“A Strong Incentive for People—Particularly the Unhealthy—To Move into the State.”

Michael Tomasky alerts me to an informative website supporting Mitt Romney’s campaign. It describes, from a pro-Romney perspective, how Massachusetts’ RomneyCare differs from the national health reforms enacted under the Affordable Care Act. I’ll let Tomasky have his say on most matters. I do want to make one point, though.

In explaining why Governor Romney would repeal ACA, the website argues: “Health care has traditionally been a state issue, not a federal one.“ That’s a fundamental divide in health policy debate. From my perspective, we have national markets in medical care, health insurance, prescription drugs, graduate medical education, and more. The federal government is a dominant demand-side presence in this national marketplace, accounting for some $900 billion in expenditures on Medicare, Medicaid, the VA, the Defense Department, and more. Like it or not, the federal government’s use (or nonuse) of this huge purchasing power and potential bargaining leverage has a correspondingly huge impact on every aspect of the medical care economy.

Then there’s nearly $300 billion in tax expenditures related to health coverage. Favorable tax treatment of employer-provided health coverage is a federal policy, which Governor Romney would curb. Many Republicans favor national caps on punitive malpractice claims. IBM, Coca Cola, and other Fortune 500 firms value federal ERISA policies which supersede state regulatory policies to provide consistent rules regarding employee benefits across dozens of states.

An even simpler consideration suggests fundamental limits on what states can do, in the absence of national health reforms. The website notes:

“Romney wanted to control costs by having everyone, even the poorest of citizens, pay some portion of their premiums for their health insurance. Romney also argues that giving healthcare absolutely free to poor citizens creates a strong incentive for people—particularly the unhealthy—to move into the state.”

I’m not a huge fan of imposing such cost-sharing on poor people. In the RAND Health Insurance Experiment, copayments and deductibles induced higher predicted mortality among low-income participants with health problems, largely through higher risks of uncontrolled hypertension. As governor, Romney vetoed Medicaid coverage of dental and optical care—two other services for which cost-sharing is linked to worse health outcomes among poor people.

For now, though, the last part of this passage is most interesting. Romney worried that generous health coverage would provide an incentive for sick people to migrate to Massachusetts. Like it or not, this is a very understandable concern from the perspective of any given state.

If I lived in New Hampshire and were seriously ill, I would seriously consider moving 50 miles south. MIT political scientist Andrea Campbell wrote poignantly in the New York Times about her sister-in-law, rendered medically bankrupt and quadriplegic as the result of a tragic car accident. Campbell is a casual acquaintance. My first advice was to ask whether her sister-in-law should move to Massachusetts, which provides better and more dignified coverage and care. Similar patterns arise in social services. Some northern Illinois parents respond to a child’s autism diagnosis by selling their homes and moving forty miles north to Wisconsin, which offers better services few families could otherwise afford.

Economist Greg Mankiw, a Romney advisor, recently noted:

…redistribution is harder when people and capital are free to move to other jurisdictions that offer better deals. If you are going to take from Peter to pay Paul, Peter may well decide to leave.

Mankiw didn’t add an equally important point: Paul might charge up his wheelchair and move, too.

States have long worried about becoming “welfare magnets,” attracting poor people to make similar moves. There is a lively empirical debate about how often this actually occurs. Poor people are less mobile than you might think. As a political matter, no state wants to become a magnet for such inflows. From a national perspective, this dynamic promotes a “race to the bottom,” in which states seek to offer less generous benefits than they otherwise would. This race to the bottom is reinforced by deep ideological and economic differences across state lines.

Before Social Security and Medicare, these same debates once occurred regarding state efforts to help impoverished or sick elderly people who could no longer care for themselves. Today, no politician would self-immolate by suggesting block-granting Medicare or otherwise devolving supports for seniors to state governments.

We have not achieved the same consensus regarding health care for poor people or the disabled. In 1965, Medicaid established national minimum benefits, and provided national resources. ACA expanded these national commitments, devoting federal resources to finance near-universal coverage. On the surface, the health reform fight includes technocratic disputes over budget estimates and over which level of government is best-equipped to provide needed services. The real fight is much deeper than that.

[Cross-posted at The Incidental Economist]

Harold Pollack

Harold Pollack is the Helen Ross Professor at the School of Social Service Administration at the University of Chicago.