You paid the high cost of RomneyCare in Massachusetts….

This study from the Beacon Hill (Economics) Institute at Suffolk University illuminates the disastrous results of the failed experiment known as RomneyCare and yet presidential candidate Mitt Romney continues to stand by the program.

Here are the key findings from the Beacon Hill study:

The High Price of Massachusetts Health Care Reform

http://www.beaconhill.org/BHIStudies/HCR-2011/BHIMassHealthCareReform2011-0627.pdf

We find that, under health care reform:

• State health care expenditures have risen by $414 million over the period;

• Private health insurance costs have risen by $4.311 billion over the period;

• The federal government has spent an additional $2.418 billion on Medicaid for Massachusetts.

• Over this period, Medicare expenditures increased by $1.426 billion;

• For a total cumulative cost of $8.569 billion over the period; and

• The state has been able to shift the majority of the costs to the federal government.

The federal government continues to absorb a significant cost of health care reform through enhanced Medicaid payments and the Medicare program.   Health care reform has also increased the rate for Medicare Advantage plans in Massachusetts, which has contributed to an increase in Medicare health care expenditures through prices for medical service delivery.

This is not defendable.

It gets worse. The Beacon Hill Institute did a fraud study to determine how the RomneyCare system is being “gamed”:

Massachusetts Health Care Reform Mandates: The Gaming Gamble

http://www.beaconhill.org/BHIStudies/HCR-2011/GamingMandates2011-1128.pdf

The law requires that individuals with sufficient means purchase health insurance and that businesses with more than ten employees make a “fair and reasonable” contribution toward their employees’ health insurance. Under the law, health insurance companies cannot refuse to cover individuals with preexisting conditions.  Individuals and businesses face fines if they fail to comply with the mandates.

Because the fines imposed by the law cost are often less than the cost of insurance, the law is vulnerable to the problem of moral hazard.

Individuals can game the mandate by buying insurance only upon being diagnosed as needing a non‐emergency procedure such as a hip replacement and then canceling their insurance after receiving the treatment or procedure.  Businesses can likewise game the mandate by canceling their health insurance plans and shifting their employees to newly subsidized state plans.    Massachusetts taxpayers and health insurance policyholders pick up the tab for these “jumpers and dumpers.”
The Beacon Hill Institute (BHI) has estimated the prevalence and cost of gaming the mandates.  We find that:

• In tax year 2008 (the latest data available) 26,000 individuals paid a total of $16 million in fines, while 758 businesses paid $7.1 million.

• In 2009, between 2,089 and 2,659 individuals gamed the individual mandate at an estimated cost to insurance carriers of between $29.3 million and $37.3 million.

• Between June 2006 and June 2010 enrollment in state subsidized insurance plans increased by 319,000, while the private group (employer) market was flat and the individual market increased by 83,000.

In essence, the incentives in RomneyCare, just as in ObamaCare, are backwards. They encourage people to behave in ways that maximize costs and inefficiency. This is what economists refer to as an “Adverse Selection Spiral”. Eventually the system collapses under the weight of its own costs and inefficiency.

UPDATE – Thomas Zaleski adds:

Wouldn’t it be great if you could purchase AUTO insurance AFTER you had an accident? That is PRECISELY what Romney care is. Break a leg, BUY insurance the SAME day!

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About Chuck Norton

I write about politics, education, economics, morality and philosophy.
This entry was posted in 2012 Primary, Budget, Corporatism, Econ, Health Law, Mitt Romney and tagged , , , , . Bookmark the permalink.

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