August, 19th 2009

Is RomneyCare a good thing/functional or not?

– Liz Mair

Via Reason, I see that the Boston Globe is arguing "yes" as is the New York Times, while CATO's Michael Cannon is arguing "no" (and some more "no" here).  That probably gives conservatives and libertarians an inkling as to where they're likely to come down on the debate, but that aside, as someone who has historically been a big-time critic of RomneyCare, I think it's worth noting Michael Cannon's criticisms of the plan since I don't think it's beyond the bounds of reason to think that President Obama's much sought-after health insurance reform could wind up looking like RomneyCare, at least a little bit.  Here's a large excerpt from Cannon's Providence Journal op-ed:

In 2006, Romney enacted a health-reform package strikingly similar to what Democrats are pushing through Congress, including individual and employer mandates, private health-insurance subsidies, broader Medicaid eligibility and a new health-insurance “exchange.” Lately, Massachusetts officials have been forced to raise taxes and cancel some residents’ coverage to pay for it all. Local headlines are decrying “the forbidding arithmetic of health-care reform.”

Supporters at the Massachusetts Taxpayer Foundation say the cost isn’t nearly as high as many people think. A recent foundation report claims that “The cost of this achievement has been relatively modest and well within early projections of how much the state would have to spend to implement reform.”

In The Boston Globe, foundation president Michael J. Widmer writes, “Between fiscal 2006 and 2010, the annual incremental cost from the state budget is less than $100 million, a modest sum for this historic achievement.” Widmer was kind enough to walk me through his organization’s estimates. As it turns out, there’s more than just a little sleight of hand involved.

First, the “annual incremental cost” — $88 million — is not the total amount that the law added to the state budget each year, but the average increase from one year to the next. In other words, the total “cost from the state budget” in 2009 is not $88 million but three times that ($264 million).

Second, that average “incremental cost” assumes the state will cut payments to safety-net hospitals by $200 million next year. We’ll see about that. Safety-net hospitals are already suing the state for more money. Set aside those assumed savings, and the cumulative “cost from the state budget” for 2009 is actually $408 million.

But the larger problem is that the “cost from the state budget” ignores 80 percent of the total cost of RomneyCare. As Widmer explains, state officials only have to scrape up about 20 percent of total new spending themselves. The federal government — which is to say, taxpayers in other states — kicks in another 20 percent through the Medicaid program.

The remaining 60 percent appears in no government budget. It is new “private” spending that individuals and employers must undertake according to the law’s dictates. That brings the total cost of RomneyCare to at least $2.1 billion in 2009.

Both Widmer and his organization’s report do mention that the law spurred employers to spend an additional $750 million on employee health coverage. But that only accounts for about two-thirds of new private spending. Moreover, they describe that mandated private spending as a benefit of the law, rather than a cost.

Instead of a bargain, RomneyCare is therefore far costlier than conventional wisdom suggests. Beacon Hill is eliminating health coverage for 30,000 legal immigrants, and contemplating a sweeping overhaul of how medical care is purchased, organized, and delivered, just to cope with one-fifth of the law’s cost.

Neither is RomneyCare terribly cost-effective. The law covered an estimated 432,000 previously uninsured residents in 2009. That means Massachusetts is covering the uninsured at a cost of about $6,700 per person, or $27,000 for a family of four. The average nationwide cost of an individual policy ($2,600 in 2007) and an employer-sponsored family policy ($12,700 in 2008) are fractions of those figures.

These criticisms are also worth noting since my money would be on Romney running for President again in 2012.  I know, it's a little early to be thinking about all that, but still, I would like to hear what Romney thinks about all this because while I have always given him full credit for having the balls to tackle an issue that a lot of Republicans run scared from, I think his model is deeply flawed-- and I'd be curious to see if, with the benefit of hindsight, and as a potential future presidential nominee, he might care to explain what, if anything, he thinks should have been done differently.  That, in turn, might offer some insight into his potential for ongoing leadership on this issue, should he run, win the nomination or indeed win more than that (admittedly, at least one big "should"). 

Setting aside my curiosity, though, I also think Romney is going to have to say something on this sooner or later, in part because conservatives, libertarians (and yes, some total whackjobs) have of late been heavily focused on health insurance reform, elements of the President's plan for which do look similar to elements of RomneyCare.  Those voters and activists are unlikely to forget this before things get going next year (as they will).  That's especially the case given Minnesota Gov. Tim Pawlenty's recent criticism of the Massachusetts plan-- something I can't see Pawlenty dropping.  Right now, from the perspective of a possible Republican primary involving Romney, health care looks like a pretty big liability for him. [intro]



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