The Corner

Is Romneycare Working?

This morning Doug Holtz-Eakin did a good job explaining why it is misleading to claim that Romney’s and Obama’s healthcare laws are similar reforms or that the relative “success” of one means the “success” of the other. Now, over at Reason, health-care expert Peter Suderman makes a really good case that the recent evidence touted by some liberals in recent days of the effectiveness of the Massachusetts health-care reform is misleading, or at the very least, not as convincing as they make it out to be.

Here is the claim: Health premiums in Massachusetts are not rising as fast as they were and hence, the reform may not turn out to be as devastating for the state budget as we previously thought.

The data comes from the new analysis of the 2010 Medical Expenditure Panel Survey (MEPS) data by Fred Bauer. It shows that between 2006 and 2010, “employer-sponsored health-care premiums for a family rose about 19% in Massachusetts, while they rose about 22% in the US as a whole.” A similar pattern exists with individual premiums. Suderman explains:

Bauer notes that although “health-insurance premium growth did not slow as much for individuals as it did for family plans. . . it still did slow in absolute terms and relative to the nation as a whole.” He continues:

“By the 2008-2010 period, the individual premium in Massachusetts grew about 5% slower than it did for the US (Bay State premiums grew 11.9% while US premiums grew 12.6%), so the gap between the two premium growth rates did narrow over the period.”

However, both Holtz-Eakin and Suderman show that this trend disappears if one looks at the 2006–2009 growth in premiums. In other words, the slight progress in the data comes from the single year: 2010. One data point is hardly a trend obviously, and that alone makes it hard to conclude that “RomneyCare is working. Across the board.”And as Suderman reminds us:

After several years of family health insurance premiums rising faster than the national average, average family premiums in the Bay State actually dropped slightly in 2010. As The Boston Globe noted last December, instead of boasting the most expensive employer-sponsored family health insurance premiums in the U.S., as it did in 2008 and 2009, the state’s 2010 premiums are merely in the top quintile, coming in at number nine. By other measures, Massachusetts’ premiums are still rising, though the rate of growth slowed in 2010.

So what happened in 2010 that may explain this blip in the data? In addition to a bad economy, Massachusetts governor Deval Patrick and his insurance commissioner rejected “nearly 90 percent of proposed rate increases under emergency legislation,” and as can be expected with price controls, the health insurers in the state started to cut back on services. In addition, evidence shows that consumers may also be buying less insurance at a slightly higher price, meaning a smaller price increase than would have occurred if they were buying the same level of insurance as they did in the past. Here is how it works:

Think about it this way (these numbers are hypothetical): In 2010, you buy a plan for $100. In 2011, you have the option to either buy the same plan for $106 or pay $103 for a less comprehensive plan than in 2010 sold for $90. If you take the latter option, you’re actually paying a lot more, on a unit basis, despite the smaller dollar increase. It’s not clear how much buy down accounted for the 2010 figures, but we know it was already happening in the years prior: Welch notes seeing “significant” buy down in 2008 and 2009.

Suderman concludes with several Massachusetts officials and politicos’ reactions to all data through 2009 and preliminary data from 2010. They do not augur success. If fact, some evidence suggests that the slight improvement of 2010 may not continue in the future.

The whole thing is here.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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