Checking on ‘Romneycare’ 

Public skepticism about more government control of health care remains a serious obstacle for both President Barack Obama and Republican primary candidate Mitt Romney.

As governor of Massachusetts, Romney instituted an early statewide version of Obamacare, mandating the individual purchase of insurance. Romney continues to defend his system with desperate attempts to distinguish it from Obamacare. The best he can say is that his program was constitutional, since states, unlike Washington, possess the so-called “police power,” allowing them to regulate most anything. 

Regardless, Romneycare’s constitutionality does not imply that it was a wise policy. To be sure, it has caused about 95 to 96 percent of Massachusetts residents to be insured. But 90 percent or more were already insured before the law passed.

So Romney’s accomplishment was actually quite modest. But the cost has been anything but.

Last year, Massachusetts State Treasurer Timothy P. Cahill wrote that Romneycare “was projected to cost taxpayers $88 million a year. However, since this program was adopted in 2006, our health-care costs have in total exceeded $4 billion.”

Romneycare spread the financial pain widely. In June, the Beacon Hill Institute estimated higher costs of $8.6 billion since the law was implemented. Just $414 million was paid by Massachusetts.

Medicaid (federal payments) covered $2.4 billion.  Medicare took care of $1.4 billion.  Even more costs, $4.3 billion, have been imposed on the private sector — employers, insurers, and residents. 

As expenses have risen, so have insurance premiums. Economists John F. Cogan, Glenn Hubbard and Daniel Kessler estimate that Romneycare inflated premiums by 6 percent from 2006 to 2008.

Gov. Deval Patrick, Romney’s Democratic successor, insisted that premiums not rise. Predictably, his rejection of proposed rate hikes required insurers to operate at a loss.

Robert Dynan, a career insurance commissioner, wrote that the state “implemented artificial price caps on HMO rates. The rates, by design, have no actuarial support.” Patrick’s price controls did not fare well in court and his administration eventually negotiated reduced rate hikes. But the governor then came up with a new legislative program to arbitrarily cut medical costs.

The Beacon Hill Institute warned that this would result in “capping services provided by physicians and other caregivers. These are, in effect, price controls that will dampen the incentive to provide services and lead to longer wait times and the rationing of health care.” 

Even worse, bankrupt insurance carriers would translate either to no health care coverage or to expensive government bailouts. John Graham of the Pacific Research Institute observed that “if politicians refuse to allow health plans to increase their premiums at a rate commensurate with the increase in medical costs, health plans will plunge into financial crisis.”

Finally, Romneycare inflated demand for medical services without increasing the corresponding supply. Earlier this year, the Massachusetts Medical Society discovered “more than half of primary care practices closed to new patients, [and] longer wait times to get appointments with primary and specialty physicians.”

Although the expansion of insurance was supposed to reduce emergency room use, Grace-Marie Turner of the Galen Institute notes that in Massachusetts, “difficulties in getting primary care have led to an increasing number of patients who rely on emergency rooms for basic medical services.” Thus, uncompensated care still costs Massachusetts more than $400 million annually. 

Romney’s signature policy achievement is a failure that raises doubts he is the Republicans’ best choice for president.
 
Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.

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Doug Bandow

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