Romneycare's Fatal Flaw

Stephen Spruiell is a staff reporter for The New Republic.

We know he's against it, but how does he square his opposition to it with his support for a similar plan in Massachusetts? His answer - what's good for the states is not always good for the country - looks increasingly weak now that flaws in the Massachusetts model are coming to light. And yesterday, the Heritage Foundation's Robert Moffit, an erstwhile supporter of the Massachusetts plan, declared in a Washington Post op-ed that Heritage's support for the individual mandate, a central feature of both Romney's plan and Obama's, was mistaken. "Our research . . . has led us to realize our initial idea was operationally ineffective and legally defective," Moffit wrote.

Moffit wrote that he first noted problems with the individual mandate in a Spring 2008 paper he published in the Harvard Health Policy Review. He did not officially renounce his past support for the Massachusetts plan, but he did use Massachusetts as an example of how the individual mandate fails to achieve its intended purpose. The problem with the mandate is that it has to be enforced - an idea that is unpopular and that few politicians are willing to see through. "In Massachusetts," Moffit wrote, "the first state to enact an individual mandate with tax penalties and fines, the public authorities have already exempted approximately 60,000 persons from its terms."

Consequently, the Massachusetts system experiences severe and debilitating "churn," as those exempted individuals (and others who simply choose to pay the fine) sign up for health insurance a few weeks before they need a major procedure and then drop it after a few months. The Boston Globe reported that "In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan."

Enforcement of the individual mandate "didn't work as planned," the Globe reported, and "consumers who work for small businesses have ended up shouldering a much larger burden."

Romney's successor, Gov. Deval Patrick, has announced a few tweaks here and there to address this problem, but nothing like the kind of enforcement that would be required to make the system work. That's because, as Moffit noted in his Harvard esssay, "Politically, the pursuit of an individual mandate would require an insistence on a level of public coercion by unspecified means that does not yet enjoy anything close to a public consensus." The enforcement mechanisms in Obamacare also vindicate Moffit's view: The penalty for evading its individual mandate is relatively small; its constitutionality is suspect; and it might not even be enforceable.

I spoke with Moffit on the phone after the publication of his op-ed, and I asked him to elaborate on his observations about the individual mandate, particularly in the light of the problems Massachusetts has experienced. Moffit says that Romneycare was addressing a real problem - the nearly $50 billion in annual uncompensated-care costs that accumulate as a result of free emergency-room care for the uninsured - but that it has proved to be a "mixed bag." Romneycare "reduced the uncompensated-care costs for hospitals," he says, but Romney's successor has failed to cut uncompensated-care subsidies. "Even though hospitals' uncompensated-care costs went down, Patrick continued to funnel taxpayers' money to them anyway," Moffit says.

Another problem is runaway insurance mandates. Even though Romney himself wanted fewer mandatory benefits and more flexible plans, the bill he signed gave state bureaucrats the authority to define "minimum" plan standards. As Michael Cannon of the Cato Institute has noted, lobbyists in Massachusetts have successfully pushed for the inclusion of prescription drugs, preventive care, drug-abuse treatment, hospice services, fertility treatments, prosthetics, telemedicine, and numerous other mandates in the definition of "minimum"; this has driven up the cost of health insurance in Massachusetts substantially.

#adFinally, there are the problems with enforcing the individual mandate. "There doesn't seem to be any way around this," Moffit says, "unless you change the rules governing health insurance." The ban on exclusions for pre-existing conditions - which necessitates the individual mandate - doesn't appear to be workable. That's why Heritage scholars such as Ed Haislmaier are moving away from the idea of simple guaranteed issue and toward an "earned" guaranteed issue under which people would be guaranteed coverage "if they can give evidence of 18 months or more of prior creditable coverage." (Moffit laid out some additional alternatives to the individual mandate in his Harvard paper.)

If Heritage is moving away from its support for an individual mandate, where does that leave Romney? To date, his statements in defense of Romneycare and in opposition to Obamacare have strained against each other. Asked by Newsweek's Andrew Romano to explain the difference between the plans, Romney said, "I can't think of a great metaphor. Maybe Dr. Jekyll and Mr. Hyde: They both have two arms and two legs, but they're very different creatures." Unfortunately, Jekyll and Hyde is exactly the metaphor that comes to mind for many conservatives listening as Romney defends his plan but attacks Obama's.

"I think that some Republicans believe that what we did in Massachusetts has to be decried in order to justify their criticism of Obamacare," Romney told Newsweek. "But in my view, they're wrong. We're better off pointing out those things about Obamacare that we don't like instead." The problem is that conservatives dislike the same things about both plans. Romneycare and Obamacare both empower a bureaucracy to design one-size-fits-all insurance plans, which consumers are then forced to buy. To be sure, Obamacare comes with higher taxes, Medicare cuts, and deficits - all huge concerns - but its individual mandate is just as unpopular in polls where respondents are reminded that there are penalties for non-compliance.

Nor can Romney simply blame his health-care plan's inadequacies on poor implementation: Conservatives will correctly counter that bureaucracies do not have the proper incentives to implement such programs well. Heritage and Moffit have provided Romney with a graceful path for admitting that, in hindsight and with the benefit of empirical evidence, the individual mandate is not a workable solution to the problem of the uninsured. It's a path he should take.

(The opinions expressed in this commentary are solely those of the author.)
By Stephen Spruiell:
Reprinted with permission from National Review Online