Monday, January 9, 2012

Clarifying the Curve

In a comment at FrumForum, Chris Conover at AEI replies to my analysis of the rate of growth of per capita health-care spending in Massachusetts.  Since Conover raises some worthwhile points and because FrumForum is (alas) about to go dark, it's worth quoting the comment in full:
As a practical matter, it is quite difficult to distinguish the effects of the recession from the effects of “Romneycare” in the 2007-2009 period. So in general, Fred Bauer gives more credit to Romneycare than I myself would.
That said, in assessing gubernatorial performance, it seems a little odd to ignore the fact that health spending was going up MUCH faster than the national average while Governor Romney was in office but then give him great credit for the purported slowdown in spending after he left office. If the argument is that governors really can’t do that much about health spending anyway, then it renders all these cross-state comparisons moot. One can’t (or shouldn’t) cherry-pick the data to highlight a comparison that looks favorable and ignore ones that are not.
The best analogy I can give is this. Imagine someone who is very obese getting a diet pill. Prior to taking the pill, this individual’s weight relative to the national average was rising 27% every 2 years. After the pill, their weight is still rising relative to the national average, but “only” 5% faster. The individual taking the diet pill is still gaining weight faster than those who don’t. Would you take that pill?
Until Mr. Bauer can explain what it is about Massachusetts health care that should lead us to “expect” 27% faster-than-average growth in its spending, pointing to only 5% faster-than-average growth seems problematic. Especially since the one thing we know for certain happened between 2004-2006 and 2007-2009: Governor Romney left office! If we give Governor Romney “credit” for the ballooning of MA health spending during his administration, then his apparent ability to lower this excess to “only” 5% seems far less impressive.
There's a lot here, so I'll address it in parts.

First of all, I should clarify that the aim of my last piece was not---FrumForum headline notwithstanding (and I was not responsible for writing the headline for the FF post)---that Romneycare alone bent the spending curve down forever.  I think more analysis and evidence would be needed to substantiate that argument.

Instead, my analysis grew out of a desire to test the now-standard claim that Romneycare exploded health-care spending in Massachusetts.  This federal data suggests that, at least until 2009, this claim might be more than a little problematic.  Now, more evidence might come out that supports the argument of exploding Massachusetts health-care spending due to Romneycare, but current federal data does not support this claim.

In his last few posts to the AEI blog, Chris Conover has been making a very different claim: that health-care spending grew rather quickly during Romney's term as governor.  The CMS data certainly seems to support that claim.  For example, in 2006, health-care spending grew 44% faster in Massachusetts than it did in the nation as a whole.  However, Romney is not exactly an anomaly here.  In 1998, during Paul Cellucci's term, health-care spending also grew 44% faster in Massachusetts than it did in the nation as a whole.  Since 1991, there have been only three years---1995, 1996, and 1999---where health-care spending in Massachusetts grew slower than it did in the nation as a whole. It's also worth noting that my piece was not particularly talking about Romney's overall record of health-care spending but about the effects of Romneycare (or at least what the effects of it aren't).  So I'm not sure how much I was "cherry-picking" data here as much as trying to compare the immediate period before Romneycare to the period after Romneycare.

Also, the extreme increase in spending during Romney's tenure arguably makes the case for Romneycare stronger, not weaker: an executive looking at exploding spending might feel the need for a game-changing reform.  Moreover, most anti-Romney "conservatives" are not claiming that health-care spending in Massachusetts during Romney's tenure was much of a problem; for them, Romneycare's meddling with the status quo was worse than leaving things as they were.

As I said in my earlier post, I think health-care spending is due to a variety of factors, some of which are out of the hands of governors and government more broadly.  So I think there are limits to how much any single political official can change the health-care curve, especially in the US health-care system, which relies on a combination of government and private spending.  I also think that cost controls are not the be-all and end-all of measuring the worth of a health-care system.

However, if I were to defend the claim that Romneycare reduced the rate of health-care spending growth, I might make the following points.  Mr. Conover is right to note that the recession does play a role in the reduction of the rate of health-care spending growth in the US and Massachusetts.  However, much more analysis would need to be done to explain why the recession caused the rate of growth in per capita health-care spending to decline in Massachusetts faster than it did in many other states, including ones with higher unemployment rates.

The recession might explain the absolute fall in the rate of per capita health-care spending growth in Massachusetts, but it does not entirely explain the relative fall as well.  In the recession during the early 2000s, Massachusetts was hit fairly hard (its unemployment rate more than doubled between late 2000 and the middle of 2003), but its health-care spending grew at a much more rapid rate than that of the nation as a whole: 14.7% faster in 2001, 20.5% faster in 2002, and 9.7% faster in 2003.  So, in the past, an economic slow-down did not lead to a radical narrowing of the gap between US and Massachusetts health-care spending growth rates.

And to return to Mr. Conover's analogy of the pill:
Prior to taking the pill, this individual’s weight relative to the national average was rising 27% every 2 years. After the pill, their weight is still rising relative to the national average, but “only” 5% faster. The individual taking the diet pill is still gaining weight faster than those who don’t. Would you take that pill?
 I think I, and most other people, would take that pill (with a couple caveats on the side).*  After all, that is still a big reduction in the rate of growth.  But I wouldn't stop looking for further treatment, either.  Refusing to take that pill (when that pill can be taken as part of a broader health-care regime) would be somewhat like letting the perfect be the enemy of the good.

And more data here will be crucial in adjudicating this point.  In 2007, per capita health-care spending in Massachusetts grew 46% faster than it did for the nation as a whole, but, in 2008 (once Romneycare went more fully into effect), it grew 6.7% faster; by 2009, it was only growing 3.8% faster.  That could either be a statistical blip or it could be the start of a downward trend in the growth of health-care spending in Massachusetts; there have been times when the rate of growth in Massachusetts spending has slowed compared to the nation as a whole only to explode a few years later, so a couple years is not enough time to demonstrate sufficiently the effects of a health-care policy on spending.

But I think there is a big difference (in terms of policy and in terms of politics) between debating how much Romneycare slowed spending up through 2009 versus debating how much it skyrocketed spending up through 2009.  Contemporary political discussion has focused on the latter; federal data suggests that this assumption might be a problematic one.

*Those caveats include a consideration of whether the pill would have other harmful side effects and whether it would work over the long term.  The jury is probably still out on Romneycare on both those points.  I do not think---and doubt even Romney himself believes---that Romneycare is the magic pill for curing all the nation's health-care concerns.


  1. Maybe it's a poor analogy, but leaving aside Washington, DC, MA was the fattest guy in the room health spending-wise, when Governor Romney took office. So no one can blame him for the state's having the highest health spending in the nation, for that happened before his arrival.

    But one might suppose that it would be easier for the fattest guy to lose a little weight in subsequent years than the skinniest guys such as TX and UT (who respectively were 13% and 25% below average weight in 2003). That didn't happen: even though one might have rationally expected the skinny guys perhaps to catch up to the national average, they stayed about the same during Gov. Romney's term. But the fattest guy grew monstrously fatter during those 4 years. Then, after Governor Romney left office, the fattest guy STILL was gaining even more weight faster than those skinny guys: it just wasn't as fast as before.

    Put the shoe on the other foot. Suppose UT or TX had reduced their health spending relative to the national average by 27% during the last two years Perry and Huntsman were governors, but this declined to only a 5% reduction in the years after they left. According to Mr. Bauer's logic, this would indicate failed policies. After all, compared to the preceding two years the rate of decline in relative health spending slowed considerably. So whatever "reforms" they might have put into place by the end of their terms apparently were ineffective even though in absolute terms health spending continued to decline.

    Personally, if I were trying to lose weight, I would be more inclined to try the prescriptions of Drs. Huntsman or Perry (who apparently kept their patients relatively skinny) than Dr. Romney, who allowed the weight of the fattest patient in the room to explode for 4 years and then apparently STILL couldn't do better than let that patient's weight rise at a slower rate than in the past.

    A longer time series surely will help us to better assess the long-term effects of Romneycare. But in the meantime, I remain in the skeptical corner that Dr. Romney found a prescription that was good either for MA or the nation as a whole. I don't believe the available evidence strongly supports the opposite conclusion.

  2. When people in Massachusetts (I take it neither of you are?) talk about exploding costs since RomneyCare, typically they are referring to the state budget, not these esoteric numbers (which include nursing home expenses that are in no way affected by RomneyCare). Pre RomneyCare, healthcare accounted for 25% of the state budget; now it's 45% (don't hold me to exact percentages but that's the scale and directionality of the change).

    Also our out of paycheck premiums have gone up at least 50% and co-pays more than doubled. So assuming your numbers are right, our employers are paying a lot less, which is conventional wisdom concerning what will happen with Obamacare. For the 1% of us that pay for our own insurance, our premiums have doubled. That's because it's age rated; all you have to do is live and you get a double-digit increase annually.

    So basically RomneyCare -- according to your figures -- gave employers the chance to get out of the healthcare insurance business. Although more employers are offering insurance because they are mandated to, well over 100,000 fewer people get insurance from their employment.

    (As I have written to Mr. Bauer privately, there are also major problems with the years selected for control and comparison purposes. Again, I'm sure because he does not come from Massachusetts, he does not realize the RomneyCare was actually our fourth "reform" since the 1980s and that we've had three since. The years from the 1990s that he calls out for lower grouth coincide almost perfectrly with the year after previous "reforms.")

    -- Dennis Byron