Romney and the race to the bottom

Mitt Romney’s presentation has been scrutinized pretty closely, but before we move on, there was one point in particular that’s worth some additional attention. One of the more interesting moments, oddly enough, came when the Republican presidential hopeful opened the floor to questions.

The first question Romney was asked, in fact, was about how he’d prevent a “race to the bottom” among the states. He replied that the voters would do it for him. If they didn’t like how their governor or legislature was handling health care, they’d kick them out. His answer was so off it raises the question of whether he’s even read his own plan.

Romney’s proposal permits insurance to be sold across state lines. The way the race to the bottom works is that South Dakota — to pick a not-so-random state — wipes out their insurance regulations to attract jobs and tax revenue from insurers who want to headquarter in a low-regulation state and sell their product in other states. But there’s no way for voters in Colorado or California to punish politicians in South Dakota. And it’s not like this is some theoretical concern. It already happened in the credit-card industry.

Specifically on the “race to the bottom” problem, Romney ultimately told his audience, “We’re a grand and generous people. We’re going to care for one another.”

If this was Romney at his wonkiest best, we’re left with one of two realizations. Either (a) Romney doesn’t really understand health care policy as well as he thinks he does, or (b) he understands it just fine, but can’t figure out a way to solve a glaring problem in a conservative-pleasing way.

It’s one of the GOP’s favorite talking points: we don’t need real reform; we just need to let consumers buy across state lines. President Obama and the Affordable Care Act allow this, but set minimum standards that states must abide by. Romney effectively said he intends to remove, or at least severely weaken, those standards.

Which is why that “race to the bottom” inquiry was such a good question. Under Romney’s vision, state policymakers would tell insurers that if they were to set up shop in their state the rules would be written in the industry’s favor. The industry would go with the state that offered the sweetest deal — which is to say, the most lax oversight with the fewest restrictions — and before long, it would be consumers’ only choice. Why? Because every insurer would move to that state, leaving Americans — lacking a public option — with no other coverage to buy.

That’s exactly what happened with the credit card industry, and it’s a model to be avoided, not followed.

So what’s wrong with Obama’s approach of minimum standards to prevent this? For consumers and families, nothing. For conservatives, though, it means federal regulations, and we can’t have that because it would mean officials looking out for consumers, which is, you know, bad. Or something.

It gets worse. The Congressional Budget Office did an analysis of the idea in 2005, when there was a Republican Congress and Republican White House.

The legislation “would reduce the price of individual health insurance coverage for people expected to have relatively low health care costs, while increasing the price of coverage for those expected to have relatively high health care costs,” CBO said. “Therefore, CBO expects that there would be an increase in the number of relatively healthy individuals, and a decrease in the number of individuals expected to have relatively high cost, who buy individual coverage.”

That is to say, the legislation would not change the number of insured Americans or save much money, but it would make insurance more expensive for the sick and cheaper for the healthy, and lead to more healthy people with insurance and fewer sick people with insurance. It’s a great proposal if you don’t ever plan to be sick, and if you don’t mind finding out that your insurer doesn’t cover your illness.

For all the talk about Romney struggling with the mandate issue, the fact that he can’t coherently deal with this problem is just as alarming.