Romney Health Plan: The Good, the Bad and a Question Mark

I know I promised no more August commentaries, but Gov. Romney just released his health plan and everyone wants to talk about it. So here is my take.

Mitt Romney is the only U.S. politician who can credibly claim to have created universal health care coverage. His Massachusetts Health Plan may yet falter; but so far he has walked the walk, while his Democrat opponents have only chattered. He alone owns the health care issue.

The Good. In taking the Massachusetts plan nationwide, Romney has left most of the bad features on the cutting room floor. There is no individual mandate, no employer mandate and no managed competition. States would have the opportunity to go their own way.

At the federal level, Romney would have the government help, rather than hinder. People who buy their own health insurance would get the same federal tax relief as those who obtain health insurance at work. Subsidies would allow low-income families to buy private insurance. A block grant of Medicaid funds would give states the ability to move enrollees to the private sector.

The Bad. People would be able to deduct all out-of-pocket health costs. This bizarre idea probably got added late at night when the Romney team was tired. In New York City, where the marginal tax rate is 50%, government would be paying half the bill. You would be able to buy an MRI scan or a stomach staple for 50 cents on the dollar. The incentives would be to spend, spend, spend. By contrast, Health Savings Accounts (which Romney also supports) create incentives to save.

Guiliani (following Bush) opts for a health insurance standard deduction. The result: people could not lower their taxes by buying more extensive coverage. Under the Romney plan, by contrast, people could lower their taxes no matter what they do — buy more insurance, buy more health care, or any combination thereof. This is the opposite of cost control.

The Question Mark. What kind of subsidy will low-income purchasers of health insurance get? Romney is still resisting tax credits. That opens the door to a spending subsidy, which risks becoming another entitlement.

A Humble Suggestion. Romney doesn't need a mandate in order to claim universal coverage as the goal of his plan. But he does need to close the loop. As in Massachusetts, funds hospitals now use to provide free care to the uninsured would subsidize private health insurance instead. That's good. But if people turn down the offer and remain uninsured, surely the money needs to go back into the safety net. That promise needs to be explicit.

Then there is that problem of out-of-pocket spending…

Comments (5)

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  1. David Wilson says:

    May I suggest you do a comparison on a grid basis of the Romney plan vs. the Guiliani plan pros and cons of each and whose plan is best in the end?

  2. Scott Holleran says:

    Thanks John. But “having the government help” is another way of saying government coercion, and subsidies and block grants are not even close to capitalism. Why praise an advocate of government intervention in the medical profession?

  3. […] The Romney Plan. There are five main elements: (1) A required benefit package, defining what insurance everyone must have. (2) Subsidies for low-income families. (3) A pay-or-play choice, imposing a fine on anyone who continues to be uninsured. (4) A system parallel to employer-based coverage, in which individuals paying (essentially) group health insurance rates can choose among competing health plans. (5) The use of disproportionate share funds (previously used to subsidize care for the uninsured) to subsidize private insurance for low- and moderate-income families. (See the NCPA analysis here.) […]

  4. […] ¬†NCPA Critique: Romney Health Plan: The Good, the Bad and a Question Mark […]

  5. Dungar says:

    Take a look at the British Health service, it’s hoilrbre and rationed. It’s literally second rate health care in a first world nation because of the socialist model that has been a failure since the beginning. The people over there make jokes about the health service.In Germany when you turn 70 they throw you away. A family member of mine has nothing wrong with her but one knee, but they would not fix it because of her age. We brought her over here to the states and had her a new one put in within a month. First class American-style medical care.