A Response to Gruber on RomneyCare & Health Care Costs
I just came across this letter to the editor of the Wall Street Journal from MIT economist Jonathan Gruber. I don’t know how to confine myself to just one of the letter’s many problems. So brace yourselves, here comes the fisk.
Joseph Rago’s article on Massachusetts health-care reform (“The Massachusetts Health-Care ‘Train Wreck‘,” op-ed, July 7) is exactly the type of selectively misleading use of facts upon which opponents of health-care reform have been relying over the past year.
No comment, other than remember the phrase “selectively misleading use of facts.”
Health-care reform in Massachusetts has covered 60% of the state’s uninsured, has done so at roughly the cost projected before reform was enacted in 2006, and remains overwhelmingly popular with the residents of the state.
Regarding coverage gains, Massachusetts officials used to claim that RomneyCare reduced the share of uninsured residents from around 10 percent to 2.6 percent. In a study released this year, Aaron Yelowitz (a former student and coauthor of Gruber’s) and I show why that figure is too low and why the actual figure is likely 5.1 percent or higher. The study on which Gruber relies — like all other such studies — neither mentions nor attempts to measure the problem that Yelowitz and I identified: uninsured Massachusetts residents appear to be responding to the individual mandate by concealing their lack of insurance, which would inflate the coverage gains. Since that study obtained results similar to our results for Massachusetts adults, that study’s estimate of a 60-percent reduction in the uninsured appears to be an upper-bound estimate, rather than a point estimate.
Regarding costs, I haven’t seen any updated numbers since the Massachusetts Taxpayers Foundation’s whitewash from May 2009. I’d like to see an updated, non-whitewashed report on actual spending and how it compares to the original projections, especially considering that in 2006, the Kaiser Family Foundation reported that Massachusetts “anticipates that no additional funding will be needed beyond three years.“ Updated figures would also allow us to judge how much RomneyCare spent per newly insured resident.
The state has seen a decline in its nongroup premiums of more than 50% relative to national trends…It reduced the costs to individuals of purchasing insurance…[an] enormous reduction relative to pre-reform…
Here’s where Gruber engages in his own “selectively misleading use of facts.” Yes, non-group premiums appear to have fallen for the 4 percent of residents in the non-group market — because RomneyCare shifted those costs to workers with job-based coverage.
It is true that reform has not slowed the growth of group health-insurance premiums, which have continued to rise at exactly the same rate as in the nation as a whole.
The first part of this sentence is an understatement; the second part is false. This report from the left-wing Commonwealth Fund shows that premiums in Massachusetts are growing faster than anywhere else in the nation. And the only study that has tried to isolate the effect of RomneyCare finds that it increased premiums for employment-based coverage by 6 percent (see cost-shifting, above).
Despite Gov. Mitt Romney’s claims, the Massachusetts reform was not designed to slow the growth of health-care cost growth.
It should be obvious by now that RomneyCare wasn’t designed that way. But it sure was sold that way. And so was ObamaCare. Any bets on how long before we hear apologists for both claiming that ObamaCare wasn’t designed to slow cost growth?
The PPACA also includes a series of changes that represent the best thinking about how to control costs, such as an independent rate-setting board for Medicare, pilots of innovative medical reimbursement approaches, and an end to the open-ended tax subsidy to the highest cost health insurance plans in the U.S. None of these is guaranteed to slow the rate of cost growth. But each is better than doing nothing, which was the alternative.
So the, ahem, best thinking on how to contain health care costs is (1) price and exchange controls set by (2) an unelected and unaccountable rationing board, plus (3) taxing health insurance. Bra-vo. Sure, Obama’s National Economic Council chairman Larry Summers says, “Price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time.” But when the alternative is nothing — nothing! — that means the bar for “best thinking” isn’t very high.
In the end, it is impossible to control health-care costs without first bringing as many citizens as possible into our health-insurance system.
As I blogged earlier today, it does not speak well of the Left’s approach to health care that in order to reduce wasteful government spending — or at least pretend to — they must first create more wasteful government spending.
Filed under: Cato Publications; General; Government and Politics; Health Care
RomneyCare Advocates: We Swear, This Time Centralized Planning Will Work
You know things aren’t going well in Massachusetts when supporters of RomneyCare write “there’s some evidence that the reforms signed into law by Mitt Romney in 2006 are struggling.” That’s how The Washington Post‘s Ezra Klein puts it in a post defending RomneyCare. The New Republic‘s Jonathan Cohn offers a similar defense.
Klein mentions only a few of the difficulties confronting Massachusetts. Here are a few more:
- The Commonwealth Fund reports that even though Massachusetts already had the highest health insurance premiums in the nation, premiums rose faster post-RomneyCare than anywhere else; 21-46 percent faster than the national average.
- A recent study estimates that RomneyCare has so far increased employer-sponsored health-insurance premiums by an average of 6 percent.
- The success that Klein sees in Massachusetts’ individual market — which accounts for just 4 percent of the private market — is merely the product of shifting costs to workers with job-based coverage.
- Contrary to Klein’s post hoc spin that RomneyCare “was never an attempt to control costs,” Romney himself promised that “the costs of health care will be reduced.”
- Aaron Yelowitz and I find evidence suggesting that uninsured Massachusetts residents are responding to the individual mandate not by obtaining coverage but by concealing their insurance status. Coverage gains may therefore be less than official estimates suggest.
- Evidence is mounting that, despite stiffer penalties than ObamaCare will impose, increasing numbers of people are gaming the individual mandate by only purchasing health insurance when they need medical care. Such behavior could ultimately cause the “private” insurance market to collapse.
Nevertheless, the Klein/Cohn thesis is basically that costs have been climbing and employers have been dropping/curtailing health benefits for decades. So you can’t blame that stuff on RomneyCare. We should instead be thankful that Massachusetts enacted a new raft of government price controls, mandates, and subsidies to protect residents from those features of “the American health-care system.”
The only problem is that “the American health-care system” is the product of the old raft of government price & exchange controls, mandates, and subsidies. The largest purchaser of medical care in the country (and the world) is Medicare. Medicaid is second. The Left complains so much about fee-for-service medicine fueling rising health care costs and reducing quality, you’d never know that their beloved Medicare program is the primary reason for its dominance. Likewise, the reason why employers are dropping and curtailing coverage is that the government turned the private health insurance market into an unsustainable employment-based system that is doomed to unravel. Cohn’s book documents the inhumanity of that system so well, you’d think it would sour him on the sort of centralized planning that created it. I could go on…
RomneyCare and its progeny ObamaCare are attempts by the Left’s central planners to clean up their own mess. If Klein and Cohn want to defend those laws, pointing to the damage already caused by their economic policies won’t do the trick. They need to explain why government price & exchange controls, mandates, and subsidies will produce something other than what they have always produced.
ObamaCare Regs’ Effect on Uncompensated Care Overblown
An Obama administration “fact sheet,” released alongside the interim final rules for several of ObamaCare’s cost-increasing mandates, claims those mandates will reduce the “hidden tax” imposed by uncompensated care:
By making sure insurance covers people who are most at risk, there will be less uncompensated care and the amount of cost shifting among those who have coverage today will be reduced by up to $1 billion in 2013.
According to research by the Urban Institute, that “hidden tax” isn’t very large:
Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurers in the form of higher charges.
As the Congressional Budget Office repeatedly lectures Congress, “Uncompensated care is less significant than many people assume.”
Likewise, these mandates’ effect on uncompensated care will be less significant than the Obama administration would like you to think. Using data from the Centers for Medicare & Medicaid Services and a reasonable assumption of 6-percent annual growth, total private health insurance premiums in 2013 will be in the neighborhood of $1.1 trillion. So the administration is boasting that these mandates will reduce the 1.7-percent “hidden tax” imposed by uncompensated care to 1.61 percent.
Indeed, the whole of ObamaCare may not do much to reduce the “hidden tax” of uncompensated care. After Massachusetts enacted a nearly identical law, the Urban Institute reports, “high levels of emergency department (ED) use have persisted in Massachusetts. Specifically, ED use was high in Massachusetts prior to health reform and has stayed high under health reform.” A lot of uncompensated care comes in through the ED.
Finally, notice how a 1.7-percentage-point premium surcharge is a bad thing if President Obama is ostensibly rescuing you from it, but a good thing if he’s imposing it on you.
Looking to a Failed Model for Health Care Reform
CNN health care correspondent Sanjay Gupta, who was briefly considered for surgeon general in the Obama administration, reports that the administration is looking to Massachusetts as a model for its forthcoming health care reform proposal. That model would involve an individual mandate, an employer mandate, a “connector” with increased insurance regulation, and massive subsidies for the middle class.
Given that the Massachusetts plan is expected to run $2-4 billion over budget over the next 10 years, has failed to come close to universal coverage, has done nothing to reduce health care costs (indeed, may have driven up insurance costs), and has actually led to increased wait time for primary care physicians, that may not be the best model out there. In fact, perhaps the Obama administration might like to look at studies by David Hyman and me detailing the Massachusetts model’s many problems.
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