Part VII: RomneyCare

Yesterday, I took a look at Mitt Romney's record on taxes and fees which gives us a great picture of how Mitt Romney likes to manage the government.  No comprehensive review of Mitt Romney's economic leadership is complete without looking at RomneyCare. We can really learn a lot about his leadership skills by look at this program in great detail.

The Creation Of RomneyCare 

Mitt Romney got his idea for RomneyCare after hearing the Heritage Foundation propose the idea of individual mandates as a  conservative alternative to Hillary Clinton's attempt to nationalize the United State's health care program in the 1990s. Conservative think tanks and politicians opposed the idea of a universal health care. They wanted individuals to be responsible for their own health care, not the government. 

Once Mitt Romney heard Heritage Foundation's proposal, he decided that he would undertake a serious in depth and detailed investigation to see if he could make the conservative think tank ideas a reality:

Romney had started, naturally, with a Bain-style strategic audit, pulling together experts from business, academia, and government, and posing a few basic—though frequently overlooked—questions: Who exactly was uninsured? Why were they uninsured? What could be done to enable people to keep their health coverage even if they switched jobs or worked as independent contractors?

A survey of 5,000 state households turned up some surprises. Twenty percent of the uninsured were eligible for Medicaid but had not enrolled. Another 40 percent had annual earnings high enough to afford health care but had decided to forgo it. The remaining 40 percent were earning too much to qualify for Medicaid but not enough to afford health insurance.

Romney focused on the fact that so many people who could afford health care had decided to go without it. He asked for data on the bundled price of health care to be unpacked and looked for ways to change the market conditions that had driven up the cost of care. He ultimately settled on a measure, known as the Connector, which created an entirely new market for health care—enabling individuals and families to purchase private health insurance, with pre-tax dollars, at a savings of 20 percent to 40 percent. (Romney also pressed for eliminating a number of state-imposed mandates on health insurers, as these mandates had the perverse effect of driving up premiums and leading some companies to drop health insurance as a benefit. The legislature refused to go along, but did agree to a moratorium.)

Because, under the Connector system, health coverage was not tied to an employer, residents had a property right to the insurance and would not lose it if they switched jobs. “This is something conservatives have been trying to achieve for 50 years,” says Robert Moffit, a former Reagan administration official who, as director of Health Policy Studies at the Heritage Foundation, regularly consulted with Romney.

Romney created an Internet portal for hospitals and clinics to enroll eligible residents in Medicaid automatically when they sought treatment. For uninsured residents whose income was too high to qualify for Medicaid, Romney offered a subsidy funded from the state’s uninsured care fund, which totaled about $1 billion. Romney asked an MIT economist, Jonathan Gruber, to develop an econometric profile of this segment of uninsured residents. Gruber discovered that they were disproportionately young single males who were both educated and healthy, so the subsidies were unlikely to be greater than the $1 billion in the pool.

True to form, Romney became deeply immersed in crafting the health-care proposal. Moffit recalls that when he was asked to brief Romney, he found the tables turned. Romney was the one who gave Moffit the comprehensive PowerPoint presentation. “In 25 years of briefing elected officials and senior government executives, this was the first time I was the one who got briefed,” Moffit says. “It was like being in a private class with a very high-energy professor, and Romney was the professor and I was the student.”

Mitt Romney was confident that his health care plan would be a success because he had worked hard for the previous two years to keep Massachusetts financially stable.

When Mitt entered into office in 2003, he was a left with a massive deficit of approximately $3 billion.

However, Mitt Romney was able to balance the state budget for each year of his administration and got the state out of debt by implementing a mixture of aggressive reduction in the size and cost of government along with bold strategies to spur economic growth.

By 2005, Mitt Romney had a budget surplus of $1 billion and by the time he left office in 2007, he left the state had a $ 2 billion surplus.(Source) In contrast, President Obama did not work to make sure that America was in good financial shape before enacting ObamaCare. He simple went full spead ahead with his health care plan. 

Having a budget surplus of $1 billion in 2005 allowed Mitt Romney to confidently to unveil his health care plan in 2006.When Mitt Romney introduced his health care plan on Beacon Hill, he made sure that his proposal wouldn't undermine all his hard work of whipping the state into financial shape. Thus, when his plan was presented, it was estimated to cost less than 1.5% of the state budget and that it would be simple program since the bill was only 70 pages long.

However, Mitt Romney's health care plan wouldn't sail through the Democratically controlled state congress unmolested:

"The legislature made a number of changes to Governor Romney's original proposal, including expanding MassHealth (Medicaid and SCHIP) coverage to low-income children and restoring funding for public health programs. The most controversial change was the addition of a provision which requires firms with 11 or more workers that do not provide "fair and reasonable" health coverage to their workers to pay an annual penalty. This contribution, initially $295 annually per worker, is intended to equalize the free care pool charges imposed on employers who do and do not cover their workers. The legislature also rejected Governor Romney's proposal to permit even higher-deductible, lower benefit health plans."

Source.

Here are some additional alterations the Democrats made to Romney's original health care plan :

1) At the core of the House plan is the controversial payroll tax, which would be levied on businesses with more than 10 employees if they do not provide insurance to their workers. Romney and Travaglini oppose the tax.

But last night's 129 to 24 House vote on the payroll tax would be enough to overrule a Romney veto, and earlier this week House Speaker Salvatore F. DiMasi suggested that many senators support the idea, despite Travaglini's reservations.

2) House leaders amended the bill so that the salaries of highly paid employees would count only up to $94,200 in calculating overall payroll costs. They also exempted from the calculation employees getting healthcare coverage through their spouses.

Part-time workers would count as full-time employees in calculating the payroll tax, a detail designed to persuade employers to offer them coverage.

3) In addition to pushing employers to cover their workers, the House plan would also require people who can afford health insurance to buy it, provide subsidies to lower-income people to help them pay premiums, and raise the income limits for MassHealth, the state's Medicaid program, so an additional 130,000 people can enroll.

Background source for #1-3 is here.

4) Romney also vetoed provisions providing dental benefits to poor residents on the Medicaid program, and providing health coverage to senior and disabled legal immigrants not eligible for federal Medicaid. The legislature promptly overrode six of the eight gubernatorial section vetoes, on May 4, 2006, and by mid-June 2006 had overridden the remaining two.

Source.

Thus, we can see that Romney fought with the Democrats who controlled both houses in Massachusetts and was unable to win since they were able to override ALL of his eight vetoes.

After unsuccessfully attempting to keep the democrats from modifying his original health care plan, Governor Mitt Romney signed the health legislation on April 12, 2006. Only two members of the House and Senate voted against it. Moreover, RomneyCare passed without any backroom deals, no voting gimmicks such as "deem and pass" and it was done in a bipartisan fashion. The Heritage Foundation, which was the source of this plan, praised the passage of RomneyCare.

Implementation

The intent of Romney's health care plan was to introduce free market principles into the state's health care system. Make it work more like a market.  Moreover, it was designed to reduce the "free rider problem" by making individuals responsible for their own health care plan. 

As a result, everyone in Massachusetts is covered through the private sector. They are required to purchase their own health care plan with their own money. Even in instances where an individual relies on the state for assistance in health care, insurance coverage is paid by the state to a private company. Furthermore, the only federal involvement in Mitt’s entire health care plan is that RomneyCare takes Medicaid funds and state money that was normally applied for emergency rooms and simply redirected that money to allow the poor to buy private health insurance so that tax payers are not footing the bill for those people who are with out insurance.

That's why Massachusetts has the highest health care coverage in the nation with 98% of the citizens and 99% of the children covered under his plan.  

Mitt Romney, in 2009, looked back on his health care plan and called it a success: 

"When our bill passed three years ago, the legislature projected that our program would cost $725 million in 2009. At $723 million, next year's forecast is pretty much on target. When you calculate all the savings, including that from the free hospital care we eliminated, the net cost to the state is approximately $350 million." 

Conclusion

As you can see, Mitt Romney solved the problem by thou roughly investigating the issue and educating himself on the issue to such a point that he was as competent as the experts who advised him on the issue. Moreover, he was able to offer a plan that was not a financial burden to the state of Massachusetts and provided coverage to almost all of his citizens. 

Mitt Romney's health care plan was a conservative approach to a state problem.Various conservatives have supported and praised RomneyCare over the years. Many people argue that Mitt Romney's plan is not a conservative plan saying that it is a socialist program. However, It is not a socialized health care plan. 

Another criticism that Mitt Romney gets is that Obama used Mitt Romney's plan as a basis for ObamaCare. The truth is that Obama flipped flopped on his support RomneyCare.  If you really look at the history and facts behind ObamaCare, you'll see that there was no way Obama could have used RomneyCare as a template for his health care plan. There are also  a lot of differences between RomneyCare and ObamaCare.

The Massachusetts health reform bill is far from the ideal plan to reform health care, but even with its flaws, it is fairly successful and it works. (For a good rebuttal of typical arguments against Mitt's health care plan, I suggest reading this blog.) Moreover, any criticism of the current state of the Massachusetts health care system should be laid at the feet of Deval Patrick and the Democrats who control the Congress, NOT Romney. 

Tomorrow, we'll review his record on job creation in which Massachusetts was ranked 50th in unemployment at the beginning of his term to 11th by the time he left office.