By Reid Fletcher
March 27, 2012
PNHP note: The following synopsis of the health care planks of some of the prominent contenders for the U.S. presidency was prepared and offered to us by Reid Fletcher, a second-year student at Northwestern University’s Feinberg School of Medicine. Note that Mr. Fletcher also sketches a picture of the Massachusetts reform of 2006 as part of his analysis. For a more extensive assessment of the latter, see the Mass-Care and PNHP report of last October.
Mitt Romney, Republican Party
Mitt Romney wants to repeal the Patient Protection and Affordable Care Act (ACA) and replace it with a market-based reform. His primary objective is to increase the number of people insured by the wasteful private insurance companies. Despite abundant evidence to the contrary, Romney claims that increasing reliance on the free market will produce more competition and lower costs. His plan would force more seniors into Medicare Advantage (MA) plans which do not provide any added benefit to seniors, are more expensive, and limit the free choice of seniors due to restrictive private insurance care networks. In fact, MA plans are paid, on average, 14 percent more than traditional Medicare per beneficiary. In addition, MA plans are able to game the risk-adjustment system and thereby overcharge Medicare an additional $30 billion annually, or 8 percent of total Medicare spending.
Romney would also block grant the Medicaid system, which would shift costs to the states and ultimately result in fewer benefits being available to lower income individuals. This is essentially a first step toward unraveling the safety net for the very poor, whom Romney admittedly is “not very concerned about.”
His plan also involves a massive expansion of the availability of health savings accounts (HSAs) combined with high deductible plans (HDPs). Individuals and employers can deposit tax-free dollars into HSAs which can be used to pay for medical expenses. The theory behind these plans is that they will make consumers more “cost-sensitive” to the medical services they acquire. In reality, these plans encourage rationing and discourage preventive care. Furthermore, these plans expose patient to greatly increased risk if the HSA runs out due to unexpected illness and the plans have not been demonstrated to lower overall health care costs.
Romney, of course, is also closely associated with the 2006 Massachusetts reform, a description of which is appended.
Newt Gingrich and Rick Santorum, Republican Party
Both Gingrich and Santorum have expressed health reform plans that are essentially identical to Mitt Romney’s plan. The commonalities include the repeal of the ACA, block granting Medicaid, privatizing Medicare, and expanding the use of HSAs.
Barack Obama, Democratic Party
The Obama administration has touted the ACA as the first step toward universal coverage. Unfortunately this is not true. The ACA will leave at least 25 million people uninsured and tens of millions more underinsured. Low income individual will be forced into an expanded, but still poorly funded, Medicaid system. With increasingly fewer providers excepting Medicaid patients, this will prove to be an inadequate solution. Everyone else will be given subsidies to purchase coverage in the broken private insurance market. Studies have shown that the fragmented private insurance system has contributed to the fact that 31 percent of all health care dollars are spent on administration, nearly twice the amount paid in the single-payer Canadian system.
Jill Stein (Green Party) and Rocky Anderson (Justice Party)
Stein and Anderson are both proponents of a single-payer plan, which would essentially be an improved-Medicare-for-all system. Stein is more consistent on this point than Anderson. Anderson, while he supports a single-payer system, has also said he’s leaving the door open for a market-based reform.
In a single-payer plan, everyone would be automatically covered by a single public insurer. Everyone would be given the same level of coverage and everyone would have the same freedom to see any provider they choose. This system would reduce administrative waste to the acceptable Canadian levels, which would save nearly $400 billion each year, which is more than enough to cover all of those who are currently uninsured or underinsured.
Furthermore, mechanisms like capital planning, global budgeting, and bulk purchasing would help to control ever-increasing health care costs and improve efficiency within the system.
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The Massachusetts reform: an analysis
In 2006 the Massachusetts Legislature, under direction from then-Gov. Mitt Romney, passed a major health reform bill which four years later became the model for the ACA supported by the Obama administration. Given the seeming inevitability of Romney winning the GOP nomination and the highly controversial nature of health care reform, it is highly likely the reform in Massachusetts will come to the forefront of the nation’s attention at some point during the fall elections. The Obama campaign will try to weaken Romney by claiming that the Massachusetts plan is successful and a means to increase insurance coverage; meanwhile the Romney campaign will suggest that the Massachusetts reform was successful, but was not the model for the ACA. In truth, both campaigns will be wrong. The Massachusetts was the model for the ACA and it has been unsuccessful.
What was done in Massachusetts?
Like the ACA, the Massachusetts reform increased coverage by expanding public programs for residents up a certain level of the poverty line while forcing everyone else to buy public insurance or face penalties. The net effect has been to push more people into the private insurance market, so as to lower the total number of uninsured, without modifying the existing private insurance system.
An evaluation
While proponents of the Massachusetts reform will point to the fact that the state now has one of the high rates of health insurance coverage in the country (97.3 percent) as evidence of the success of the legislation, a closer look at the situation quickly shows that the reform effort has not been successful.
We will analyze three areas to demonstrate the failure of the Massachusetts reform: insurance for the poor, cost controls, and rate of underinsurance.
Insurance for the poor
One of the biggest changes that came with the Romney reform was to the safety net program that provided coverage to low-income residents. Prior to the reform, the “Free Care Pool” completely subsidized medical services for the uninsured and underinsured up to 200 percent of the poverty line, in addition to partially subsidizing care for residents between 200 percent and 400 percent of the poverty line. Health care reform replaced the Free Care Pool with the “Health Safety Net”, which was covers medical services for those unable to purchase insurance on their own. However, major differences exist between these two programs which have serious implications for the level of coverage for the poor. For example, The Health Safety Net only fully subsidizes care for those up to 150 percent of the poverty line and increases cost sharing for residents up to 400 percent of the poverty line. Thus there is a larger burden placed on the poor, which will ultimately result in avoidance of necessary care and poor outcomes
Cost controls
While Massachusetts now boasts one of the highest level of health insurance coverage in the nation, the state also has one of the highest health care costs per capita. Health care reform has done nothing to
slow the quickly rising costs of health care in Massachusetts, and in fact, by some measures the reform legislation has actually exacerbated the problem. This is largely because the reform failed to address the fundamental defects in the system. Instead of directly addressing the dysfunctional and wasteful private insurance market, the reform pumped more people into the system. Overhead and administrative costs related to private insurance are one of the main drivers of increased health care costs, and the Massachusetts reform, like the PPACA, did nothing to address these deficiencies.
Rates of underinsurance
Rates of underinsurance have skyrocketed in Massachusetts since the implementation of reform. The rising costs of private insurance, combined with the individual mandate to purchase that insurance has forced consumers to opt for low cost options like high deductible health plans. In fact from 2010 to 2011, the number of people in high deductible health plans doubled. These plans shift costs to consumers and have been shown to decrease utilization of necessary medical services. These plans de-incentivize cost-saving preventive care and put consumers at high financial risk if they get sick.
Conclusion
The Massachusetts health reform has not been successful. While the state can boast one of the highest rates of insurance coverage in the country, it also has an excessive amount of underinsurance and skyrocketing health care costs. Given that President Obama’s PPACA was largely based on the Massachusetts reform, the prospects for success of the PPACA are minimal. Simply put, forcing a large percentage of the population into the wasteful and inefficient private health insurance system cannot achieve cost savings or quality coverage for all. The only way to achieve this is to reform the health insurance system, and the most effective way to do this is to implement single payer reform.
