Why the Mandate Fight Won't Sink Romney

Romney's received flak for allegedly flip-flopping on the health mandate. But he can use the issue to redirect attention to a larger problem: weak health cost controls.

Mitt Romney’s support for Judge Henry Hudson’s ruling against the Obamacare insurance mandate has led to predictable howls over Romney’s previous efforts to create a statewide healthcare insurance plan in Massachusetts (which also featured a mandate). Is Romney simply a flip-flopper and a political opportunist?

Actually, Romney is being quite consistent with his previous comments on this issue.  For Romney, insurance is an issue for the state and not the federal government (as is the case with Obamacare).

Here is his statement on the issue from a presidential primary debate back in 2007:

For Democrats, they want to have government take it over. The right answer is to get all of our citizens insured so they don’t have to worry about losing their insurance if they change jobs or have a preexisting condition. But Hillary says the federal government’s going to tell you what kind of insurance, and it’s all government insurance. And I say no, let the states create their own plans, and instead of government insurance, [have] private, market-based insurance.

Romney’s position on Judge Hudson’s ruling is altogether in line with his previous views.

The mandate may become the mechanism for the legal overturning of Obamacare but from a healthcare system perspective it’s not the central problem. The reason Obamacare should be replaced is its inability to confront the problem over the cost of care. The purpose of the mandate is simply to force the uninsured to help fund the entire insurance plan. Without that, covering the uninsured will require a specific tax, and a pretty hefty one at that.

Of course, health insurance really does not function like insurance at all. Insurance is designed to cover rare events that are very costly or will have profound economic effect. Life insurance, flood insurance, collision insurance are typical examples of the proper uses of insurance. Using insurance to cover frequently occurring activities like visits to primary care physicians is one of the reasons insurance is so expensive. The success of the Indiana health plan created by Governor Mitch Daniels is mostly attributable to a much more rational insurance model that focuses on the proper structure for insurance.

As detailed in an article in Health Affairs:

Following the HSA {Health Savings Account} model, the Personal Wellness and Responsibility (POWER) Account is used to fund the deductible. Moving away from premiums and copays that are typically too low to incentivize collection by providers, HIP requires individuals to make mandatory monthly contributions – ranging from 2 percent to 5 percent of income, up to $92/month — to their POWER Account. To prevent participants from obtaining temporary coverage, penalties are stiff for payment lapses: Participants have up to 60 days to make their contribution and are then terminated and cannot reapply for twelve months if a payment is missed.

After their monthly contribution, participants have no other cost sharing requirement except for copays for non-emergency usage of the emergency room. While contributions are higher than traditional Medicaid premiums, participants have total control over how these dollars are spent. Members receive monthly statements detailing the use of the accounts and can apply year-end balances to offset future required contributions only if they have received requisite preventive services. This transforms Medicaid beneficiaries into consumers with an incentive to demand price transparency, make decisions about how to obtain the best value for their purchase, as well as to seek necessary preventive services and maintain a healthy lifestyle.

This model gives patients a real incentive to think about the economic consequences of their seeking healthcare. However, until physicians as well as patients have an economic interest to consider the cost of care in the utilization of health services, the system will remain on an unsustainable trajectory. Obamacare does not allow this dynamic except in a few demonstration projects.

No doubt Romney will have plenty of opportunities to lay out his vision for healthcare in the upcoming presidential election season. He can defend the consistency of his position vis a vis the Obamacare mandate. He will though have to explain how he plans to control the costs of care in our national healthcare system.