Over the weekend, Mitt Romney muddied the waters about where he stands on health-care reform with a series of vague statements from himself and his campaign about health insurance for people with pre-existing conditions.
His floundering is a subset of a larger problem: He has committed himself to a set of positions that won't allow for a replacement of Obamacare with something that actually fixes the problem of tens of millions of Americans without health insurance, including those with pre-existing conditions.
Sarah Kliff of the Washington Post describes Romney's progression on pre-existing conditions:
It started with the Republican presidential candidate saying during an appearance on “Meet the Press” that he liked the Affordable Care Act’s provision that requires insurers to cover preexisting conditions, and would support something similar. Hours later, his campaign clarified he did not, however, support a federal ban against denying coverage for preexisting conditions. Around 10 p.m., the Romney camp had circled back to the same position it held back in March: that the governor supports coverage for preexisting conditions for people who have had continuous coverage.
The "continuous coverage" distinction is key: In order to retain the right to insurance that covers your pre-existing condition, you need to make sure to pay health insurance premiums every month. But often, the reason people lose health insurance because they have lost their job. Telling the recently unemployed to pay out of pocket for continuous coverage, typically at a cost of several hundred dollars a month for an individual or more than $1,000 for a family, is often not viable.
It's worth noting that the purpose of the continuous coverage requirement is similar to the purpose of the individual mandate: It provides an incentive for healthy people to stay in insurance pools, avoiding a "death spiral" in which only sick people buy insurance.
Unaffordability is not a fatal problem for Romney's continuous coverage proposal. It could be fixed with a range of subsidies that make it affordable for people to maintain continuous health coverage. Essentially, that's what Obamacare does, and what Romney's health plan in Massachusetts did.
For a conservative approach to fix at least part of the affordability problem, see this article from National Affairs by James Capretta and Tom Miller. Capretta and Miller propose to combine a Romney-style proposal on pre-existing conditions with significantly expanded funding for high-risk insurance pools, in hopes of covering up to 4 million uninsured Americans with pre-existing conditions.
But Capretta and Miller estimate that their plan would cost somewhere on the order of $200 billion over 10 years. Where is the indication that Romney plans to make such a significant financial commitment, let alone get one out of a Republican Congress? Romney's platform is full of expensive promises -- restore $700 billion in Medicare cuts, grow defense spending to 4 percent of GDP, cut tax rates. It funds these promises in part by drastically cutting spending on health care for the non-elderly. Implementing something like the Capretta-Miller proposal would be a significant reversal of course.
And what about the tens of millions of Americans who are uninsured not because they have pre-existing conditions but simply because they cannot afford insurance coverage? Romney says he wants to replace Obamacare, but his plans do not signal much help for them.
Romney has talked about leveling the playing field for individual purchasers of insurance, so they would get the same favorable tax treatment as businesses buying insurance for their employees. This would make it easier for individuals to buy their own health plans, but it's not a substitute for Obamacare-style subsidies. Any way you structure a tax incentive, it's likely to over-subsidize the wealthy and under-subsidize the poor, leaving huge swaths of America still unable to afford insurance.
Romney hasn't said exactly how his tax incentive would work. But it would probably be a tax credit (whose value is static across incomes) or a tax deduction (whose value rises with income). In 2008, John McCain proposed a $5,000 per family tax credit for health insurance. Scaled up for health-care inflation, that would likely be closer to $6,000 today.
The average health plan premium for a family is now $15,745. Some middle- and upper-middle-income families can be expected to cover a gap of about $9,000. But poorer people need a larger subsidy if we hope to get them covered.
(It is also worth noting that if Romney plans to convert the existing tax exclusion for employer-provided health care into some other health-care subsidy, he cannot also use it as an area for tax-base broadening to pay for his cuts in tax rates, and he needs a lot of base-broadening to make his tax-cut math work.)
The key to the subsidy structure in both Romney's Massachusetts plan and Obamacare is that the subsidies decline in value as people's incomes rise. Under Obamacare, people with incomes up to 133 percent of the poverty line get Medicaid, which has very little cost to the beneficiary. Above that, they get sliding-scale subsidies for private insurance; the poorest beneficiaries pay just 2 percent of their incomes. Middle-income people get smaller subsidies, and wealthy people have to pay their own way.
Republican rejection of the Medicaid expansion is especially problematic, because Medicaid is cheaper than private insurance, and people earning less than 133 percent of the poverty line have almost no money of their own to contribute toward premiums.
Telling these people the federal government will pay 40 percent of their health insurance premiums will not get them insured. The options aside from Medicaid are to provide them private insurance at significantly higher taxpayer cost than in Obamacare, or leave them uninsured. It is easy to guess which option Republicans in Congress would prefer.
Romney doesn't want to get into these details about who will get what subsidies. But the details are important. They are the difference between expanding health insurance coverage to the vast majority of Americans, and leaving tens of millions of Americans without access to the health care they need. And they are the difference between actually making it possible for people with pre-existing conditions to get the coverage they need, and not making it possible.
As on so many issues, Romney's line on health reform is essentially, "Trust me, I'll figure it out." But uninsured Americans stand to gain a lot from the implementation of Obamacare. They have no particular reason to believe that Romney's vague alternative would bring them similar benefits.
Read more breaking commentary from Bloomberg View at the Ticker.