RALEIGH – There were once two Republican governors who sought to advance health care reform in their respective states. Their paths diverged in the political wood.
One, former Massachusetts Gov. Mitt Romney, took the more-traveled road to reform, a familiar road blazed by past federal and state expansions of government-run health care and marked by fawning media coverage. It has proved to be the road to ruin for his state. The other governor, Mitch Daniels of Indiana, took the less-traveled road to reform, and that has made all the difference.
Here’s something else of interest about this story of divergent paths by two GOP governors – they may both be running for president in 2012. Romney is already the (very) early frontrunner in the race, according to many pundits. Daniels hasn’t committed to a presidential bid but won’t rule it out either.
Conservatives in the Republican primary electorate may find much to commend in the public records of both men. But on health care, the record is clear. Whatever his intentions, Romney made a bad deal with the Massachusetts legislature and passed an ill-advised piece of legislation that is all too accurately seen as a precursor to ObamaCare.
The result, as the Wall Street Journal observed Monday in an editorial, has been budget-busting cost overruns and rampant gaming of the ramshackle state-run insurance cartel that Massachusetts set up. In brief:
• The plan is $47 million over budget in 2010 and will be worse off in 2011.
• Massachusetts now has the highest health insurance premiums in the nation. Nevertheless, insurers are on average paying out $1.12 in claims for every premium dollar they’re taking in. The private market is, in other words, imploding – as was the Left’s goal all along.
• Romney’s successor, Democrat Deval Patrick, had responded to the implosion by announcing draconian price controls across virtually all aspects of Massachusetts health care.
By contrast, Daniels approached health care reform in Indiana carefully and modestly, focusing first on controlling costs in the health care plan over which his government already had direct control – the plan covering public employees. Also in Monday’s Journal, Daniels explained the thinking behind his introduction of a consumer-driven alternative for state workers:
It turns out that, when someone is spending his own money alone for routine expenses, he is far more likely to ask the questions he would ask if purchasing any other good or service: “Is there a generic version of that drug?” “Didn’t I take that same test just recently?” “Where can I get the colonoscopy at the best price?”
By contrast, the prevalent model of health plans in this country in effect signals individuals they can buy health care on someone else’s credit card. A fast-food meal costs most Americans more out of pocket than a visit to the doctor. What seems free will always be overconsumed, compared to the choices a normal consumer would make. Hence our plan’s immense savings.
The Indiana experience confirms what common sense already tells us: A system built on “cost-plus” reimbursement (i.e., the more a physician does, the more he or she gets paid) coupled with “free” to the purchaser consumption, is a machine perfectly designed to overconsume and overspend. It will never be controlled by top-down balloon-squeezing by insurance companies or the government. There will be no meaningful cost control until we are all cost controllers in our own right.
The early results from Indiana’s consumer-driven health plan are promising. More than 70 percent of state workers have opted into the HSA-based plan, saving themselves as well as taxpayers millions of dollars a year. There’s no evidence that participating workers are scrimping on truly necessary care, but they are cutting back on marginal expenditures now that there is an incentive not to purchase – the prospect of building a larger balance in their savings accounts.
Romney’s plan was based on all the old, odd assumptions of the Left: that trying to force people to buy health plans they may not want is either practical or wise, that spending more money on health care will slow health care inflation, and that 2+2 equal whatever some politician wants it to equal, rather than having an objective reality.
Daniels’ plan was based on past experience and human nature: that informed consumers can make wise health care decisions, that financial incentives matter and can be harnessed to advance reform, and that only if we stop making medical services appear virtually costless to patients will cost containment become feasible.
Romney still has time to admit and learn from the failings of the Massachusetts trial run of ObamaCare. And Daniels still has time to consider whether to seek the presidency. Perhaps their political paths will end up converging after all.
Hood is president of the John Locke Foundation