RomneyCare: Not Universal and Not Cheaper

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First, an abashed confession: I had hoped, despite its flaws, that some improved version of Mitt Romney's Massachusetts health insurance mandate might help stop the slide toward what used to be called socialized medicine by leading to expanded private health insurance coverage. In 2006, then-Gov. Mitt Romney predicted in a Wall Street Journal op/ed:

Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced.

How was this miracle going to be achieved? Romney declared:

The solution we came up with was to make private health insurance much more affordable. Insurance reforms now permit policies with higher deductibles, higher copayments, coinsurance, provider networks and fewer mandated benefits like in vitro fertilization–and our insurers have committed to offer products nearly 50% less expensive. With private insurance finally affordable, I proposed that everyone must either purchase a product of their choice or demonstrate that they can pay for their own health care. It's a personal responsibility principle.

http://seattlepi.nwsource.com/dayart/20070919/cartoon20070919.gif

As the Wall Street Journal points out today, it hasn't worked out that way:

Supporters are exultant because 350,000 people are newly covered since former Governor Romney's parley with Beacon Hill Democrats in 2006; this cuts the state's uninsured rate by about half. That's not the promised "universal" system, but never mind. The ominous news is that only about 18,000 people -- or 5% of the newly insured -- have taken advantage of the "connector," which was supposed to be the plan's free-market innovation linking individuals to private insurers.

Most of this growth in coverage has instead come via a new state entitlement called Commonwealth Care. This provides subsidized insurance to those under 300% of the poverty level, or about $63,000 for a family of four. About 174,000 have joined this low- or no-cost program, a trend that is likely to speed up.

As this public option gets overwhelmed, budget gaskets are blowing everywhere. Mr. Patrick had already bumped up this year's spending to $869 million, $144 million over its original estimate. Liberals duly noted that these tax hikes are necessary because enrollment in Commonwealth Care is much higher than anticipated. But of course more people will have coverage if government gives it to them for free. The problem is that someone has to pay for it.

Who knew that giving away something for "free" would increase the demand for it?

Whole current WSJ op/ed here. Take a look at my Reason Foundation colleague Shikha Dalmia's insightful WSJ op/ed on health insurance mandates. My original proposal to mandate completely private health insurance here.

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  1. Why exactly should the government be mandating anything having to do with healthcare?

  2. Ooo, Ooo, I see the difference!

    One has better hair.

  3. Car insurance sure got cheaper when it became mandatory. The free market always works perfectly under those circumstances. And by “works” I mean “Ensures a steady market, no matter what the price.”

  4. jon: Even if that were universally true, that doesn’t make it right.

  5. Who knew that giving away something for “free” would increase the demand for it?

    Interesting example of how slippery the use of the term “demand” can be.

    One would almost think from that sentence that the people who formerly didn’t have health insurance didn’t want or need it.

    If you give a pauper a ten-spot, he doesn’t get any hungrier.

  6. I always wanted to kick Romney in the balls every time they had a debate and he talked about how his plan “used the free market.” Ahem… no. Stuff happening as a result of your legislation and people having to buy insurance doesn’t make it anywhere near “free.”

  7. Is that cartoon supposed to be funny?

    And eye exams aren’t expensive enough that you would need insurance.

  8. One would almost think from that sentence that the people who formerly didn’t have health insurance didn’t want or need it.

    There is certainly a large subsect of people (usually young and single) who go without health insurance, or have true-catastrophe coverage only.

    If dinner’s always on someone else, though, joe, you can bet that I’m going to eat early and often, whether I need to or not. It’s just common sense.

  9. joe,

    I think he meant “consumption” rather than “demand”…

  10. Fair enough, TAO.

    It’s probably safe to say that there’s a little of both going on.

  11. I am glad that Mr. Bailey’s confession is abashed rather than unabashed. He should be ashamed to have even considered Mitt Romney’s socialist stew.

    IMHO, Mr. Bailey should have dismissed ROmney’s proposition out of hand. What part of the reality that Mitt was proposing this leninist lunacy as a political gimmick did Ron not get? Or that the proposal reeked of vast rent seeking opportunites for Mitt’s buddies? Or that the thing would inevitably make government bigger and worsen the health care system?

  12. Nigel Watt: My basic argument is that an individual private insurance mandate is the only politically viable way to prevent a complete slide toward universal government rationed health care. My proposal is similar in many ways to the way health insurance is done in Switzerland and the Netherlands.

    Definition of demand used here: The desire to possess a commodity or make use of a service, combined with the ability to purchase it.

  13. Also, as much as I despise Mittler, this wasn’t his plan. It was a compromise plan he worked out along with the Legislative leadership and certain other political and business leaders. If Romney had his druthers, the “Connector” probably would have been the entirety of the plan.

  14. Ron, it sounds like you’re cutting of your nose to spite your face.

  15. Ron, it sounds like you’re cutting of your nose to spite your face.

    Not to me. I don’t like it anymore than you do, but attempting to conserve choice and freedom in the current political context and “national mood”, if you will, requires more than stamping your feet.

    Do I want to see mandated health insurance? No, but it might the only viable freer alternative, akin to school vouchers.

  16. Do I want to see mandated health insurance? No, but it might the only viable freer alternative, akin to school vouchers.

    It won’t work either, but it will remove your moral standing to oppose socialized medicine.

  17. Ron,

    Do you have any info on cost per enrollee numbers? I found this piece by Klein on its, but I’d like a little more historical data. I admit that I’m generally sympathetic to Klein’s observation that it is really too soon to tell how good or bad Romney-care is turning out to be. While not dismissing the budget shortfall issue, what strikes me most is that the Massachusetts results suggest that the government probably underestimates the number of uninsured. It’d be interesting to know if any person or agency during the debate phase actually got this number right (i.e. forecast the necessary budget correctly).

    I also tend to agree with Klein that Romney, for political reasons, went for comprehensiveness and just punted on the issues of cost and quality. So initial shortfalls in those latter two categories don’t surprise me.

    Anon

  18. Sure, the idea and the push did not come exclusively from the Romney camp, but let’s not minimize the Mittster’s craven objective of using this rent seeking nightmare as a political tool.

  19. I have trouble creating an entitlement program for people who already misspend their money. Programs are usually designed to encompass the largest possible pool of people so that a program can be shown to be “necessary” and so that the connected politician will get more votes for having done it.
    $63,000 is a ridiculous limit. Even absent eliminating a lot of the regulations that would make private health insurance even cheaper a lot of families, if they spent their money properly and really thought family health was a priority, could significiantly contribute to some decent coverage at that income.

  20. The numbers all look perfectly correct if you peruse them through Mitt’s Magical Peeping Devices.

  21. Mandatory private health coverage is not the solution for three reasons:

    1) No one wants to insure the chronically ill, they will always be money losers.
    2) If private insurers are forced to cover them, they have every incentive to treat them as shabbily as possible, in the hope they will go elsewhere.
    3)The administrative costs of multiple private insurers will always be higher than a single payer system, and genuine competition will be limited to the young and healthy.

    Governments don’t have a monopoly on peverse incentives, the market has them for health care too.

  22. I am always amazed when people say that having the government pay for healthcare will reduce costs. It is as if no one has to pay for it. The only way to reduce costs is to either reduce service or figure out a way to deliver the services more efficiently. One way you could do the latter would be cut off the trial lawyers and do something about the administrative costs of healthcare. Take Michelle Obama for example. She at least at one time had a job as a healthcare adminstrator that paid over 300K a year. Sadly I don’t think her job, maybe her getting it but not the job itself, was a political payoff. Hospital administrators really do make that kind of money. Now what on earth could she, a person with a liberal arts degree and no expertise in healthcare, have possibly been doing to justify that kind of salary? But we have so regulated and micromanaged the healthcare industry, we have created an army of overpaid suits who do nothing but suck off the system. What is worse, all of the ideas to fix the system will do nothing but create more suits who dont’ see patients or in anyway add to the quality of the care but get the highest salaries anyway.

  23. “$63,000 is a ridiculous limit. Even absent eliminating a lot of the regulations that would make private health insurance even cheaper a lot of families, if they spent their money properly and really thought family health was a priority, could significiantly contribute to some decent coverage at that income.”

    We’re talking Mass., here, not Alabama. It ain’t cheap.

  24. The reason demand was underestimated is because people in low paying jobs with benefits that they chip in for realized they could now stop paying for benefits and get them from the gov’t for “free”. It’s a no-brainer, really.

    What it sucks for is the poor bastard who makes 301% of the poverty level. Sorry, sucker, quit your job and get some free bennies!

  25. “But we have so regulated and micromanaged the healthcare industry, we have created an army of overpaid suits who do nothing but suck off the system.”

    Oh please. As if for-profit corporations never get top-heavy with deadweight. Logical? No. But common. Not every company is a lean, mean, profit machine.

    Overpaid suits are a self-perpetuating phenomenon. (And that’s not even counting the consultants).

  26. “1) No one wants to insure the chronically ill, they will always be money losers.”

    Few people are chonically ill from birth and if they are they are covered under the parents healthplan. Just pass a law that says insurance can’t dump someone for being ill. Insurance will then take the young and healthy and make their money which then covers the cost of the young and healthy when they no longer all. It is what insurance is about “pooling risk”.

    “2) If private insurers are forced to cover them, they have every incentive to treat them as shabbily as possible, in the hope they will go elsewhere.”

    Show me one piece of evidence that that is happening? The US has some of the best care in the world for diabetes and cancer and alzheimers and other chronic or terminal disease. What you are saying is not borne out by the facts. Further, if you look at the poor quality of care for these types of diseases in places like the UK and Canada, it appears the oppostite is true. Goverment bureaucrats have every incentive to treat the sick badly in order to meet budgetary constraints.

    “3)The administrative costs of multiple private insurers will always be higher than a single payer system, and genuine competition will be limited to the young and healthy.”

    Again, show the evidence of that being true? Is the admin costs in the UK or Canada lower than here? Further, even if they are, does the savings justify the rationing and obvious evils of these systems?

  27. “Oh please. As if for-profit corporations never get top-heavy with deadweight. Logical? No. But common. Not every company is a lean, mean, profit machine.”

    And those companies become GM or Pan AM Airlines and go out of business or suffer some kind of reorganization. Government mandated deadweight goes on forever.

  28. “The reason demand was underestimated is because people in low paying jobs with benefits that they chip in for realized they could now stop paying for benefits and get them from the gov’t for “free”. It’s a no-brainer, really. ”

    Yeah, right.

    The person who made that decision was almost certainly the employer.

  29. “And those companies become GM or Pan AM Airlines and go out of business or suffer some kind of reorganization. ”

    Eventually. Maybe. They can last a looong time.

  30. “Yeah, right.

    The person who made that decision was almost certainly the employer.”

    Of course it was. If you create a government system, the employers are then free to dump their employees into the government system. This is what has happened with retiree healthcare. Most companies have changed their retiree benefits to drop basic medical coverage to include only a suplimental program to medicare. If you have government funded healthcare, employers will stop paying. This is why big business loves single payer plans.

  31. “Again, show the evidence of that being true? Is the admin costs in the UK or Canada lower than here? ”

    Try reading more. How about France or Germany? The UK and Canada are not the only countries with systems different from ours.

  32. The person who made that decision was almost certainly the employer.

    Does it really matter? They both stand to gain.

  33. “Try reading more. How about France or Germany? The UK and Canada are not the only countries with systems different from ours.”

    “Try reading more”? How about you try not being a smug prick and answering the argument. It is far from obvious that admin costs would be reduced under a single payer plan. Indeed, central planning and control hasn’t reduced administrative costs in any other area. Why would health care be any different? Further, how much of the current systems administrative costs are the result of government planning and regulation?

  34. “Does it really matter? ”

    One’s a low-paid employee, therefore suspect in these parts.

    The other’s a sterling example of capitalism, a pillar of society.

    I’m not surprised the suggested blame was pinned on the worker.

  35. $63,000 is a ridiculous limit.

    It depends. That’ll buy you a cup of coffee and a plywood flop in Winotown for a family of 4 in DC.

    That said, get ‘yer own insurance, deadbeats.

  36. Jon H,

    I don’t think anyone’s blaming the workers, rather pointing out the rational action they would take.

    If I had a choice between paying for health care and legally not doing so, I’d choose the second too.

  37. I’m not surprised the suggested blame was pinned on the worker.

    Jon H

    You really miss the point around here don’t you? The “blame” is placed on a system that causes people to make choices that they otherwise would not make or have to make, whether it be an employer or worker. Try reading around different comment threads a little more before assuming things about your company.

  38. John,

    The argument is that the single-payer system eliminates the private insurance layer. Since health care providers are already working with the Government, along with private industry, eliminating private industry is an instant cost savings.

    I think the argument grossly overestimates the private sector administrative costs and grossly underestimates the necessary increase in public sector administrative costs.

  39. I am always amazed when people say that having the government pay for healthcare will reduce costs.

    It’s a version of the anarchist statement that if nobody had to pay for anything, we could save all the work of cashiers, bankers, bookkeepers, accountants, etc. which is undoubtedly true but neglects the productivity of their informational role in an economy.

  40. I am always amazed when people say that having the government pay for healthcare will reduce costs.

    This is actually true, but the reason makes the whole concept of “universal healthcare” a lie.

    The government can make healthcare cheaper (and state gov’ts do) by the simple expedient of refusing treatment to people who are poor risks. I believe in OR the cutoff is a 5% likelihood of survival over 5 years. And guess who decides that? Yep, a gov’t bureaucrat.

    The best part is, in OR if you’re refused treatment, by law they have to inform you that you ARE eligible for suicide.

  41. Car insurance sure got cheaper when it became mandatory

    This is a common myth, but it’s not true. Car insurance became cheaper for the same reason term life insurance got cheaper: the Internet made it very very easy to consumers to choose coverage by price, and insurance agents were largely cut out of the loop. The timing of the mandates was coincidental.

  42. Few people are chonically ill from birth and if they are they are covered under the parents healthplan.

    Which is lovely until they hit 18 or 24 and get bumped, but have that history of chronic problems that keeps them from getting their own coverage. Or do you think that kids stay on their parents’ health insurance forever?

  43. “$63,000 is a ridiculous limit. Even absent eliminating a lot of the regulations that would make private health insurance even cheaper a lot of families, if they spent their money properly and really thought family health was a priority, could significiantly contribute to some decent coverage at that income.”

    We’re talking Mass., here, not Alabama. It ain’t cheap.

    You can easily live on this amount in NYC (I have with 5 kids) if you don’t eat out, don’t drink starbucks, don’t take cabs, don’t get anything beyond basic cable.

    What’s next, the right for premium TV service?

  44. Which is lovely until they hit 18 or 24 and get bumped, but have that history of chronic problems that keeps them from getting their own coverage. Or do you think that kids stay on their parents’ health insurance forever?

    If you had read more than one sentence, you would have seen that he addressed that point:

    Just pass a law that says insurance can’t dump someone for being ill. Insurance will then take the young and healthy and make their money which then covers the cost of the young and healthy when they no longer all. It is what insurance is about “pooling risk”.

  45. I’m shocked, shocked I tell you. A government program that costs much more than estimated when proposed. That’s never happened before.

  46. One would almost think from that sentence that the people who formerly didn’t have health insurance didn’t want or need it.

    And if they were subsidizing … let’s say Ford Mustangs, you think people who didn’t really want or need one might be lining up?

    Get real.

  47. One would almost think from that sentence that the people who formerly didn’t have health insurance relied on the forcible conscription of ER docs to provide “free” care didn’t want or need it insurance they paid for out of their own pocket at the prevailing market rate, but would be happy to force others to buy it for them for “free”

    Fixed.

  48. “Just pass a law that says insurance can’t dump someone for being ill. ”

    Because nobody ever changes insurers?

  49. I can imagine what premiums would look like if the insurance companies knew that anyone they sign up could easily cost them tens of millions of dollars.

    There ain’t no such thing as a free lunch, and sometimes there ain’t even a cheap one.

  50. There is no legitimate legal basis for requiring a citizen to enter into a business contract with a private company in order to exercise their rights. The word “fascism” is the appropriate word to describe this type of tyranny.

    The solution is very simple – require that all individuals bear responsibility for their own health care. Some, many, or maybe even most will enter the free market to purchase health care insurance. The wealthy will be able to buy health care treatment out right. Some will choose to treat themselves. Others will do without. Some will die. Such is life, but it would be a much better life with the right of liberty to choose how to take care of one’s own responsibilities rather than pay for someone else’s care and a layer or two of profiteering thus stripping you of the ability to take care of yourself and almost always failing to take responsibility for your problems. i.e. I’m paying a great deal of money through taxes to pay for other people’s medical care along with many other unconstitutional programs yet I can’t afford to have my wisdom teeth taken out.

    It is not economically possible to treat every medical problem of every person. Spending huge sums of money on every person who is likely to die soon enough anyway only produces a huge cost to others without any real gain. Life and health are precious but not nearly so much as to justify taking the life, liberty, health, and wealth of other people.

  51. Americans spend only slightly more per year on healthcare than they do on entertainment. It wouldn’t be hard for most Americans to switch enough of their discretionary spending to healthcare without missing a beat. The ‘crisis’ is a fiction. My mother – a healthy woman in her mid-50s – pays something like $500 a month for insurance, yet doesn’t consume even close to $6,000 worth of medical care in a year. I think she’d be better off putting that money into a highly liquid health catastrophe investment account, but she’s convinced anything but insurance is absolutely crazy. Naturally, she consumes as much healthcare as possible, too. I imagine most people are the same.

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