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Cut Romney (A Little) Slack

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Mitt Romney didn’t help his case when he said, in a speech this morning, that “I like being able to fire people who provide services to me.” Already critics, including some of his Republican rivals, are linking the quote to his work at Bain Capital, an investment firm that made hefty profits by acquiring and then downsizing companies. “It’s clear … he likes firing people,” Jon Huntsman quipped. “I like creating jobs.”

Great line, but let’s cut Romney a little slack here. He was talking about his ideas for health care reform, not the economy. Specifically, He would like to transform Medicare into a “premium support” system, in which seniors shop around for the policies they liked best – dropping, or “firing,” insurance plans when something better comes along. He also wants non-elderly Americans to have some choices they would not otherwise have, among them the option to buy insurance across state lines. In other words, Romney was not saying he likes seeing people lose their jobs and, as Greg Sargent says, to suggest as much would be "misleading and unfair."*

But the argument that Romney was trying to make, about health care policy, deserves some scrutiny of its own, because you’re going to hear it again. Conservatives frequently claim that that the health care system will be better off if people act more like consumers, shopping around for the best insurance plans. The best way to accomplish this, they say, is to transform Medicare into a premium support system and to repeal the Affordable Care Act, putting in its place a deregulated market with more insurance options. Romney has endorsed all of these ideas.

But unfettered choice is not a good thing in health care policy. One reason is that getting good, reliable information about insurance plans is difficult – as anybody who has ever tried to buy coverage on his or her own can attest. Another is that, even in a world with perfect information, the insurance market is prone to a particular kind of failure. Insurers don’t want to pick up bad risks and will do whatever they can to avoid them. Absent regulation, that makes it virtually impossible for people with serious medical conditions to get coverage. As Ezra Klein put it a while back, when Republicans were talking up this idea, "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. And it's the Republican plan for health-care reform." 

Research backs this up, by the way: The most reliable projections, including those by the Congressional Budget Office, suggest that deregulating the insurance market would make coverage cheaper for healthy people but only by making it less accessible for sicker people. In that sense, deregulation actually means fewer choices, rather than more, at least for the people who need choice the most. 

That doesn’t mean competition can’t have an important place in health care. But government needs to structure and regulate the insurance market aggressively. That’s what European nations with relatively healthy competitive markets, such as the Netherlands and Switzerland, do. And it’s what the architects of the Affordable Care Act hope to accomplish here.

As for seniors, Medicare already has a competitive marketplace: Seniors in the traditional program can opt into private insurance alternatives, through the Medicare Advantage system. Many already do and oftentimes they’re getting a better deal. But the premium support plans that Republicans talk up rarelyhave the same set of protections against discrimination by medical condition, which is why they threaten access for seniors – again, leaving them with less choice rather than more.

* Of course, as Sargent also points out, some of Romney's attacks on Obama take quotes of context in pretty much the same way.

Update: Here's more analysis from Derek Thompson and Igor Volsky, who also think the real significance of Romney's comments are what they say about health care.