonwealth Care” is tied to even larger issues, most obviously the current healthcare debate in Washington DC--and also the ideological contours of the 2012 election.

As the Times reports from Boston:

The state's system, like the proposals moving toward votes in the House and Senate, focused on three goals: making medical insurance almost universal, fostering competition through a regulated insurance exchange, and helping low-income workers pay for coverage.

OK, so is that proto-national plan working out in Massachusetts? Oliphant and Geiger do not paint a positive picture of Commonwealth Care in action these past three years:

But insurance premiums for most residents are going up, not down. Many middle-class people who had insurance before the overhaul see little change -- except that they're spending more. They're seeing little or no difference in the quality of their care

The Times adds this killer quote from a Democrat in the state legislature:

"What we did was health insurance reform, not healthcare reform," said Massachusetts state Sen. James Eldridge, a Democrat who regrets having voted for the bill.

For what it’s worth, the distinction between “health insurance reform” and “healthcare reform” is a favorite distinction here at SMS. We think that healthcare should be “reformed” by accelerating the search for cures; by contrast, fiddling with the financing, important as that is, should be secondary to the march of Serious Medicine.

OK, that’s the report from Massachusetts--more people covered, prices up, care about the same. But what are the future implications for the country? Oliphant and Geiger quote one observer, assessing the Senate Finance Committee bill:

Robert Laszewski, a healthcare policy analyst and former insurance company executive, calls the finance panel's bill "Massachusetts all over again."

So does that mean higher costs for Americans if the SFC bill becomes law? Yikes! And these harsh words are found in the LA Times, a member in good standing of the MSM. As I have said repeatedly on, Congressional Democrats might say that they are strongly in favor of Obamacare, but, fearful of a backlash in coming elections, they are petrified of actually enacting it.

Meanwhile, over on the political right, there’s been massive pushback against the Massachusetts plan. Just last week, The Wall Street Journal ran an opinion piece attacking Commonwealth Care, headlined, “Paying the Health Tax in Massachusetts.” Let author Wendy Williams tell her story:

My husband retired from IBM about a decade ago, and as we aren't old enough for Medicare we still buy our health insurance through the company. But IBM, with its typical courtesy, informed us recently that we will be fined by the state.

Why? Because Massachusetts requires every resident to have health insurance, and this year, without informing us directly, the state had changed the rules in a way that made our bare-bones policy no longer acceptable. Unless we ponied up for a pricier policy we neither need nor want-or enrolled in a government-sponsored insurance plan-we would have to pay $1,000 each year to the state.

My husband's response was muted; I was shaking mad. We hadn't imposed our health-care costs on anyone else, yet we were being fined ("taxed" was the word the letter used).

“Taxed.” A tax increase. Them’s fightin’ words to Journal readers.

Of course, we might note that Mr. and Mrs. Williams seem to have chosen to live on Cape Cod after they retired. It’s a beautiful area, but the peninsula is, of course, part of what has long been known as “Taxachusetts.” That is, Mr. and Mrs. Williams knew what they were getting themselves into--and went there anyway. If we believe in federalism, we have to make allowance, to be sure, for different states to have different tax policies. Yet one result of such political diversity, seen in 2005 Census data, is a wide variety of per-capita taxation levels among the 50 states--from a high of $3600 per person per year in Vermont, to a low of $1430 in South Dakota. Massachusetts ranks seventh from the top, with a per-capita tax burden of $2818.

We might also note that Williams’ statement, above--“We hadn't imposed our health-care costs on anyone else, yet we were being fined”--is more than a little arguable. Specifically, we can argue with her statement that “we hadn’t imposed” healthcare costs on anyone else. Such non-imposition of healthcare costs is true for everyone before they incur healthcare expenditures. But everyone does incur such expenditures, and oftentimes the rest of us end up paying.

We don’t know the particulars of the Williams family insurance plan, but we do know that many Americans get sick well beyond their ability to pay, or the limits of their insurance coverage. These things happen, and, almost by definition, they are neither planned nor intentional. But they are inevitable. Accidents and serious illness happen, oftentimes imposing huge burdens on the taxpayers.

Yet not only do Americans tend to be compassionate in the distribution of healthcare, well beyond individuals’ capacity to pay, but there are also laws that force the delivery of expensive care. One such law is the Emergency Medical Treatment and Active Labor Act, passed in 1986, requiring virtually all U.S. hospitals to provide emergency care, regardless of the patient’s ability to pay. Interestingly enough, there is no corresponding federal responsibility to reimburse hospitals for these costs, although there exists a federal subsidy program. Still, one study found that the total cost to hospitals of uncompensated care totaled more than $34 billion in 2005; other estimates go much higher. But whatever the cost of uncompensated care, it is not small--and we all pick up the tab.

In addition to the policy issues raised by Williams’ piece, there are political issues, too.

Williams quotes former governor Romney as saying, back in 2006, “We insist that everybody who drives a car has insurance, and cars are a lot less expensive than people.” And yet obviously she doesn’t buy that argument for the “Romneycare” mandate. Nor do others who write opinion for the right-tilting Journal editorial page. For example, on September 18, David B. Rivkin Jr. and Lee A. Casey published a fighting piece in the Journal headlined, “Mandatory Insurance Is Unconstitutional.” Take that, Mitt!

In Romney’s defense, the health-insurance “tax” that Williams and her husband are now paying was imposed by a different Massachusetts government, after Romney left office. But let’s not minimize the damage being done to Romney’s future inside the Republican Party. Romney’s gubernatorial support for a health-insurance mandate--thus opening the door to future increases in mandated coverage, and mandated cost, as seems to have hit Mr. and Mrs. Williams--will be a big vulnerability for him if he seeks the Republican nomination again in 2012.

So is that the final word? Is a Massachusetts-type health-insurance mandate a bad idea, and/or a Republican Party loser?

Not necessarily, according to Jim Woodhill, a Houston-based businessman. Woodhill, a fixture in conservative-libertarian circles, does not defend Romneycare per se, but nonetheless, he has shown a distinct willingness to challenge conservative-libertarian orthodoxy. He is the original Serious Medicine Strategist. And so here at SMS we were delighted to receive Jim’s detailed response to the Williams piece. It appears in bold below, with bits of the Williams piece included again, in both bold and italics. The bracketing asterisks in the text are Jim’s way of emphasizing a word or a point:

I must tell you that I am a hard-core believer that carrying sufficient insurance so that one does not risk imposing one's medical costs on one's fellows is a fundamental *duty* of citizenship and so I favor an individual mandate strong enough to achieve the goal of taking the amount of "uncompensated care" delivered in the United States of America down to *zero*.  (It's only at zero that we can let all the financial services people working in hospitals and doctors offices go.)

The root cause of the problem below is a failure of imagination on the part of insurance companies and also the regulators.  Under America's current health care (non-)system, medical providers are unwitting and unwilling parties to insurance contracts the terms of which they had no say in and which they did not sign.  Part of The Woodhill Plan is that health insurers could cut any deal they wanted with the insured (e.g., any size deductible, co-pays, and co-insurance), but the *insurer would take the risk that the insured might not have those sums*, not the provider.  That is, the medical providers would experience all patients as being fully insured with "first-dollar" coverage and would be paid 100 cents on the dollar for services rendered at whatever rate was pre-negotiated with the patient's PPO network.  It would be the insurance company that would dun the insured for the amounts not covered by the specific insurance in force.  Under such a system, the state would not care whether the deductible was $1, $2,000, or $20,000, just that its health insurance companies were solvent.  There would be no uncollectible medical debt, and therefore no public purpose for a mandate of a "reasonable" deductible. 

  Ten years ago, we had excellent coverage through a
     more gold-plated plan. But we found that it was no
     longer worth paying the premiums and scaled back to
     a more modest policy. Today, we pay about $300 a month
     for catastrophic care. If we went with the next step up in
     plans offered to us by IBM, our monthly premium would
     increase to $800.

Then IBM needs to work with its insurer to tweak their current plan, at least for Massachusetts!

     We simply don't need to pay that
     kind of money for the amount of health care we
     actually consume.

This statement is reflective of the editorial page of The Wall Street Journal needing to consult a *dictionary*.  "Insurance" is not something that one pays for because of the health care expenses one *has* had in the past (which is what this health-blessed couple is *assuming* they will continue to enjoy in the future).  It's what one pays for the health care expenses one *might* have in the future!   This fundamental misunderstanding leads the Journal to denounce the notion that the "young and healthy" should end up paying for the care of the "old and sick."  Alas, I have news for them.  As long as the "sick" get care, it will be the "healthy" who pay for it.  The problem is that what I call Serious Medicine either costs nothing or some big multiple of the median financial net worth of an American family.  All there is to be done is replace super-high-"friction" mechanisms such as cost-shifting with low-friction mechanisms such as universal *adequate* insurance.

Woodhill is making an important argument here: We have a duty to be covered. If we aren’t covered, we will still get treated, but others will end up paying for our treatment. If libertarians and limited-government advocates mean what they say--that people should be free, so long as they aren’t doing harm to others--then they need to consider the harm that the uninsured are inflicting on others by their lack of insurance.

Yes, there are other ways to address this problem--using, for example, insurance pools for emergency and catastrophic care--but Woodhill argues that those alternatives are less satisfactory than the mandatory insurance plan he favors.

Woodhill’s position is controversial in Republican circles, but he is looking way ahead, past even the 2012 elections. The resurgent right may ambush Romney over his past support for Commonwealth Care, thereby derailing his bid for the presidency, but one of these years, a Republican is going to win back the White House. At which point, he or she will have to figure out a healthcare plan that will really work for the country, even if that plan doesn’t please the ideological avant-garde.

Indeed, as I have pointed out here at SMS, the actual policies--defined by money spent, laws written, and, yes, taxes collected--that have been put in place by elected Republicans, such as Romney, or Louisiana Governor Bobby Jindal, are a lot different from the policy proposals dominating opinion pages.

And yet the outlines of future healthcare policies--hopefully representing a constructive synthesis of best practices and best ideas--need to be blueprinted now. That’s work that Jim Woodhill, among many others, has been willing to do. And I have no doubt that in the future Jim’s innovative ideas, challenging as they might be to comfortable orthodoxies, will gain respectful hearing in the corridors of actual power.

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