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A Project of The Annenberg Public Policy Center

Romney Off Base on Health Care

Mitt Romney made misleading statements about the federal health care law in an effort to highlight how it differs from the overhaul he signed into law as governor of Massachusetts.

Romney, who has not yet declared his candidacy for the Republican presidential nomination, gave a major speech on health care May 12 at the University of Michigan Cardiovascular Center. He started off by describing the federal plan, as he saw it, and what happened in Massachusetts. In his state, he said, there was "no government insurance." He added: "We didn’t create a government insurance program or a government policy that people got. No, no. We gave people a premium support program where they could buy their own private insurance of their choice, and for the poor, we helped them with support."

The exact same statements could be made about the federal law.

There is no new "government insurance" in the law championed by President Barack Obama. The so-called "public option" died long before the legislation was signed into law. And, in fact, the Massachusetts and federal overhaul efforts are quite similar in how they cover the uninsured. Both expand Medicaid and provide subsidies for low-income individuals, and both require those who can afford insurance to buy it or pay a fine. Of the 401,000 Massachusetts residents who have gained coverage since the state law was passed, 164,000 are on Medicaid or the Children’s Health Insurance Program (41 percent of the newly insured), 154,000 are buying coverage with the help of government subsidies, and 83,000 are buying insurance on their own.

The federal law is expected to cover 34 million of the otherwise uninsured, with half — 17 million — added to Medicaid and CHIP by 2021 and 24 million getting private insurance through state-based exchanges, many of them with the help of subsidies. (Employer and non-group coverage would drop by 7 million, according to the nonpartisan Congressional Budget Office.) CBO has said that 57 percent of those buying their own insurance would get subsidies in 2016.

Job-Killing Exaggeration

Romney repeated a popular — and misleading — Republican theme by saying the federal law "kills jobs" and is "an economic nightmare." He added that the law was, "in my opinion, one of the reasons why this recession has taken so long to get out of." But requirements on employers won’t take effect until 2014. Beyond that, independent experts say the impact on jobs would be "small" or "minimal," and there would likely be gains in the health care and insurance industry that would partly offset that.

The CBO estimated that the federal law would "reduce the amount of labor used in the economy by a small amount — roughly half a percent — primarily by reducing the amount of labor that workers choose to supply." So that’s not a loss of jobs equal to half a percent, but rather, primarily a reduction in the supply of labor.

CBO explained that those with low incomes would essentially have more money thanks to federal subsidies to buy insurance and the expansion of Medicaid coverage. "Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market," CBO said. And older workers would retire from insurance-providing jobs earlier because the law guarantees coverage for preexisting conditions and limits variation in rates based on age.

Also, John Sheils, senior vice president of The Lewin Group, a subsidiary of UnitedHealth Group that operates independently, has estimated a small impact in the range of 150,000 to 300,000 low-wage jobs. Sheils didn’t estimate what the increase in health care and insurance jobs might be. Overall, he told us, there would be a "small net job loss."

No New Taxes?

Romney said that the Massachusetts plan "didn’t raise taxes," while the federal law raised taxes by $500 billion over 10 years. But that ignores the fact that the state did indeed increase the cigarette tax by $1 a pack. Romney himself didn’t do that, but his successor, Gov. Deval Patrick, did in order to help fund the law. The tax was expected to bring in $305 million in fiscal years 2009-2010. And the law Romney signed fines individuals who don’t get insurance and employers that don’t provide it. The list of $500 billion in taxes in the federal law sent to us by a Romney spokesman includes revenue from similar requirements in the federal law.

Also, Romney glosses over the fact that Massachusetts had $385 million in federal money to use for its plan. Under a Medicaid waiver, the state was using that money to pay safety net hospitals for treatment of the uninsured. The federal government said the state couldn’t use the money that way anymore, and the threat that it would lose hundreds of millions of dollars was one of the factors that prompted the health care overhaul.

As for the federal health care law and its taxes, the Joint Committee on Taxation estimated that the biggest chunk of revenue — $210.2 billion — comes from an increase in the Medicare payroll tax of 0.9 percent on income over $200,000 for individuals or $250,000 for couples, and a 3.8 percent tax on investment income for those earning that much.

A ‘Government Takeover’

Romney repeated another familiar claim in saying that people tell him "Obamacare represents a government takeover of health care" and "I think they’re right." As we’ve pointed out many times, the federal law doesn’t institute a government-run, single-payer system along the lines of what Canadian or British citizens have. The law actually brings millions of additional customers to private insurance companies, who will sell their plans through state-based exchanges. Yes, it’s true that the federal government will set a minimum benefit standard that those plans will have to meet — just like the Massachusetts state exchange — and there are additional insurance regulations in the law, like the popular ban on denying coverage for preexisting conditions. 

Distancing himself from the federal legislation will be a challenge for Romney, as evidenced by a Wall Street Journal editorial on the potential candidate headlined "Obama’s Running Mate." The editorial said that "the debate over ObamaCare and the larger entitlement state may be the central question of the 2012 election. On that question, Mr. Romney is compromised and not credible." Romney is eager to differentiate what happened in Massachusetts from the federal law, but he strains the facts in the process.