Sunday, May 15, 2011

Myth Romney on health care

It is entertaining to watch Mitt (aka Myth*) Romney try to thread the political needle as he explains his support of the Massachusetts health care reform bill that he signed as Governor back in 2006. While he attempts to distinguish his law from the one enacted under President Obama mainly as an issue of state versus federal jurisdiction, the big issue he has to overcome with the Republican primary audience is the individual mandate.

Why do you need an individual mandate -- or as Romney calls it, "personal responsibility"? Well, you don't unless you also want to require insurance companies -- as he does -- to cover all patients. As I have said before about the federal law, which also applied to the situation in Massachusetts:

I think one of the most important aspects of the law is "guaranteed issue" of health insurance: Insurance companies will no longer be permitted to use pre-existing medical conditions as a bar to coverage. A concomitant of guaranteed issue is the individual mandate, the requirement that all people purchase health insurance. Why?

Left to their own, insurers will impose pre-exisiting conditions types of restrictions because they understand the moral hazard aspect of insurance. Healthy people provide an actuarial balance to sick people. If people only buy insurance when they need care, the risk profile of the insured population rapidly swings, upsetting the actuarial calculations used to establish premiums. So, if these restrictions are outlawed, everybody needs to be in the risk pool. Accordingly, you have to ban optional insurance.

So, Romney is correct on this point, even though some people hate to admit it.

But Romney is also a bit loose with some facts. While claiming it is possible to design a state-by-state approach that does not rely on new federal funding, he leaves out the fact that the MA law was dependent on -- and in fact, was designed to secure -- over $300 million in federal funding. To a great extent, it was possible to achieve a political consensus on this bill in MA because of the need to save the so-called "Medicaid waiver." I guess you could assert that the $300 million was not "new" federal money, but it was scheduled to expire.

I had a chance to meet with Romney as governor during the period of the bill's pendency. You would be hard-pressed to find a governor more knowledgeable and engaged in the details of the proposed legislation. He, like others, felt it important not to squander the opportunity for compromise that was provided by the budgetary "gun to the head" of losing this amount of federal support.

What a shame now that he can't admit that such political compromise is the sign of smart governing, rather than weakness.

Where Romney and Obama agree, sadly, is in promising the American public that they can have it all -- access, lower costs, and choice. That seems to be the deceptive mantra that is needed in the body politic. Both men ignore inconsistencies in their own legislative frameworks between that mantra and reality. Note that Romney, for example, looks favorably on the removal of fee-for-service pricing, ignoring the reduction in choice implicit in such pricing. (Minute 16:32 of the video below, where capitated rates have "a lot of promise.")

Here's his speech. If you cannot see the video, click here.

* I give credit here to the blogger over at Massachusetts Liberal, who may have introduced this term back in February of 2007.


Anonymous said...

I don't follow Mitt, but here's an entertaining quote by Dana Milbank of WaPo:

"From China last week came the rare news that twin girls had been born with a single body and two heads. Here in America though, we have an even more unusual case: two people conjoined in the body of a 64 year old man.....and so the Romney twins presented themselves to the U. of Michigan medical school on Thursday for a consult. Based on the symptoms, the prognosis is grim."


Barry Carol said...

I thought Romney’s speech was pretty good overall. I especially liked his mention of value based insurance products and the need for consumers to care more about what healthcare services, tests, procedures and drugs cost. The big missing link, though, continues to be a lack of price transparency, especially for hospital based care. We need disclosure of actual insurance contract reimbursement rates so prices, at least for specific procedures, can be determined before services are rendered and compared among hospitals.

I’m hearing, though, that it’s the hospitals, especially those with significant local or regional market power, that are most resistant to contract rate disclosure. At least some insurers are actually starting to come around to the notion that price transparency would help to mitigate cost growth even if it makes their own business more competitive. Doctors, for their part, need to care more about costs in making their referral and treatment recommendations.

It’s hard for me to see the resistance to price transparency from powerful hospitals being overcome without state regulators, legislators or both stepping in to force action on the issue. Healthcare can never work like a regular market without price and quality transparency tools. In addition, special pricing rules may be required for care delivered under emergency conditions.

Now that Massachusetts has achieved near universal insurance coverage, hopefully, it will turn its attention to costs and provide leadership there. Someone needs to lead the way. Massachusetts is probably the most logical candidate to take this on at the state level.

Unknown said...

"Myth" Romney -- now that's going to have me giggling into Monday. Thanks for the smile.

Anonymous said...


I believe the Mass governor is trying to provide some leadership on costs (whether one agrees with how he is doing it), but he is arrayed against some extremely powerful interests. See how Partners Health Care's income quintupled recently and how they are controlling allocation of their 40 million bribe - er, gift:

One can see why they don't want price transparency. It will be an epic battle.


Barry Carol said...

nonlocal –

I agree that bringing about price and quality transparency will be an epic battle, but it’s a battle we need to have. Hospitals account for the largest component of healthcare costs by far and they’re increasing consistently faster than all other components mostly because of increased reimbursement rates as opposed to greater utilization.

It’s well known that prices for most procedures are considerably higher in the U.S. than in Europe or Canada, even if we use Medicare rates for U.S. prices. I’ve never seen a comparison of what it actually costs to provide the care, though. Let’s see a comparison of costs for academic medical centers in the U.S. vs. their counterparts in other countries and a similar comparison for community hospitals. How many employees per licensed bed are required to staff a hospital in the U.S. vs. elsewhere? If costs are significantly higher in the U.S. and compensation per employee other than physicians is no higher, how much return are we getting for those added costs?

Back to the issue of hospital market power, we need more use of tiered networks and limited or narrow networks to create countervailing power against the most powerful hospitals. Hospitals also can’t be allowed to simply refuse to sign contracts that require patients to incur higher coinsurance than they would pay at other nearby hospitals. The hospitals are killing us financially and that’s where the focus needs to be if we are serious about attacking medical cost growth.