JONATHAN COHN JANUARY 9, 2012
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Mitt Romney didn’t help his case when he said, in a speech this morning, that “I like being able to fire people who provide services to me.” Already critics, including some of his Republican rivals, are linking the quote to his work at Bain Capital, an investment firm that made hefty profits by acquiring and then downsizing companies. “It’s clear … he likes firing people,” Jon Huntsman quipped. “I like creating jobs.”
Great line, but let’s cut Romney a little slack here. He was talking about his ideas for health care reform, not the economy. Specifically, He would like to transform Medicare into a “premium support” system, in which seniors shop around for the policies they liked best – dropping, or “firing,” insurance plans when something better comes along. He also wants non-elderly Americans to have some choices they would not otherwise have, among them the option to buy insurance across state lines. In other words, Romney was not saying he likes seeing people lose their jobs and, as Greg Sargent says, to suggest as much would be "misleading and unfair."*
But the argument that Romney was trying to make, about health care policy, deserves some scrutiny of its own, because you’re going to hear it again. Conservatives frequently claim that that the health care system will be better off if people act more like consumers, shopping around for the best insurance plans. The best way to accomplish this, they say, is to transform Medicare into a premium support system and to repeal the Affordable Care Act, putting in its place a deregulated market with more insurance options. Romney has endorsed all of these ideas.
But unfettered choice is not a good thing in health care policy. One reason is that getting good, reliable information about insurance plans is difficult – as anybody who has ever tried to buy coverage on his or her own can attest. Another is that, even in a world with perfect information, the insurance market is prone to a particular kind of failure. Insurers don’t want to pick up bad risks and will do whatever they can to avoid them. Absent regulation, that makes it virtually impossible for people with serious medical conditions to get coverage. As Ezra Klein put it a while back, when Republicans were talking up this idea, "It's a great proposal if you don't ever plan to be sick, and if you don't mind finding out that your insurer doesn't cover your illness. And it's the Republican plan for health-care reform."
Research backs this up, by the way: The most reliable projections, including those by the Congressional Budget Office, suggest that deregulating the insurance market would make coverage cheaper for healthy people but only by making it less accessible for sicker people. In that sense, deregulation actually means fewer choices, rather than more, at least for the people who need choice the most.
That doesn’t mean competition can’t have an important place in health care. But government needs to structure and regulate the insurance market aggressively. That’s what European nations with relatively healthy competitive markets, such as the Netherlands and Switzerland, do. And it’s what the architects of the Affordable Care Act hope to accomplish here.
As for seniors, Medicare already has a competitive marketplace: Seniors in the traditional program can opt into private insurance alternatives, through the Medicare Advantage system. Many already do and oftentimes they’re getting a better deal. But the premium support plans that Republicans talk up rarelyhave the same set of protections against discrimination by medical condition, which is why they threaten access for seniors – again, leaving them with less choice rather than more.
* Of course, as Sargent also points out, some of Romney's attacks on Obama take quotes of context in pretty much the same way.
Update: Here's more analysis from Derek Thompson and Igor Volsky, who also think the real significance of Romney's comments are what they say about health care.
17 comments
I'm happy to cut him some slack. Just as soon as he admits those ads he placed taking comments that Obama said when he was quoting McCain out of context were misleading and unfair. Karma is a bitch, Mitt.
- Tristan
January 9, 2012 at 2:46pm
The ironic thing is that allowing insurance to be sold across state lines, while simultaneously repealing Obamacare, would utterly destroy Romneycare. Young and healthy people would all buy cheap insurance in states without community rating, causing a death spiral of skyrocketing premiums and more out-of-state purchases to avoid community rating. The result would be unaffordable deficits (to pay for the subsidies of those who remain in the system), and a decimated market for anyone who didn't qualify for subsidies.
- andrew123s
January 9, 2012 at 2:50pm
What Tristan said.
- JEFF FREY
January 9, 2012 at 2:56pm
Not to mention, since private Health Insurance Companies are exempt from Anti-Trust laws, there's nothing stopping them from colluding about prices to the point where you CAN'T fire some poorly performing company and hire another -- the "another" you'd try to hire wouldn't be any better. But you have a better point -- nothing about the current private industry has prevented the companies from dropping people the moment they NEED care, nor refusing to cover people with pre-existing-conditions. If people "don't have enough choices" in the current market, it's because the current market is TOO FREE of regulation, not that there's too much. Romney is making the "Let Them Eat Cake" argument -- if they can't get good services, let them buy BETTER services. Well there AREN'T any better services being offered by the Free Market, that's WHY we need Obamacare.
- AllanL5
January 9, 2012 at 3:06pm
What Tristan said x3. The real significance of the comments is that you can't say stuff like, "I enjoy firing people" on the campaign trail, no matter what the context. That phrase is right there with saying, "Hitler was right" and "I'm a pedophile". Someone as disciplined as Romney should, but clearly doesn't, know better. Double for someone who makes campaign ads quoting Obama out of context and then basically says that all's fair with words, no matter the context.
- wildboy
January 9, 2012 at 3:06pm
An important line of critique against this kind of proposal is that when it comes to things like health insurance people don't shop around. It goes back to the idea of decision fatigue that was posted here a few months back. Who can be bothered to look at the details of five or ten different insurance plans and decide which is best/cheapest? How competent are most people to make such a comparative assessment even if they are willing to put in the effort? Knowing which insurance plan is "best" requires an acurrate prediction of your and your family's future requirements for medical care, i.e. that a person be able to predict the unpredictable. The notion that market competition can produce better health insurance is a fallacy. It is anathema to the core principle of insurance: the best, cheapest plan is the one that covers the most people and thereby spreads the risk most widely. But of course that means the best insurance plan is one that covers everyone. Medicare for all.
- AaronW
January 9, 2012 at 3:32pm
And the economies of scale should make "Medicare for All" ultimately a cheaper option in the U.S. than the health care systems in Europe.
- ironyroad
January 9, 2012 at 3:43pm
I'd like to add, Romney wants individuals to be able to "Shop for Care". But the problem is that individuals have no power over the Insurance Companies to "shop". An employer can use his entire employee base to bargain for better prices. But even with a thousand employees to share the risk, employers have been powerless to prevent Health Care Costs from rising faster than inflation for the last 20 years. How much power will a thousand unconnected individuals have? None. THAT is the Romney vision of Health-Care, and it simply doesn't work. It's too expensive, and doesn't cover everyone.
- AllanL5
January 9, 2012 at 4:20pm
wildboy likes Hitler and is a pedophile? I am shocked, here I thought he was a normal guy and all. what Tristan said, Romney lies daily, 100% absolute falsehoods. I am sickened by his complete ease in which he states them, he literally has no integrity.
- blackton
January 9, 2012 at 5:23pm
Aaron is absolutely right. Last year the University offered its faculty a choice of two options for our health plan. One had higher payments but nominally covered more, the other lower payments an nominally covered less. It was not easy at all to compare the plans -- you needed to build a spreadsheet if you wanted to have any chance of making a real comparison. A couple of people did and circulated their analyses, but most of us did not spend hours to do the same independently. Expand this to 4 or 5 options and I think it is safe to say that nobody would be able to make an informed choice without paying a consultant.
- JEFF FREY
January 9, 2012 at 5:34pm
The other thing that no one talks about is that health care doesn't really fit the insurance business model. Insurance presupposes that the event being insured against is expensive but uncommon. Drivers agree to pay a couple grand a year for auto insurance because they know that while it's unlikely that they'll be at fault in a crash that totals a Mercedes or, worse, takes someone's life, if such an unlikely event were to come to pass it would be financially disastrous. Insurers, OTOH, issue auto insurance because their actuaries can quite accurately assess the probability that individual drivers will make claims of a given size, and from there the price calculation is straightforward. Most drivers won't ever make claims, at least not big ones, but they are happy to pay for the peace of mind. Health insurance is entirely different. Sooner or later everyone needs medical treatment, and there is a lot less individual variation in lifetime cost of that medical care than you might imagine--for the majority it falls within the range of $100K-$1 million with the median at about $250K. (This is as true for the uninsured as everyone else. The only difference is who gets soaked when the person gets sick. In America it is rare for a person, even a homeless person, to die without receiving expensive medical treatment.) The major inter-individual variation is the age at which those expenses kick in. Thus if an insurer means to insure all its clients for life, there isn't much risk to spread around; the lifetime risk is already well distributed. Even young, healthy clients are a liability if it is assumed that they'll remain with their current insurer for life. Private health insurance thus is predicated on the idea that insurers will not insure clients for life. Clients will get shunted into Medicare as they age or Medicaid of they get so sick as to be disabled or to no coverage at all if they lose their jobs. It is only because private insurers know that someone else--usually the Federal government--will be on the hook for major medical expenses for a large proportion of their clients that private insurers can ever hope to turn a profit.
- AaronW
January 9, 2012 at 5:51pm
The sad part is I think Mitt truly meant it the way it came out. He has a long track record of firing employees. But, why even use a metaphor like "firing people", instead of the obvious "shop around for a better deal" in the first place?! A small bit of freudian slip while trying to make his case about people being able to shop for health care insurance, perhaps? Perhaps this is some "real" Romney, slipping through the facade? I can't believe a speech writer or advisor would be so tone def.
- GSpinks
January 9, 2012 at 6:51pm
Cut Romney a little slack? Why? He won't towards his opponents. I'm sick of seeing Democrats bring a pocket knife to a howitzer fight. Time to show him two can play his "game". No mercy, none.
- tmmats
January 9, 2012 at 7:32pm
And a "job creator"? That's a lie in itself: http://articles.latimes.com/2011/dec/03/nation/la-na-romney-bain-20111204 He made himself and other partners rich, but job creator? That's a lie. I'm ecstatic that Gingrich is doing some of the early work for the Obama people now. Yes, Romeny does enjoy firing people as long as he gets rich off of it. His track record proves it.
- tmmats
January 9, 2012 at 7:39pm
Blackton, touche. You brought a smile to my face this AM.
- wildboy
January 10, 2012 at 9:37am
You can't tell if the health insurance is the cheapest anyway, because you dont' just pay premiums, you have cost-sharing for the cost of the care as well. So you might pay more premium, but the insurer's contracts with providers have better discounts, so if you use care, you could end up even or paying less. Competition between insurers might even raise costs. If you have one insurer dominating the market, they can drive hard bargains with the providers, who want to be on that insurer's preferred provider list. For many businesses, many of whom are self-insured, these contracts mean that they are paying less for the health care. If there are many insurers in a market, then your favorite cardiologist is going to whoever has the best fee schedule (or the highest $ amount per rbrvs). Your insurer has to pay more for his services, or he won't be on the list and will participate with other insurers. It's kind of counterintuitive, but insurers don't provide a product, really. The competition needs to be between the healthcare providers.
- ReganaD
January 10, 2012 at 7:43pm
You can't tell if the health insurance is the cheapest anyway, because you dont' just pay premiums, you have cost-sharing for the cost of the care as well. So you might pay more premium, but the insurer's contracts with providers have better discounts, so if you use care, you could end up even or paying less. Competition between insurers might even raise costs. If you have one insurer dominating the market, they can drive hard bargains with the providers, who want to be on that insurer's preferred provider list. For many businesses, many of whom are self-insured, these contracts mean that they are paying less for the health care. If there are many insurers in a market, then your favorite cardiologist is going to whoever has the best fee schedule (or the highest $ amount per rbrvs). Your insurer has to pay more for his services, or he won't be on the list and will participate with other insurers. It's kind of counterintuitive, but insurers don't provide a product, really. The competition needs to be between the healthcare providers.
- ReganaD
January 10, 2012 at 7:43pm