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The Truth About RomneyCare

Now that Mitt Romney has shown himself politically vulnerable after Iowa, more people are taking a closer look at his claims about the “RomneyCare” health care plan he helped create as Massachusetts governor. In this interview from April 2010 which recently recirculated last month, Romney attempts to draw some distinctions (as well as acknowledge similarities) between his RomneyCare plan and the national ObamaCare plan. One of the alleged virtues of RomneyCare over ObamaCare is that Romney’s plan does not contain “price controls,” whereas ObamaCare does. But how does this stack up against reality?

Romney’s claim may have been technically true at the time the plan was enacted. But according to the New York Times, this was a deliberate choice on the part of Romney and the Massachusetts lawmakers when they passed the law in 2006. They aimed for “universal coverage” first, and decided to worry about controlling costs later. In other words, they knew that costs would be a problem but chose to kick the can down the road. It’s like borrowing money from a loan shark then saying, “At least I don’t owe him any money right now!”

But even before Romney’s 2010 claims, the state had already implemented some price controls. As Michael Tennant notes, “Requiring insurers to cover those with pre-existing conditions at the same rates as healthy individuals --  another feature of the Massachusetts law that Romney praises -- surely qualifies as a price control.”

Similarly, requiring insurance companies to provide numerous mandatory benefits (including lay midwives, orthotics, and drug-abuse treatment) and then denying insurers’ requests for rate increases to cover their increased costs is another form of price control.

Yet another price control considered (but ultimately not implemented) was a proposal to compel doctors to accept patients covered by the state’s “Affordable Health Plans” at government-set payment rates or else lose their state medical licenses.

And because costs continue to rise faster in Massachusetts than in the rest of the country, the state is planning to ban paying hospitals and physicians for actual services rendered and instead implement mandatory “bundled” or “global payments.”

Under this system, doctors and hospitals would band into large networks or “accountable care organizations” (ACOs) and receive a fixed fee for taking care of a patient’s medical needs for that month (or year). If the providers spent less than their fee, they would keep the remainder. If their costs exceeded the fee, they would eat the difference. Another variation would be to pay providers a fixed fee per each “episode of care” (such as a heart attack or a hip replacement surgery), regardless of how few -- or many -- unforeseen complications arose. Either way, such mandatory caps on payments for medical care are an overt form of price control.

In theory, “bundled payments” are supposed to encourage doctors to work together to minimize unnecessary tests and treatments. However, in practice they will have two serious negative consequences.

First, “bundled payments” will create a powerful incentive for providers to skimp on care. The ACO administrator might ask a doctor, “Do you really need to take Mrs. Smith to surgery now for her heart problems -- or can she get by with just medications for a little while longer? And does she really need the high-end antibiotic that kills 99% of bacteria? Or can we get away with the cheaper drug that works 85% of the time? We’ve already burned through her fee for this year, so anything else you do for her comes out of our pockets!”

Second, they will create an incentive for providers to avoid the sickest patients. As one physician describes:

Young healthy patients who may need a day or two in the hospital for their pneumonia will be readily admitted as there will be a high likelihood of profitability with the ensuing bundled payment. Pneumonia patients with diabetes or with HIV who will likely need long admissions and expensive medications will become hot potatoes. Community hospitals will find reasons to transfer high utilizers to other facilities. Perhaps they need an endocrinology consultation. Perhaps they need an infectious disease specialist. Bundled payments will create an incentive to avoid treating obese patients, cancer patients, and other patients with chronic diseases.

Dr. Stewart Segal calls such patients “ACO lepers.” Instead of being rewarded for caring for the sickest patients, many doctors will avoid them or send them to other providers as quickly as possible. Bundled payments thus reverse the incentives for physicians, rewarding them for not practicing medicine. And it will be the sickest, most vulnerable patients who will suffer the most under such a system.

Finally, if “global” or “bundled” payments fail to control costs sufficiently, Massachusetts has a backup plan. The Beacon Hill Institute recently noted, “A Special Commission on Provider Price Reform has come up with recommendations that, in effect, put the insurance companies in the business of imposing price controls on hospitals.” One way or another, more price controls are coming to Massachusetts.

In conclusion, Romney’s claim that the Massachusetts plan didn’t include price controls may have been technically true at the time the law was passed. But he helped create an unsustainable system that has quickly and predictably led to price controls -- with still more to come. Hence, Romney’s claim is disingenuous if not downright misleading.