Analysis: Romney would send consumers healthcare bill, with benefits
WASHINGTON (Reuters) - Republican presidential nominee Mitt Romney has a prescription for controlling soaring costs within the $2.8 trillion U.S. healthcare system, partly by making consumers pay more of their own medical bills.
Romney's vow to repeal and replace President Barack Obama's healthcare overhaul has played prominently in the campaign, even as Romney has offered few details about his alternative.
But as he prepares to face Obama in their first presidential debate on Wednesday, Romney is giving a few hints. The former Massachusetts governor's advisers say he would accelerate the use of high-deductible insurance plans that offer lower premiums but require beneficiaries to pay thousands of dollars more in out-of-pocket expenses than they would face under conventional coverage.
Romney's overriding aim is to create a much bigger retail market in healthcare, with transparency on pricing and services, more flexible insurance pools and interstate insurance markets.
That would allow consumers to choose up front what products and services to buy and from whom, according to the Romney campaign. But consumers would cover most routine medical expenses themselves, including annual check-ups, with assistance from health savings accounts and new tax breaks intended to align the private markets for group and individual insurance that cover more than 160 million people.
"The result," Romney wrote in the New England Journal of Medicine, "will be patients who can confidently choose the coverage that is right for them, who know and care what healthcare costs."
The Romney campaign says its series of changes differ dramatically from Obama's 2010 Patient Protection and Affordable Care Act, which requires most Americans to buy health coverage and seeks to make it easier to do that by creating state-based insurance exchanges. Medicaid, the national program for the poor, would be expanded to accommodate those with low incomes.
Romney's approach is a political departure for him.
In Massachusetts, he oversaw the passage of comprehensive state healthcare changes that later became the model for "Obamacare," the president's federal program.
Romney's role in creating the Massachusetts plan made many conservatives wary of him, and in seeking the Republican nomination for president Romney made a point of rejecting Obama's plan as an illegal overreach by the federal government.
Since winning the Republican nomination, however, Romney has said he would support some Obamacare provisions. More recently, Romney has been criticized for describing emergency rooms as a way to cover the uninsured - the type of expensive treatment that programs such as Obamacare and his Massachusetts plan seek to avoid.
HOW MUCH IS IT?
Romney's new incentive-based strategy also could hold pitfalls for consumers.
Analysts say the use of heath savings accounts favors the affluent, while statistics indicate that high-deductible plans can mean big out-of-pocket costs for people with lower wages and little disposable income.
"It remains a very significant tax shelter, and with all tax shelters, it means a lot to people in high (income) brackets," said Henry Aaron of the Brookings Institution.
But Romney advisers say the approach strikes at two major contributors to spiraling medical prices: a federal tax exclusion on employer-sponsored health plans and conventional benefit packages that insulate consumers from the true cost of healthcare through co-payments and limited deductibles.
The idea would be to provide new tax breaks for consumers who now have employer-sponsored plans, which are exempt from federal income tax. But it's unclear whether those breaks would equal the value of the current tax benefits.
Conservative analysts say plans with high deductibles make consumers more responsible because they eliminate co-payments and require the patient to see more of the bill.
"Healthcare is the only service in the United States that you buy and use without knowing what the price is," said Dr. Scott Atlas, a Romney adviser with Stanford University's Hoover Institution. "If you're paying out of a health savings account, you actually see the bill. It really does reduce prices."
But Obama supporters and some independent analysts say the Romney strategy could backfire, leaving consumers with higher costs and tax assistance that favors the more affluent.
"What he's really talking about is shifting more and more of the cost onto the individual," said Christen Linke Young, Obama campaign associate policy director. "That's what he means when he says 'patient centered.' It's really troubling."
HEALTH INFLATION'S ENGINE
Critics also say the patient-centered approach would do little to help the chronically ill, whose needs account for the lion's share of annual medical costs but who often are unable to change providers or forego expenses.
The Romney campaign said people with high medical expenses would still be able to rely on more conventional plans with co-payments and limited deductibles, adding that high-deductible plans can provide catastrophic coverage.
Growing numbers of U.S. employers have embraced high-deductible plans in recent years to try to guard against rising costs that outpace growth in the economy, inflation and wages.
About 19 percent of Americans with employer-sponsored health coverage now are enrolled in high-deductible plans, up from 4 percent in 2006, according to the nonpartisan Kaiser Family Foundation, which studies healthcare trends.
Deductibles average about $2,200 for individuals and $4,000 for families, while premium savings for beneficiaries average $350 for an individual and $1,000 for a family, according to Kaiser. Annual out-of-pocket liabilities are capped at about $6,000 for single coverage and $12,000 for family coverage.
To help consumers, Romney would enhance the attractiveness of health savings accounts, tax-deferred instruments funded by employer and individual contributions. Options include higher contribution limits and a wider range of covered costs.
The Romney camp believes those kinds of changes could shift the $800 billion private health insurance market toward high-deductible plans that health savings accounts support.
Employer contributions to health savings accounts now average $600 for individuals and $1,000 for families, according to Kaiser.
"When you make them easier for people to access, that number gets bigger and bigger. And as that number gets bigger and bigger, the market shifts dramatically," said a Romney campaign official, referring to the higher-deductible plans. "We're on our way. The idea is to continue that trend."
A Romney administration also would usher in new tax benefits to help consumers meet their medical bills, possibly including deductions for health expenses and tax credits for those who would not benefit from deductions because they pay little or no income taxes.
Those new tax breaks could replace some or all of the current tax code exclusion that exempts employer-sponsored healthcare benefits from federal income taxes. The tax exclusion costs the U.S. Treasury about $100 billion to $200 billion a year in lost revenue.
"The current tax treatment of health insurance is the engine that fuels our health inflation costs. There are myriad ways of solving that. But until we solve it, we do not have health reform," the Romney campaign official said.