Heritage to Mitt Romney to President Obama: The disputed origins and outcomes of health care reform
Carolyn Kaster, ASSOCIATED PRESS
When Mitt Romney faces off against President Barack Obama tonight in the first of three presidential debates, some of his former rivals may be saying, "I told you so."
During the primaries, Romney's challengers attacked his Massachusetts health care reforms — focusing mainly on the individual mandate, which they argued inspired a key feature of Obamacare.
Rick Santorum led the attacks, arguing that the mandate link compromised Romney and he would be poorly positioned to attack Obamacare as a result.
The irony is that the individual mandate has deep conservative roots. There are key differences between what Romney first proposed and what Obamacare became — differences with disputed implications. But when it comes to individual mandate itself, left and right originally saw more eye to eye.
How the GOP ended up with a candidate whose signature policy achievement is thought to handicap his campaign efforts is a fascinating story in policy development and partisan politics.
The uninsured Porsche
When Romney brought the individual mandate to Massachusetts, he followed the lead of the Heritage Foundation, a staunchly conservative think tank, which saw it as a free market alternative to government-run health care.
Decades ago, Heritage helped lay the intellectual foundations of the Reagan Revolution with detailed conservative policy analysis. But by 1989, health care costs were rapidly climbing, jumping from 9 percent of GDP in 1980 to 12 percent in 1989 — on its way to 17 percent today, and still climbing.
As costs rose, health care availability became iffy for the working poor or the self-employed, pressures that burst out in the bitterly fought Clinton health care push of 1993 and 1994.
The Heritage Foundation had anticipated this fight in 1989, offering a plan to solve critical health care cost and availability problems without top-down federal control.
As Topher Spiro at the liberal Center for American Progress noted, the Heritage Foundation offered its plan at a time "when they were certain that a government run, single-payer system was on its way." The Heritage proposal, he said, "relied on private markets but allowed government intervention to correct market failures." This is the basic framework of Obamacare, Spiro concludes.
The Heritage plan had two simple foundations. First, it argued that American society would not leave people to die in the streets. Second, it insisted that we could not allow the uninsured to shift costs to others.
"If a young man wrecks his Porsche and has not had the foresight to obtain insurance, we may commiserate but society feels no obligation to repair his car," read a 1989 Heritage Foundation report.
"But health care is different," the report continues. "If a man is struck down by a heart attack in the street, Americans will care for him whether or not he has insurance. If we find that he has spent his money on other things rather than insurance, we may be angry but we will not deny him services — even if that means more prudent citizens paying the tab."
The Heritage plan offered three policy strategies: expand Medicaid for the very poor, offer tax credits for lower and middle incomes and use an individual mandate to force free-riders to join up. All three of these elements eventually entered into Romney's reforms — and from there moved into the 2010 Obamacare legislation.
Insurance in name only
During the 1990s, a handful of states from Maine to Washington experimented with simpler but ill-fated reforms. One tactic simply barred insurers from denying coverage based on pre-existing conditions. Another forced insurers to charge roughly equal premiums to both the young and the old.
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
TV coverage: KSL-TV 5 political specialists Richard Piatt and John Daley are in Denver at the debate providing insight, interviews and commentary. Each debate will be broadcast live on C-SPAN, ABC, CBS, FOX and NBC, as well as all cable news channels including CNN, Fox News and MSNBC.
Format: This is the first of three October debates between President Barack Obama and GOP challenger Mitt Romney. The debate will focus on domestic policy and be divided into six segments of approximately 15 minutes each. The debate moderator is Jim Lehrer of PBS, who will open each segment with a question and each candidate will have two minutes to respond. The remaining time in each segment will be discussion and follow-up questions.
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