Romney’s Universal Healthcare Plan Anticipates Large Cost Overruns

Stanley Feld M.D.,FACP,MACP

Universal Healthcare coverage is an important idea. It is not synonymous with a single party payer as some would like us to believe. When Mitt Romney was governor of Massachusetts he had a bipartisan bill passed for universal healthcare coverage. The coverage was going to be provided by multiple insurance companies. Governor Romney’s goal was to achieve universal healthcare coverage using the private sector. Market forces were supposed to control costs and there would be no need for government single party payer.

I predicted the Romney plan would not work. The reason is simple. The rules of the game were not changed for the insurance industry, the hospital systems and the physicians. The reason this important idea cannot work is because the program was superimposed on the rules of a broken healthcare system.

The patients thought they were going to get a good deal because now they had guaranteed coverage. Mitt Romney was a hero of the people. As soon as the legislation was passed the insurance industry was fighting over the premium price. The premium is expected to rise next year.

“Enrollment in the state's new subsidized health plan is growing so quickly that the state could face a funding gap as large as $147 million by the end of the fiscal year, according to a state projection.”

"It's a good problem to have - people are getting insured and hopefully getting care," said state Senator Richard T. Moore, cochairman of the Legislature's Health Care Financing Committee. "But any shortfall is a big deal.

The subsidized program is part of the state's unprecedented initiative requiring nearly all residents to have health insurance. Even if the gap reaches $147 million, there is no indication it would cripple healthcare reform.

"It's too early to make any departure from the health reform plan," said Leslie Kirwan, secretary of administration and finance and chairwoman of the Commonwealth Health Insurance Connector. "We will follow the trends and adjust, if needed."

This is a lame bureaucratic statement preparing the state of Massachusetts for a tax increase.

“Financial pressures will grow for fiscal 2009, which begins July 1, since insurers who participate in the subsidized program are expected to ask for significantly higher payments from the state. In addition, there is uncertainty about how much the federal government will contribute toward the total cost.

The state budgeted $472 million this fiscal year for the subsidized program, based on enrollment estimates made last winter. The program, called Commonwealth Care, provides comprehensive insurance to people without access to work-based coverage who earns less than 300 percent of the federal poverty level, or about $31,000 for an individual. The state money pays the full premium for the lowest-income residents and subsidizes the rest. Members are responsible for small co-payments.

Outreach has resulted in more than 133,000 people signing up. If enrollment reaches the high estimate of 178,280 by June 30, Holland said, the state cost could hit $619 million.

The enrollment booms "is a sign of success, not failure," said John McDonough, executive director of the advocacy group Health Care for All. "The sky is not falling. There's a budget challenge."

Massachusetts has a lot of "budget" challenges.

“McDonough also said the higher enrollment suggests that there are more uninsured people in Massachusetts than state surveys showed.

Commonwealth Care is one part of the state's effort to cover the uninsured.
The state has some flexibility built into its $27 billion budget to help fill the likely gap. Kirwan can shift money from the $448 million Health Care Safety Net Trust Fund, which pays for care at hospitals and health centers for uninsured patients.

Long-term funding of healthcare reform depends, in part, on shifting more and more of those funds to insurance subsidies over the next few years.

However, this year's state budget includes significantly less money than last year's for the safety net, and spending in that account last year did not go down as much as some had expected, according to preliminary figures.

Hospital officials are concerned about getting stuck with unpaid bills.
Boston Medical Center and Cambridge Health Alliance negotiated a special deal in the health reform law that guaranteed them $287 million a year through 2009 in fees and increased Medicaid rates
"This is one of many warning signs, especially in tandem with the projected state budget deficit and the skyrocketing cost of healthcare in the state," said Alan Sager, professor of health policy and management at the Boston University School of Public Health. "The [healthcare] law is very shaky on the revenue side."

Mitt Romney’s plan does not include price transparency on the part of all stakeholders. The plan does not provide consumers with ownership of their healthcare dollar. The plan does not encourage competition. The result of the plan has to be failure with cost overruns using the rules of the present healthcare system.

When the plan fails the healthcare wonks who promote a single party payer system will claim the failure of the Romney plan has proven that universal healthcare has to be regulated by the government as the single party payer

The only thing the Romney plan demonstrates is a governments lack of understanding of the problems in the healthcare system. The plan does not speak to the issue that 80% of the healthcare dollar is spent on the complications of chronic disease. This is where the most saving can be achieved.

It does not face the issue that we have to deal with the obesity problem in the country.

It does not deal with the insurance industry’s abuse of its power or the abuse of all the stakeholders.

It does not deal with patients’ responsibility for their care or their need to own and control their healthcare dollar. A Romney like plan will only succeed when we deal with these defects in the healthcare system.

It deals only with the concept of how much money we are going to put in the system and whom we will penalize. If the plan had been constructed correctly and motivated patients to create a competitive healthcare system, the universal healthcare concept of Romney and Schwarzenegger would have a chance to succeed.

Hillary Clinton’s healthcare proposal is similar in that it is also built for failure. Failure proves the concept does not work. The replacement will be a single party payer.

The consumer is the only one who can force politicians to understand the problems in the healthcare system.

Comments

[KGilbert]

Good commentary. I agree that the incentives still need to be adjusted. Still, it will be interesting to see what savings do come out of this plan. Having universal coverage should reduce emergency room visits and unpaid bills. Eventually this savings should trickle down to the patients (in an ideal world). The magnitude of savings will not be immediately obvious, but desperately needs to be quantified. No one is going to get this right on the first shot - how kind of the taxpayers in MA (and soon here in CO?) to give us some real data to use to inform future reform plans.

[forHealth]

It nullifies the usual argument that only through universal health insurance will the costs go down. In reality, Massachusetts has demonstrated just the opposite. Instead of providing affordable options, the insurance providers for that state see a blank check. The Romney plan does not provide any accountability on the part of insurers once they receive their easy premium/tax money.