Scott Brown won the Massachusetts senate race by promising to derail the Democrats’ congressional health reform locomotive, a victory that has also thrust his biggest supporter, Mitt Romney, back into the national spotlight. The irony is that, as state senator, Brown helped pass then-Governor Romney’s remarkably similar 2006 state health overhaul. Despite Mr. Romney’s statement at the time that “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced,” his RomneyCare milestone threatens to become a politically costly millstone for his 2012 presidential prospects—or so says Kimberley Strassel of the Wall Street Journal.
The Massachusetts program has used the carrot of generous premium subsidies and the stick of mandated individual coverage to reduce its uninsured population from about 10% pre-reform to 5.1% (Census Bureau estimate) or 2.6% (Massachusetts estimate) last year. Unfortunately, it has failed to contain costs, with insurance premiums continuing to increase considerably faster than the CPI.
Thus, Mr. Romney has a lot of ‘splainin’ to do, and per Ms. Strassel, he’s done a pretty bad job of it, maintaining that mandates are necessary (they’re not) and that cost-control was never a goal (it was). For all his intelligence, experience, money, and degree from the world’s finest business school, he doesn’t know much about health insurance. Neither do his advisors or, for that matter, the entire Republican establishment with its malpractice reform and interstate insurance nostrums, proving once again H.L. Mencken’s dictum: “For every complex problem, there is an answer that is clear, simple, and wrong.”
This may surprise you, but I have a rather positive view of Massachusetts’ reform. It’s a gutsy experiment dealing with some fundamental problems in health care. True, it is deeply flawed, being over-regulated, unnecessarily coercive, too expensive, lacking in incentives for prevention and cost control, and aimed at too limited a market. But it has one redeeming feature that, if fixed, could overcome these deficiencies and produce the national model for effective, efficient health reform. The critical component is the Commonwealth Connector, a marketplace that allows individuals and small business employees to choose from among multiple, portable health insurance plans.
Here’s what is needed:
1. Make it affordable. The Connector’s regulations make health insurance too expensive, (1) by mandating unnecessary benefits (e.g., coverage for wigs, adoption birth-mothers, experimental treatments, obesity, in vitro fertilization, alcoholism, and DES); (2) by adding its own excessive overhead to insurers’ administration costs; (3) by encouraging free riders to buy insurance when they’re sick and to drop it a few months later after they’ve received thousands of dollars of care, (4) by standardizing health benefit packages that prevent innovations to incentivize higher quality and lower costs, and (5) by limiting out-of-pocket spending below amounts affordable to many people. Eliminating these problems would make health insurance far more affordable both to individuals and to the state treasury.
2. Make prevention pay. About three-quarters of all medical spending is for preventable diseases that could be eliminated by personal control of just six health-risk factors: smoking, alcohol abuse, obesity, hypertension, high cholesterol, and high blood sugar. Federal law allows insurers to charge lower premiums to people who succeed in controlling such factors. Massachusetts’ doesn’t. It should. People would be rewarded for practicing healthy lifestyles that reduce costs.
3. Open the Connector to everyone. A big problem with improving medical quality and controlling costs is that bureaucrats usually pick the insurance people are allowed to have, the doctors they’re allowed to see, and the prices they have to pay. These decisions by employers, Medicare, and Medicaid give individuals too few incentives and no power to demand high-quality, low-cost, waste-free medical care. That’s why current coverage models are unsustainable and nearing collapse. The Connector provides individual choice, but only to relatively few Massachusetts residents. Opening the Connector to every commonwealth resident—with continued funding from employers, Medicare, and Medicaid—will go a long way to curing what ails the system.
4. Make it voluntary. The Connector’s mandate for everyone to buy insurance is unfair, ineffective and unnecessary. If health insurance were to become something it’s never been before—a good value—most people would buy it voluntarily. The mandate must be replaced by a value-based carrot and backed up by a free-rider-prevention stick that keeps people from gaming the system to its detriment.
5. Encourage greater insurer participation. The Connector’s process for picking its six participating insurers is lengthy, expensive, paternalistic, and unnecessary. Instead, it should publish uniform rules, allow insurer self-certification, and then use its authority to audit behavior and to correct and punish misbehavior. This will lower insurers’ costs by four to five percentage points and encourage greater participation, competition, innovation, and premium affordability.
These and a few other changes will make the Massachusetts Commonwealth Connector an instant model for doing health reform right. Whether Massachusetts actually does it is, frankly, doubtful. But that needn’t prevent other states from forging ahead with their own solutions based on the Bay State’s experience.
As for Mr. Romney, he should acknowledge with pride that anything as complex as health reform won’t work perfectly the first time out. He has helped midwife a bold experiment demonstrating that giving people health insurance choice really works.
Let the experiments multiply and proceed across all the states. Let the feds observe, assist and learn.