What Would Mitt Do?

Reform of America’s health system will not be a major issue in this year’s election campaigns. It never has been in the past. But the campaign will be construed as a referendum on the Obama health reforms and a test of comfort with the status quo. Voters are asked which they find less palatable.

If President Obama is re-elected, things will move forward despite nipping by the GOP. If Romney prevails, much of the new law will be at risk.

Repeal of the Obama reforms will be a return to a fiscally untenable status quo. There will be a continuing need to do something to constrain health spending, particularly at the government level which makes it appropriate to speculate on what Mitt would do.

On the one hand he wants to repeal the Obama reforms. On the other, as governor of Massachusetts, he embraced reforms that many see as similar to what was later done at the national level and signed by Obama. That’s an ongoing, but ultimately misleading, campaign issue.

Health reform has two parts that overlap modestly. One involves making health insurance universal, which is fairly simple if one is willing to write a check for those who can’t afford it and then require that everyone be in the system. It was particularly easy in Massachusetts, where an abnormally low 5% — less than a third of the national average—are uninsured. Moving in the same direction in a state like Texas where a quarter of the population lacks insurance, would be much more difficult.

The second and more complex challenge involves constraining costs. That’s really a tough one with a scarcity of successful examples to follow. The Obama reforms mandate procedures to make medicine more efficient, an effort that infuriates conservatives who construe this as a bureaucratic initiative that sabotages the doctor-patient relationship. The Massachusetts effort merely said that steps would be taken to constrain costs if the cost of providing universal coverage for all was onerous. Massachusetts is now starting to deal with that problem.

However well these efforts work, what Massachusetts learns may be of limited help to the rest of us. That’s because its costs are abnormally high to begin with – in 2009 per capital spending was a third more than the national average and rising faster. That may mean there’s an abnormal amount of low-hanging fruit that can’t be found elsewhere. Or it may mean that the high-cost elite medical institutions in the Boston area are either uniquely supple or resistant to change. We may soon know which.

The Republican answer to the cost problem is to create a medical marketplace where consumers shopping would restrain prices as it does in other markets (there are several reasons to doubt whether this would work. One is that labor intensive industries ranging from opera to higher education have been immune to it). Let consumers know the cost of care, a change few would argue with, and Republican reformers believe that a more responsive and affordable market would result.

Because most of our health care bill is run up by a minority of very sick people who often lack the strength to shop, the focus would be on the purchase of insuranceare, which is purchased in calmer times, rather than care. That’s the basis of the Ryan Medicare plan that the House endorsed. It also presupposes creation of an exchange, not unlike that in the Obama reforms, that would make the sales process more efficient while allowing comparison of a standardized product (no one wants to allow buyers to purchase a cheap policy that doesn’t pay for cancer care).

And a real test would require putting ordinary people into this market rather than limiting it to retirees. That means ending – or at least discouraging – the employer-provided coverage that most of the insured now have. How a Republican administration that wants to allow maximum freedom would push employers – particularly the largest ones, who tend to be self-insured – to drop this fringe benefit that they believe encourages employee loyalty is an interesting question.

One way would be to tinker with the tax code and limit the massive tax subsidy for such insurance, which currently costs more than $200 billion and is arguably among the biggest tax break in today’s code (eclipsing capital gains rates, the home mortgage interest deduction and retirement savings plans). Making some portion of employer-paid premiums taxable to workers as income would be a major change.

It is hard to predict how a Romney administration would respond to the continued clicking of the Medicare doomsday clock and dismay about medical bills eating up an increasing proportion of government expenditures and GDP. But with each passing year the price of inaction and cost of doing nothing increases.

For 16 years, Jim Jaffe worked for House Democrats who served on the Ways and Means Committee, apprenticing with Representatives Green, Gibbons and Gephardt before working for Chairman Dan Rostenkowski.