The Cost of Romneycare

Health reform was trumpeted as the chief accomplishment of Romney’s one term as Massachusetts' governor. Yet his plan's reliance on an individual mandate raises many questions as well.

When Massachusetts’ health reform plan was enacted in 2006, one of the principal features was the concept of the individual mandate to purchase or have health insurance, on the basis of CommonwealthCare, essentially a system of low-cost health plans with insurance premiums subsidized by the Commonwealth.   The system also includes a form of “play or pay,” whereby most employers must contribute to their employees’ health insurance. Fueled by the individual mandate, the number of uninsured in Massachusetts has fallen dramatically.  That’s a real accomplishment, although it’s important to examine how that was done.

Health reform was trumpeted as the chief accomplishment of Romney’s one term as Governor. Yet some critics argue that a mandate has dangers as well:  among other things, what incentive would there be to reduce the costs of premiums?  The Commonwealth has an interest in that issue, too, not only to reduce the overall cost of healthcare but in fact to reduce its own costs, given the subsidies.

Yesterday’s Washington Post had a lead article, “In Retooled Health-Care System, Who Will Say No?,” which discussed limiting access to health care treatments after health care reform – in a word that no one in politics wants to use, rationing.

Here’s what the Post reported on Massachusetts (emphasis added), with a bit of federal policy at the end:

Massachusetts, which has achieved near-universal health coverage but is struggling with high costs, is considering major changes in this direction. A legislative commission is about to release a report recommending that the state goad providers into joining networks that would receive payments for each enrollee, rather than for each procedure delivered.

Proponents say it would differ from the "capitation" approach -- fixed payments for each member -- used by the HMOs in the past because there would be more focus on performance and long-term value than on simply keeping costs down.

Skeptics say such a system would force the state's many solo practitioners or small groups of physicians into big networks and would renew complaints from the HMO era about limiting patients' choice. In Massachusetts, for instance, most parents with a sick child would demand access to Children's Hospital; and most cancer patients would want to go to the Dana-Farber Cancer Institute, no matter what network those were in.

The plans being considered in Washington do not go nearly as far in seeking to change providers' spending habits. They contemplate changing some Medicare payments from fee for service to a "bundling" system in which providers would be paid for an entire episode of care, giving them an incentive to reduce repeat hospital admissions. Another idea is to empower the Medicare advisory panel whose recommendations now tend to be ignored by Congress, or to create a separate, Federal Reserve-like entity to make tough decisions about federal health-care spending.

So Massachusetts, through its Payment Reform Commission, is contemplating going further than the current federal proposals, with the concept of “global payments” to insurers.  Call it “Capitation Light.”  This leads to a number of questions:

1. As Massachusetts goes, will any new federal system inevitably follow?  Congressional Republicans have a duty to ask this question now, when the plans are being debated, not later when it’s too late.  This directly impacts the current debate. Capitation was not popular; will Republicans be seen as the opponents of Capitation Light?
2. Does the very concept of a mandate lead inexorably to rationing? The burden should now be on mandate proponents to show that it does not. (Remember, Obama opposed an individual mandate in the primaries last year.  Here’s a Democratic take on why that was smart politics for them.)
3. We’ve heard a lot in the recent healthcare debate about how most employed Americans are happy with their healthcare.  Would a switch to capitation-like payments as an obvious next step change that?
4. More specifically to Massachusetts, what promises were made at the time CommonwealthCare was enacted?  Have the cost estimates proven accurate?  If so, why, and if not, why not?  (Granted, personal incomes have been squeezed, making the cost of the mandate higher for many people, but it can’t all be blamed on the recession.)
5. The bit in the quote above about Children’s Hospital and Dana-Farber is a bit of a red herring.  Those are wonderful hospitals, but Massachusetts full of wonderful hospitals and doctors.  Here’s the real question:  does Capitation Light mean that patients will be sharply restricted from specialist care? Under what circumstances and standards? And who makes those decisions:  doctors, patients, or insurers?

For an analysis of the payment reform proposals from a physician perspective, see here.  For an insurer perspective, see here.

Perhaps the proposed Massachusetts reforms will lead to a Mayo Clinic-like nirvana of coordinated care.  Perhaps this time there really will be a focus on “prevention” (but if so, why criticize all the spending on MRIs?).  But I’m skeptical of arguments that “it’s different this time” when the financial incentives are so clear.  That applies to health insurers as much as to mortgage brokers or anyone else when financial incentives are geared a certain way.  Human nature is human nature.  And in a crowded and busy healthcare system, in which reform will likely lead to more paperwork, not less, the Mayo Clinic vision seems difficult to implement in practice – one reason why it would be easier, as well as cheaper, for the Commonwealth simply to delegate the task to a person’s insurance carrier.

Meantime, the Massachusetts Republican Party has a Martha’s Vineyard-sized whale of a problem in coming up with its own proposals for healthcare. Here’s what the party’s principles say about healthcare:

Healthcare

Every citizen should have access to affordable healthcare without excessive government intrusion or control.  Massachusetts Republicans support applying market-based solutions to achieve greater healthcare access, lower patient costs, and improve quality of care.

Unsurprisingly, that’s effectively the Romney vision, as he was the last GOP Governor. Republicans may oppose the Payment Reform Commission’s ideas, but the Democrats would respond that they’re just applying the same principles of “market-based solutions” that Republicans support. If patients – who must now have insurance – oppose “global payments” as they did capitation in the 1990s, the Democrats will blame Republicans for the design of the system that led to this result. So unless the Republicans come up with something different, they could be in the situation of taking the blame for de facto capitation and eventual rationing, even though the Democrats actually introduced the second step.

Unless, of course, Romney can run and win for his old office next year on a platform of fixing CommonwealthCare from the changes the Democrats have made. After all, he wrote in 2006 that “A great deal will depend on the people who implement the program.”

Success there – limiting costs while avoiding rationing – really would be an accomplishment of national importance.