Romney Care

This week Edmund F. Haislmaier an expert in health care policy and markets with the Heritage Foundation (a conservative Republican think tank), addressed the Cato Institute (a libertarian research foundation) regarding the Massachusetts Health Care Reform.

While I would encourage you to read the whole speech, I’m going to excerpt the highlights because I know it is a long tedious read. I added my own headers, they don't belong to the origional speach.

INTRO

"my contribution was mainly to introduce the folks in Massachusetts to the concept and design of the Connector
as the tool for organizing and administering their broader, consumer-choice reforms.

Credit for starting from a consumer-centered approach goes principally to former Governor Mitt Romney and his administration. Credit for the details of the end product goes principally to the Massachusetts legislature. In between, there were numerous stakeholders who also shaped the results."

TWO PART APPROACH

"At its core, the Massachusetts legislation is a two-part approach to making consumer choice and ownership of
health insurance the fundamental organizing principle of a state's health system.

The first part is a reorganization of the state's insurance market to provide small business with a simple and
practical way to defined-contribution their workers into individual, portable coverage of the workers' choice
without, in the process, losing any of the benefits of current federal standards and tax preferences for employer-group insurance.

The second part is an accompanying shift of taxpayer funding for the uninsured from a provider-centered, and
largely opaque and unaccountable, reimbursement approach to a more transparent, consumer-centered system of
premium support for the purchase of private health insurance."

MARKET ORIENTATION

"Market-oriented health reformers have long argued for improving the health care value proposition by making
consumers, as opposed to employers or government, the ultimate decision-makers in the system. It is only when
the users and the payers are one and the same that the incentives in the health care system will be properly aligned to produce better value—that is, better results at better prices."

SIMILAR TO SCHOOL VOUCHERS

"The issue of reforming public education offers a good analogy. Children certainly get a better education if their parents are more involved and engaged in their school and its curriculum. But to transform the system substantially and produce better results on a large scale, it is necessary that parents gain direct control over the funding of their children's education and the ability to choose which school they will fund. Truly transformative change will occur only if the educational system is reorganized around the principle of parental choice made possible through education vouchers.

In the same way that education vouchers make schools the agents of parents, consumer choice and ownership of health insurance makes health insurers the agents of patients. It is that fundamental change, above all others,that can truly transform the whole health care system."

OTHER REASONS TO SHIFT TO CONSUMER CHOICE

"A second good reason a state would want to shift to a consumer-choice model is that the old employer-based model is steadily and irreversibly eroding. Today, only 60 percent of workers are covered by employer-sponsored insurance,"

" A third, and closely related, reason for shifting to a consumer-choice model is to better accommodate non-traditional employment patterns."

"A fourth reason to shift to a consumer-choice model is to reduce coverage disruptions. Far from being a static population, there is high turnover among the uninsured as individuals constantly lose and gain coverage."

"Finally, the fifth reason a state would want to shift to a consumer-choice model is that it is a precondition to removing obstacles to greater competition among medical professionals delivering health care services—competition to devise not only ways of reducing costs, but also ways of improving quality and outcomes. This is particularly true when it comes to the current system of financing uncompensated care largely through hospital emergency rooms. The creation of Medicaid and Medicare, combined with increases in the costs and complexity of care resulting from advances in medical science, and the imposition of a federal treatment mandate under EMTALA have collectively produced the current situation wherein the vast majority of residual "charity care" in the U.S. health system is delivered in hospital emergency departments."

PROBLEMS WITH OUR CURRENT SYSTEM

"One inescapable result of making hospital emergency rooms America's de facto health care safety net is that many hospitals are effectively deemed "too important to fail." For if society is counting on those hospitals to provide this essential public service, then they must be kept open—and since "free care" isn't really "free," it must be funded either through explicit public subsidies or cost-shifting to private payers, or a combination of both.

Therefore, hospitals need to be publicly subsidized and allowed to overcharge private patients to keep their doors open, regardless of their cost structures or the quality of care they provide. Furthermore, anything at all that might threaten those existing funding arrangements, and thus the survival of the hospital, must be avoided."

"It is also down this path that we find the justification for the tens of billions in federal and state tax money being shoveled out to hospitals to offset their uncompensated care costs, with virtually no transparency and no accountability. Today, that cost to America's citizens is in excess of $40 billion annually."

"it also has the distorting effect of shifting more care to that venue and away from lower-cost, and often more appropriate, alternatives such as clinics and physician offices. In the case of individuals with chronic conditions, that shift often produces less continuity of care, resulting in poorer outcomes and higher system costs.

Thus, converting hospital uncompensated-care subsidies into a system of premium support to aid the low-income in buying coverage is a precondition for creating value-focused provider competition."

INDIVIDUAL MANDATE

"final prototype issue is the contentious one of the Massachusetts individual mandate or similar "personal responsibility" provisions. Clearly, as long as there is a federal mandate on hospitals to treat patients regardless of ability to pay, there will be an incentive for some to forgo purchasing health insurance and, if they need care, to try to stick others with the bill. Insurance reforms and premium support can never completely counter that incentive. Thus, state governments will inevitably have to consider some mechanism for enforcing personal responsibility if they are to escape would-be "free-riders" imposing not only their direct costs, but also the bigger, indirect costs—such as the cost of propping up uncompetitive providers—on the rest of us.

Here, too, the Massachusetts experience is instructive. Governor Romney did not propose a health insurance mandate. What he proposed was that those who still insisted on going without coverage in a reformed system demonstrate proof of their willingness and ability to pay their own bills by posting a bond or establishing an escrow account. The Massachusetts legislature replaced those provisions with a requirement that individuals buy health insurance or be fined—essentially an individual "play or pay" requirement.

I contend that the governor had the better idea, on both philosophical and economic grounds. Other states will likely improve on the Massachusetts prototype by developing still different approaches. However, regardless of the specific mechanisms and their relative merits, the larger issue is important. Put simply, one cannot expect the system to work well if individuals are allowed to privatize the benefits of their actions and socialize the costs."

HOW THE MASSACHUSETTS PLAN HAS PREFORMED

"Barely one year later, the Massachusetts reforms are still in their start-up phase. Nonetheless, we do have some sense of how implementation is going.

1. After receiving bids from 10 carriers, for the first plan year, six different carriers are now offering 42 plan options through the Connector for the unsubsidized population, and enrollment in those plans began on May 1. That's approximately 41 more options than most Americans have today. Nationally, 80 percent of companies offering health benefits provide workers a choice of one plan—take it or leave it. Outside of federal workers in the Federal Employees Health Benefits Program, Massachusetts citizens getting health insurance through the Connector are among the only group of Americans who can shop in a competitive health insurance market with such a broad range of health care choices.

Pre-reform, the lowest premium for a typical uninsured 37-year-old in Boston was $335 per month with a $5,000 annual deductible. Now, through the Connector, the same individual can get health coverage for $184 per month ($118 pre-tax) with a $2,000 deductible—well below the $250 a month target set back when the legislation was being developed. Indeed, most can get a health plan worth twice the value at half the price.

But had the state allowed health plans into the Connector on an "any willing plan" basis and not required the board's "seal of approval," certifying all plans already approved by the state's insurance commissioner, Massachusetts residents might have had even more choices and a more competitive marketplace. Moreover, had the legislature done more to revisit the inflexible regulatory regime in Massachusetts, including 43 benefits mandates, health insurers could have offered residents still more variety and even more affordable products.

2. In the past year, the number of uninsured in Massachusetts has been reduced by 34 percent. As of June 1, enrollment of the uninsured eligible for subsidized coverage through the Commonwealth Care program was 78,900— ahead of the target set of enrolling half the eligible population (70,000) by July 1, 2007—and as of July 1, enrollment was 92,046.

3. For the year to date over the prior period (October 2006–May 2007), uncompensated care pool utilization has decreased by 12.8 percent, and the associated hospital costs are already down by 9.3 percent."