The Health Policy Election FREE

Much is at stake in the 2012 presidential election. President Barack Obama's vision and former Governor Mitt Romney's vision differ across many domains, but perhaps most starkly in the area of health policy. Fundamentally, the candidates disagree on the role of government as the guarantor of affordable access to health insurance, as evidenced by their plans for private insurance markets, Medicare, and Medicaid.

Obama's vision is reflected in the Affordable Care Act (ACA); Romney wants to repeal it. The ACA makes significant changes to private insurance regulation. The individual market will be remade, with subsidies available to families with incomes up to 400% of the federal poverty level. Insurance companies will no longer be permitted to deny coverage due to preexisting conditions or be able to charge more to those with preexisting conditions. Other changes include elimination of lifetime and annual limits, a floor on coverage generosity, and a requirement for family policies to cover dependent children until age 26 years. These changes are expected to increase the number of privately insured by 16 million.¹

Romney's repeal of the ACA would reduce federal spending on coverage expansion but also the number of people with insurance. He has proposed components of a replacement plan. One would be to forbid insurers to deny coverage due to preexisting conditions for those with continuous coverage, something the 1996 Health Insurance Portability and Accountability Act (HIPAA) already does for individuals in the group market and transitioning from it to the individual market.² However, neither HIPAA's nor Romney's protections would extend to the estimated 89 million individuals who have coverage gaps. Also, neither guarantees that coverage would be affordable.

Romney has also proposed to increase choice and competition by relaxing insurance regulations. These include allowing insurance to be sold across state lines, permitting health savings account funds to be used for premiums, and equalizing the tax treatment of individually and group-purchased health plans. Although these reforms might help some uninsured individuals obtain coverage, they are neither likely nor designed to reduce uninsurance as much as the ACA.

The candidates also differ in how they think Medicare ought to be structured. The president wants to retain the current defined benefit nature of the program, whereas Romney wants to convert it to a defined contribution model. The former is an explicit commitment to affordable access to coverage; the latter is not.

Within the current structure, the ACA would begin to slow the increase in health care spending in the Medicare program by, among other things, reducing payments to Medicare Advantage plans, encouraging development of accountable care organizations, and more broadly bundling payments (Figure). Many of the payment reforms are designed to incentivize more efficient practice of care, even though some are less targeted payment cuts. Should these measures fail to keep Medicare growth below one percentage point above that of the overall economy, an Independent Payment Advisory Board will be tasked with defining spending reduction recommendations with fast-track legislative authority. All told, these reforms are projected to save $716 billion over the next decade, extending the life of the Medicare Part A Trust Fund by 8 years, to 2024.³

By repealing the ACA, Romney would eliminate these savings, increase Medicare spending in the near term, and reduce the time until the fund is exhausted. He would also increase the eligibility age of Medicare from 65 to 67 years. Although this would save the federal government an estimated $5.7 billion per year, it would result in twice that cost to affected seniors and businesses and other programs that would otherwise cover them.⁴

Romney has also proposed restructuring Medicare with a program of premium support that would apply to those currently younger than 55 years. The program's fee-for-service plan and private plans would bid their per-enrollee cost to provide the actuarial equivalent of the Medicare benefit. A defined contribution equal to the second least expensive plan would be provided to beneficiaries. If beneficiaries chose a more expensive plan, they would have to pay the difference out of pocket. What remains unclear is what would happen under such a plan if Medicare growth rates did not stay below the proposed target of half a percentage point above the rate of growth of the overall economy. Moreover, while such a plan might save the government money, some argue that it will not bend the health care cost curve and may not include many important safeguards for beneficiary welfare.⁵ Regardless, it will not affect Medicare spending for at least a decade.

The 2 candidates' Medicaid plans are quite different. The president will expand the program; Romney would cut it back. The ACA was designed to provide Medicaid to individuals whose incomes are less than 138% of the federal poverty level. If implemented in all states, an additional 16 million people would be covered by the program at a cost to the federal government of $444 billion through 2019. To help bolster clinician participation, reimbursement rates are also being increased. While initially mandatory, this expansion became optional through a Supreme Court ruling in June, and some Republican governors have pledged not to participate.

Romney would eliminate all these changes. Instead, he would institute a block grant program. States would be free to “innovate” to find novel ways to cover poorer constituents within the constraints of the resources afforded by the block grants. Many federal restrictions on Medicaid would be lifted, allowing states to save money, if they wished, by covering fewer people or providing fewer benefits.

Savings from this Medicaid proposal come from severely reduced future spending at the federal level. Romney has expressed support for the spending targets in his running mate Representative Paul Ryan's 2013 federal budget, which held Medicaid growth to that of overall inflation. According to the Congressional Budget Office, by 2022, Medicaid and Children's Health Insurance Program spending would only be $322 billion, just $4 billion more than was spent in 2009.⁶ Without some significant and uncertain innovations, this may require millions of persons to be removed from Medicaid rolls, or a significant reduction in benefits.

Even though their visions for private and public coverage differ in many ways, the overarching distinction between the candidates is how they prioritize coverage expansion vs reduced federal spending on health care. As such, it is the focus of the ACA, which will substantially increase the numbers of insured through an expansion of Medicaid and the (subsidized) private health insurance market. Notwithstanding his pledge to reverse the ACA and spend more on Medicare in the near term, Romney's proposals generally favor spending reductions, withdrawing federal support for private insurance expansion, drastically reducing Medicaid spending, eliminating Medicare coverage for 65- and 66-year-olds, and restructuring Medicare into a defined contribution program for those currently younger than 55 years. These are major differences and will have enormous effects on all facets of the health system and the number of uninsured, as well as federal costs. On health policy, as well as other areas, voters have a real choice in November.