Heritage to Mitt Romney to President Obama: The disputed origins and outcomes of health care reform
These moves, critics argued, brought about spiraling costs and perverse incentives. Costs shifted to the young and healthy, who began staying out of the system until they got sick — when they would sign up in a hurry.
In Washington, one woman bought a policy a few months before giving birth, after which she sent a letter canceling her coverage, the Seattle Times reported. "We will do business with you again when we are pregnant," the letter said. A year later, she again bought insurance — and again canceled after giving birth. Altogether, she paid $1,807 in premiums while her insurance paid $7,025 in medical costs.
The result was a coverage death spiral that drove insurers from individual insurance markets. By the late 1990s, everyone agreed that access requirements on insurers must be paired with individual mandates on customers. Otherwise, health insurance would not be insurance at all and providers — forced to pay for services for strategic customers — could not remain solvent.
Heritage had anticipated this with the Porsche analogy, and key elements of the Heritage plan became central to the next wave of health care reform — including the Massachusetts effort and Obamacare itself.
An altered vision
But the 1989 Heritage proposal and Romney's 2005 plan both sharply diverged from Obamacare on employer mandates. Requiring employers to provide insurance or pay fines, they argued, would make marginal workers more expensive and thus even less employable.
Instead, Heritage proposed to subsidize lower-income workers, thereby jump-starting individual insurance markets. This, they argued, would empower the consumer and lower costs.
The move to subsidize low-income consumers on the private market, as an alternative to a centralized government-run system, is a notion with deep conservative and even libertarian roots, reaching back to Friedrich Hayek, the Nobel laureate economist.
Heritage had also argued in 1989 and Romney had agreed in 2005 that the individual mandate must be restricted to low-cost, high-deductible plans. If the object was to prevent cost-shifting catastrophes — to save the human Porsches, in other words — then bare-bones catastrophic protection was the key, not gold-plated plans offering bells and whistles.
But Romney's efforts in Massachusetts were thwarted. As Avik Roy of the Manhattan Institute would later write, "Romney vetoed the employer mandate; Democrats in Boston and Washington imposed one. Romney sought to require individuals to purchase inexpensive catastrophic insurance; Democrats in Boston and Washington forced individuals to buy costly, comprehensive plans. Romney sought a diverse market of insurance plans for small businesses; Democrats in Boston and Washington restricted insurance choices to three generous tiers."
Adaptation or mutation?
In short, Roy argued, the Heritage vision embraced by Romney had altered significantly by the time a Democratic legislature finished with Romneycare and Obamacare came along.
Among these differences is that the individual mandate now leaped from catastrophic coverage to a limited menu of feature-rich comprehensive plans.
Another is that the low-income premium subsidies are not subsidies at all. They are, argued Ed Haislmaier at the Heritage Foundation, premiums fixed as a percentage of disposable income, divorced from market prices and scarcity. "This is not a tax credit bill. It's a guaranteed minimum income bill," Haislmaier said.
Perspectives differ as to whether the idea evolution from the 1989 Heritage Foundation report to the Obamacare of 2010 was helpful adaptation or fatal mutation.
Time: Today, 7-8:30 p.m. MDT.
Topic: Domestic policy.
Location: University of Denver
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