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.