Is RomneyCare Different from ObamaCare?

Today’s Health Alert was written by Linda Gorman.

Governor Mitt Romney writes that the Massachusetts health reform that he helped usher in was simply one state’s effort to craft its own solution, not a model for the whole nation.

This claim is unpersuasive. RomneyCare was, in fact, the culmination of more than a decade of experiments in government-run health care funded and coordinated by large private foundations. Their efforts have caused problems in states such as Kentucky (Kentucky Kare), Maine (Dirigo Care), Tennessee (TennCare), Hawaii (Keiki Care), Wisconsin (BadgerCare), Minnesota (MinnesotaCare), and Colorado (ColoradoCare).

A cookie-cutter approach and a depressing lack of originality are hallmarks of both ObamaCare and RomneyCare. That’s why they look so similar. Under RomneyCare, the state sanctioned insurance coverage plans are bronze, silver, and gold. Under ObamaCare they are bronze, silver, gold, and platinum.

Other similarities include putting the government in charge of determining the kind of care one could receive by appointing committees to set quality goals, setting prices through a variety of payment policy boards, establishing extensive means-tested subsidies for the purchase of health coverage from capitated managed care plans, creating an exchange board to certify acceptable health policies and distribute the subsidies, recording and storing medical records electronically, paying bonuses to provider organizations that meet politically determined care standards, fining employers who do not provide insurance, banding rates and creating a number of new slush funds to reward supporters.

The RomneyCare law also reaffirmed Massachusetts’ commitment to the insurance regulations that are central to ObamaCare. In 1996, Massachusetts passed a health insurance reform law, the Non-Group Health Insurance Reform Act. According to Conrad Meier, the law resulted in 20 insurers leaving the state in two years.

RomneyCare kept the 1996 regulations even though it was well known that they were an important driver of Massachusetts’ high health insurance premiums. ObamaCare incorporates guaranteed issue, limited rate modification for age and geography, and premium increase approval structures that are in the RomneyCare law.

Though Governor Romney himself has written that the passage of RomneyCare was necessary because “as a state we were spending almost $1 billion on free care for the uninsured,” the claim that Massachusetts was being crushed by the costs of providing free care for the uninsured is suspect.

The reference to $1 billion in free care reference likely refers to expenditures of the Massachusetts Uncompensated Care Pool. In 2004 it spent more than $720 million, supposedly for free care for the uninsured. Appearances can be deceiving. There is clear evidence that a big chunk of Pool spending went to subsidize Massachusetts’ Medicaid program.

A November 2005 Massachusetts Office of the Inspector General report specifically states that a substantial fraction of the Pool’s  payments were subsidizing the state’s “inadequate Medicaid payments” and that the Uncompensated Care Pool’s “current system cedes complete autonomy to hospitals to set their own fee schedules and — despite legislative mandates to the contrary — never questions hospitals’ charges to the Pool.”

The inadequate Medicaid payments were one result of the July 1997 Medicaid expansion in which Massachusetts officials pledged to reduce the number of uninsured at no extra cost. Among other things, they encouraged the development of a capitated managed care network by the state’s safety net hospitals. Medicaid enrollment expanded from 672,400 to 901,600 in just three years. The number of uninsured dropped by an estimated 315,000 (46 percent) in the five years following the expansion.

Aided by the do-nothing attitude of public officials, the Pool was a ripe target for hospitals set on using it as a health care ATM. The 2005 Inspector General’s report details payment of millions of dollars in questionable claims every year, including $17,612 for 60 tablets of Propranolol HCI which should have cost $60, charging $2,677 for CT scans for which Medicare would pay $272, and paying claims without adequate documentation for an estimated 50% of the emergency bad debt claims. In one case, the Pool paid for a routine physical exam on a patient visiting from Jamaica. It was classified as an emergency bad debt claim. In 10 percent of the emergency bad debt cases, there were no documented collection efforts.

In short, the state was paying $1 billion for mismanagement rather than for uncompensated care. And, as Cato’s Michael Cannon has pointed out, claims that RomneyCare reduced premiums ignore important regulatory redefinitions.

Cogan, Hubbard and Kessler, observers without a political axe to grind, found evidence suggesting that the Massachusetts “reform” increased health insurance premiums. When compared to 2004–2006, family premiums in Boston grew by about 8 percent more than in 19 other large U.S. cities from 2006–2008. Pauly and Herring and other researchers have shown that regulations requiring that insurers issue policies at the same price to individuals with different health risks — a “reform” required by both the 1996 Massachusetts health insurance law and ObamaCare — tend to increase both premium prices and the number of uninsured.

In other words, the mess in Massachusetts is clearly documented as a direct result of the same ill-considered regulatory agenda that Governor Romney continues to defend.

Comments (20)

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  1. Joe S. says:

    Excellent post. Good job, Linda.

  2. Devon Herrick says:

    I’ve frequently do presentation on the problems with the Affordable Care Act. This includes problems such as why young people (and older people) will be able to game the system by waiting until sick to sign up.

    An early version of my PowerPoint was actually created long before the debate on the Affordable Care Act. I’ve had to change my presentation will little in all that time. Analysts knew well in advance what liberal advocates of health reform wanted because the proposals liberal think tanks, left-of-center funders and grant recipients were publishing on their websites. As Linda points out, the Affordable Care Act is not new. It’s merely the culmination of decades of work by those who advocate for universal coverage, with huge cross-subsidies. Most of the liberal advocates really wanted a single-payer system or a system where care is mostly paid for with tax dollars. But in order to appeal to the American public, the system had to be designed in a manner that would not upset(at least in the short run) the way most Americans get health coverage.

  3. Brian Williams. says:

    Wasn’t the initial idea to get people off the state rolls and instead subsidize their private insurance? The cost of subsidizing the private insurance would have been paid for with cuts to public health care programs.

  4. Donna Baver Rovito says:

    This landed in my email box, with the terrifying subject line: Human Right to Health

    Sen. Bernie Sanders (I-Vt.) and Rep. Jim McDermott (D-Wash.) today introduced twin health reform bills in the Senate and House, both called the American Health Security Act of 2011.

    http://sanders.senate.gov/files/TAM11019_xml.pdf

    The American Health Security Act would establish a single-payer health insurance program funded by federal taxes but administered by the states in accordance with federal standards. It would entitle every legal resident of the United States to comprehensive health care services. Private insurance companies would be limited to selling supplemental coverage.

  5. Virginia says:

    How can Romney still call himself a Republican?

  6. Vicki says:

    This is very good information. Very helpful. Very clear.

  7. Frank Timmins says:

    Nice piece Linda. It seems that many of our leading presidential candidates are messing in their nests with comments about health care financing theories. While Newt and Mitt are busy shooting off their own toes, the Huns are licking their chops at the less than unanimous conservative approach to health care reform.

    While I totally agree with your view here, I personally lean toward cutting them a bit of slack for several reasons, most of which take too much time and space to explain (and are off subject anyway). But the short answer is that in the case of Romney, the Mass. plan was hatched in a time when “managed care” was still the accepted “answer” by most of the pointed heads, “single payer” was the great immediate threat and the idea of a “mandate” was not without conservative support (including the Heritage Foundation and many of the rest of us in the peanut gallery who were looking at the problem from an underwriting viewpoint). The Massachusetts plan, although never a true crowd pleaser, was at least one that allowed for some market involvement, and in the land of Ted Kennedy no less. In other words it was a political compromise that was certainly more digestible at the time than it is now.

    Poor Mitt is trying to wriggle out of his sponsorship of the Massachusetts monster without looking like a complete zig zagger (which he has somewhat of a reputation of being), and subjecting himself to the accompanying public thrashing by our completely unbiased and even handed journalists. I don’t think Mitt has any current illusions about the acceptability of the Mass. model to the rest of the country. I think he would heartily endorse a true market based reform plan for the rest of us. I just wish he would now just man up to the fact that the Mass plan is not what it was supposed to be, and move on.

  8. George Washington says:

    If I may please;
    Ron Paul is the only presidential candidate who would cut enough spending to avert a debt crisis. Only he will restore constitutionally sound money. And, only he will strengthen our national defense by bringing our troops home and putting an end to the nation-building that is draining our country.
    Watch Dr Paul question Ben Bernanke if you doubt Paul understands even subtle aspects of the economy.
    Other candidates speak flowery words and tell nothing of how anything will get done. Mr. Paul is very different.
    Constitutionally, legislatively, and morally, Ron Paul has no equal. His 22 year voting record speaks for itself.
    The World is watching.
    Ron Paul for President in 2012.
    Thank You

  9. Ron Bachman says:

    I agree with all that John states. However…Would you rather have the author of ObamaCare as president or the author of RomneyCare? Of course, I would prefer a choice between ObamaCare and Newt’s 21st Century Individual Intelligent Healthcare (NewtCare), but we may never get to those choices if Republicans don’t stop eating their young. Both Romney and Newt have stated they will sign legislation repealing ObamaCare. Isn’t that enough already? What happened to the 11th commandment? Can’t we argue over who has the best programs going forward, instead of who is least bad? or who has made worst past political mistake?

  10. Lucy says:

    If I’m going to vote for Mitt, or Newt, I would like to feel they understand health care issues well enough to make sensible decisions. Right now, I don’t have a lot of confidence in either of them.

  11. John R. Graham says:

    A great post (as always) from Linda Gorman. But it gets worse! The Massachusetts law also jeopardizes the very solvency of private health plans in the Bay State.

    Because it was politically intolerable to allow premiums to rise in line with the costs of Romneycare, the state’s insurance commissioner denied 235 of 276 rate increases in April 2010. For a short time, no new policies were offered and plans suffered significant losses.

    The next month, Blue Cross Blue Shield of Massachusetts, the state’s largest carrier, announced a $55 million provision for anticipated losses in the second quarter alone. Of the 12 largest carriers, five were already operating at a loss. At this point, even if the state allows Blue Cross Blue Shield of Massachusetts to increase rates in line with medical costs, my analysis concludes that the carrier will become insolvent somewhere around 2017.

    Gov. Romney did not give Massachusetts “universal” private health coverage. He put it on a glide-path to a single-payer, government-monopoly health system.

  12. Jared says:

    If anyone is collecting anecdotal evidence, I’ll step up. I am a Massachusetts resident in my early thirties who has had the good fortune of being relatively healthy (something that I hope will continue). I’ve been to the doctor exactly once in the past six years, for a routine physical, yet still my health insurance premium continues to increase every year while benefits remain essentially identical.

    Where are the savings, Mr. Romney?

  13. Josh Archambault says:

    Linda,
    Couple of quick thoughts from MA.
    I will not disagree with you on the underlying point of your piece that regulations matter to insurance markets.
    However, there are a couple of important things to remember in terms of Massachusetts.
    RomneyCare did not reaffirm the mid-90′s regulations in totality, the bill removed many of the regulations that had been previously placed on the non group market by the Legislature in that 1996 law. Those changes allowed some function to return to that market. It still needs work, but the 123,000 folks buying in the non group market are thrilled for the changes.

    You are correct to point out the ongoing history and trouble that the Commonwealth has had with the free care pool. However, the 2006 law was not silent on the issue. The financing deal was structured in such a manner to phase out the pool because of its history, and move away from this flawed system. There were also provisions in the bill to screen for abuses in the system and bring transparency. However, the agency responsible for implementation failed and the current Administration has let them off the hook. A big problem for sure, but not one you can pin on the 2006 law. Chalk it up to lack of political will.

    Finally, I am not convinced the Cogan, Hubbard and Kessler study holds much water. They acknowledge that their methodology is weak…
    “…the data do not permit firm conclusions about the effect of the Massachusetts Plan on premiums”
    “The Plan’s effect on premiums is theoretically indeterminate.”
    And if you pull the data and look at percent change averages for families and individuals per enrolled employee at establishments that offer health insurance from 1996 to 2008, you see:
    1996-98 (family: 2.28%, single: 2.67%)
    1998-2000 (family: 19.57%, single: 13.69%)
    2000-02 (family: 19.6%, single: 23.33%)
    2002-04 (family: 20.27%, single: 23.50%)
    2004-06 (family: 16.39%, single: 7.41%)
    2006-08 (family: 12.19%, single: 8.72%)

    I think these pre-reform spikes provide a greater historical context in the state. I am looking for up to date data to flush out the picture.

  14. Linda Gorman says:

    Guaranteed issue and premium price controls (though it goes by names like community rating and so on) were key factors of the 1996 law that were not repealed. Celebrating the fact that legislators decided to relax certain aspects of a horrible piece of legislation is like celebrating the fact that legislators after legislators order your home demolished they give you a permit to pitch a tent on the ruins.

    On another point, as my post makes clear, aspects of ObamaCare were included in the insurance “reform” in 1996 and were not repudiated by the RomneyCare reform. As a result, data from 1996 on showing percentage rate increases in two year periods, without discussing what was happening in the rest of the country or to wait times and the plan choices available to people buying insurance, are not especially convincing.

    The Cogan study is not alone in showing that guaranteed issue seems to make people worse off. Other states decided to avoid guaranteed issue except in high risk pools. Both approaches guarantee coverage. It is pretty obvious which one has been more successful in keeping premiums down for the majority of the population.

  15. Josh Archambault says:

    Linda,
    You are right that GI and modified community rating were left in place, but in a heavily regulated state such as Massachusetts, getting rid of the nongroup legislatively designed plans was a move in the right direction, I hope we can both agree on that. I just didn’t want that to be lost in the discussion.

    My point in highlighting the Cogan study limitations was that conservatives are using it to show a causal relationship between Romneycare and premium increases, which simply is not there in the study.

    The historical data gives a better understanding of our situation here in MA, and when compared to other states around us, mirror a very similar trend.

    The same is true for wait times in the Commonwealth, the law has not changed that problem significantly– it has been a problem here for years.

    My point with the original post was to provide some context to the discussion. One can critique the regulatory environment in Massachusetts on health insurance, which we do often here at Pioneer Institute, but I think it is another thing to attribute certain issues we have to the 2006 law, when we don’t have the hard data to prove a connection. There are plenty of other things that we have data on that shows poor performance under the law to pick apart instead.

  16. Yvon says:

    Unless I am mistaken, everyone should keep in maind that Romney NEVER said he would destroy Obamacare but that he would issue waivers to all of the states…

    This implies that the law would still be in the books and that he or future Pres could cancel the waivers anytime; this would also allow him to fiddle with the law while waivers are valid.

  17. SJ says:

    Romney’s not a RINO. He’s a conservative. It’s true that Romney raised some fees on a few specified services as MASS Gov, but those are NOT tax hikes. If you think that’s the same as raising taxes, then you’re a fool.
    Massachusetts Department of Revenue: Romney cut business taxes 19 times with a state legislature that is 90% lefty. FACT. He balanced the budget all four years. FACT.

    He’s on record as saying he wants to reduce income taxes, cut the corporate tax from 35% to 20% and eliminate the death tax. He’s not a RINO.

    If you want Herman Cain, Sarah Palin or Michelle Bachman as our candidate, hey that’s great, but you can pretty much guarantee four more years of Obama with either scenario. I like all three of them as much as anyone else, but we have to face the fact that the only one of the three that can win a general election is Bachman, and that’s a hell of a gamble that I don’t think I want to risk.

    Think I’m wrong? I’ll remind you of the Nevada senate repub primary. There were certain radio hosts drooling over Sharon Angle. Tarkanian was practically a lock, but oh no, Angle is “more conservative” (which was bull by the way) Anyway, what was the outcome of the general election? Oh that’s right, Angle got crushed and we have 6 more years of dingy harry.

  18. doc says:

    I have a lot of problems with some of Mitt Romney’s health care, but, I have many more problems with a full blown Marxist like Obama. Today Romney is the only Republican who Polls well enough to beat Obama. I wish Mark would take some of Reagans advice and quit trashing fellow Republicans. I don’t want a Repubic any more than Mark does, but we have to beat the Democrats and Obama. I would like to see Mark, instead of going negative on Mitt and other Republicans, go Positive on a candidate he likes. If he did, perhaps his candidate would poll better and we would have more choices.

  19. Frank Timmins says:

    @SJ

    I don’t disagree with most of what you posted here SJ, but I wouldn’t use Nevada as proof of the Carl Rove theory of any elephant of any make up is better than any donkey as long as they can win. Dirty Harry Reid was going to win Nevada no matter who was on the other side. The bought and paid for unions were mobilized to see to that. On the other hand, if you want to use Delaware as an example……

  20. Frank Timmins says:

    To the Father of our country, George Washington

    You are right, Ron Paul would put most everything in order domestically and be a good constitutional caretaker. The only problem is we would soon wind up flipping a few nuclear warheads on Iran because Mr. Paul not only refuses to participate in traditional geopolitical games, but would remove our military forces from the Middle East. It would probably start by a nuclear dirty bomb being set off in Tel Aviv by some Ahmadinejad gopher. The price of world oil would go to $200 a barrel, and all the Libertarian ideals would mean zilch because we would be in the economic septic tank.