This morning, Mitt Romney wrapped up a speech to the Nashua Chamber of Commerce in New Hampshire with the following passage about health care reform:
ROMNEY: I want people to be able to own insurance if they wish to, and to buy it for themselves and perhaps keep it for the rest of their life and to choose among different policies offered from companies across the nation. I want individuals to have their own insurance. That means the insurance company will have an incentive to keep people healthy. It also means if you don't like what they do, you can fire them. I like being able to fire people who provide services to me. If someone doesn't give me the good service I need, I'm going to go get somebody else to provide that service to me.
And across the country, one could hear the faint sound of political reporters weeping for joy.
But let's be reasonable for a moment. It's quite clear that what Romney was trying to say was that consumers like firing service-providing companies, not people. (It doesn't make any sense, the other way. I can switch from Chase from Visa, but I don't have the ability to fire a Chase service representative.) It's a fitting gaffe for Romney, considering this is the candidate who claimed under different circumstances that companies and people are one and the same. It's also revealing, in a way that should alarm the Romney campaign, that their candidate likes to talk about consumer choice with terms like "fire" that feel too appropriate for a private equity executive whose job required him to lay off thousands of people.
But that's all politics. Onto the policy: Let's take the argument around his gaffe seriously. What Romney is arguing here is that our health care system should be more consumer-focused and that individuals should be able to switch their insurance company more easily. "I want individuals to have their own insurance," Romney said, with the all-important caveat: "if they wish to." What Romney is calling for is a market-based approach to health care without a universal mandate.
Romney says "the insurance company will have an incentive to keep people healthy." That's not true. The insurance company, as Romney knows, has an incentive to make a profit. One way to make a profit is to have way more healthy clients than sick clients. But that's not the easiest way. The easiest way is to rescind coverage when your healthy clients get sick, or to refuse coverage or discriminate on the basis of preexisting illnesses to ensure your group has only healthy people. Without regulation to prevent insurers from discriminating against or pushing off the sickest policyholders, healthy patients would all belong to cheaper plans and sick people would all get stuck in the same insurance program that death-spirals toward bankruptcy.
An individual market that moves away from company-defined health care requires group-underwriting regulations to prevent these kind of death spirals. But once we require insurance companies to accept all comers, we risk driving up premia unless we also compel all adults to buy health insurance whether or not they're sick. Otherwise, all healthy people could abstain from insurance until they contract an illness, knowing the insurance companies would accept them. Thus, you have the case for an individual mandate to make up the third leg in health care reform after government regulations and an "exchange" market for individuals.
Romney wants to give families the power to choose and fire insurance companies. That's commendable. It's also unworkable in a market where "people [only] own insurance if they wish to." That's the real gaffe from this morning.