Romney's healthcare juggling

Peter Suderman in Reason has a cute conceit for summarizing Romney’s career as a politician by tying it to his career as a consultant. I’ll disagree with that—private equity and consultancy are very different entities—but I wanted to spotlight one portion of his article that deserved, well, someone shouting “SCOOP!” in a crowded theater. (Or, maybe just “scoop.”)

Romney is pitching a Medicare plan for the 2012 election which I outlined here, in The New Republic. I’ll give a short and shorter summary of my summary. The shorter summary is that at the time no one could figure out what exactly Romney was driving at. (The Reason article makes it no clearer; it also doesn't report on Romney's then-desire to raise the eligibility age.) The short summary is that Romney apparently wanted to introduce a system in which seniors would be given a voucher for their health care needs. Seniors could then spend the voucher on a cornucopia of private insurance plans, or something that looked like Medicare, if they so preferred. As they say the devil’s in the details, and there are many devils centering around the value of the voucher. If you do Medicare the Paul Ryan way, the value of the voucher is capped and the federal government’s fiscal risk is accordingly capped as well. Any additional costs are borne by seniors. If you do Medicare the other wonky way, it becomes competitive bidding: that is, insurance plans bid for the health care vouchers of seniors and the voucher is worth whatever the second-lowest bid is. Then the senior can either take the lowest option (and pocket the cash) or take a more-expensive option, or what-have-you. Competition! Choice! The American Way!

Suderman catches Romney’s advisor in an interesting (paraphrased) comment:

Asked whether Romney’s plan could reasonably be described as ending Medicare as we know it, a Romney policy advisor admits that the structure of the program would be altered in the future. Why the hedge? Despite Romney’s oft-stated belief in the power of competition, he is not confident about it in the case of Medicare. His policy advisor warns that the effects of competition are still unclear, and it would be a mistake to eliminate a fee-driven system that has worked for years.

Romney is apparently not highly confident in the power of competition in Medicare, but wants to introduce it anyway. It’s pretty clear, then, that Romney has little enough confidence in the policy proposal he unveiled in November. It’s probably fair to be uncertain about the effects of this competition—are insurers really that interested in insuring seniors, a difficult group? How will adverse selection play out (will relatively healthier seniors go for private insurance leaving Medicare in a bind)? Might Medicare always have a cost advantage over private insurers, due to its clout at the bargaining table and its low comparative administrative costs? On the other hand, competition is competition and I suppose it’s theoretically possible a business model of integrated insurer-hospitals might emerge…

At any rate, probably the most stimulating part of this paragraph is the advisor saying “it would be a mistake to eliminate a fee-driven system that has worked for years.” I’m not sure if Romney’s advisor has been mischaracterized or is making a massive rhetorical blunder, not unlike a car executive saying it would be a mistake to not add airbags on account of cars’ working so well for years. Fee-for-service, as a generalized system, is a pretty terrible way of doing health care, and it’s hard for me to believe anyone associated with Romney doesn’t agree with that basic view.

But, yes, it would appear Romney has flip-flopped about his own plan within months of introducing it.