by Mitt Romney
The fact that both parties have come to accept deficits and ever-higher levels of public debt is deeply troubling. There are times when deficit spending may be an appropriate bridge to finance a national emergency or to stimulate a depressed economy, but it should not be a permanent part of the budget. Almost half our public debt is financed by foreign entities, a circumstance that puts our currency at risk, threatens our annual budget, and makes our productive enterprises vulnerable to foreign ownership. Like most Americans, I recognize the need for government spending, but I cannot fathom the argument that it’s fine to spend more than we earn year after year. Passing on ever-increasing debt to our children is not just bad policy, it is morally wrong.
There are people in both parties who see the budget as something of a game of chicken. Some Democrats are eager to spend so much that Republicans have to raise taxes, and some Republicans, on the other hand, are intent on lowering taxes so much that Democrats have to cut spending. Both sides take great satisfaction in their respective battle plans: the Democrats for spending more and the Republicans for taxing less. My vote is for the Republicans, but in either case, deficits cannot be accepted as part of political tactics; there is simply too much at stake.
Our big government debt problem is not a Democrat problem—it is a Democrat and Republican problem. When President Bush and Republicans were in charge, they grew government, grew spending, and grew debt just like the Democrats. Neither party has been willing to say no to the people who want more and more from government. Saying yes wins votes. Saying no means concession speeches. But what America faces today calls for truth, and having just experienced a brush with economic collapse, the American people are ready for truth. They know that if we go on borrowing, we will do to the country what was done to Lehman and AIG and General Motors and to millions of homeowners. Except in the country’s case, there is no one that could bail us out.
If we wisely begin to reform entitlements and commit to live within our means, we will accomplish for our children what our parents did for us: Bestow upon them an America that is stronger and more prosperous even than what we have known. We do not have to become the worst American generation. There is still time to correct our course—barely. And our example of admitting and remedying a critical error will be an example our children may find both informative and indispensable.
No Apology: The Case For American Greatness
7
Healing Health Care
So there I was at Morristown Memorial Hospital in New Jersey. It was 1983. My job was to find millions of dollars in hospital savings, identify ways to improve patient care, convince doctors, nurses, and administrators to take the steps we suggested, and share what we learned with other hospitals around the country. But there was one small problem: I didn’t know anything about health care—and that fact was more than a little unnerving for me and for the hospital’s CEO.
This wasn’t the first time I’d been hired as a consultant to do a job in a business I didn’t know much about. One of my first senior assignments had been at the Morgan Knitting Mills in Tamaqua, Pennsylvania. Soon after our arrival, the junior consultant and I were ushered into the CEO’s office, where John Morgan was behind his desk, catching up with The Wall Street Journal. As he put the paper down on his desk, he looked at us, let out a sigh, then stood and raised both hands above his head. He was about six feet, four inches tall—sufficiently imposing to attract my full attention. Boys! Boys! he bellowed. They sent me boys when I needed men!
Fortunately, we boys were able to understand and accurately present his business to potential acquirers. But John Morgan always had a way of putting people on their heels. One CEO asked him why he was selling his company. His answer: That’s a stupid question. I’m old, I have no kids, and they don’t dig graves big enough to put it in with me! I knew just how that CEO felt.
So Morristown, New Jersey, wasn’t the first time I had felt a little apprehensive about an assignment. But over the years, I’d gained a measure of confidence about jumping into unfamiliar businesses and helping them find ways to improve. I’d performed well enough at companies that made farm tractors, glass bottles, pharmaceuticals, fiber optics, chlorine, and process-control values. The analytical concepts and approach that I’d learned from my employers at Bain & Company, combined with hard work, help from smart people, and a little luck, got me up to speed and able to contribute in a variety of settings. We’d start by forming a team with the client’s own people, who brought to the table the comprehensive industry expertise we sometimes lacked. We would add data—a lot of data, so much, in fact, that I wasn’t comfortable until I had been fully immersed in it. We applied the proven concepts that Bill Bain liked to call compressed experience. And then we would condense what we learned from the data, from the industry experts, and from our conceptual framework into the two or three issues we believed would make the biggest difference in helping an enterprise become more successful.
Morristown Memorial Hospital, however, was a different kind of challenge, and I wondered whether health care would be too dissimilar from the business world we knew for us to be successful. Just to add to the pressure, Morristown Memorial was one of four hospitals we were taking on at the same time.
After setting up our team at each of the hospitals, we began gathering data. We looked in minute detail at the costs of a number of procedures that we selected as examples, from triple-bypass surgery and gall bladder removal to suturing a minor laceration. We counted big things such as nursing hours, operating-room time, and pharmaceuticals, as well as little things such as Q-Tips, gauze pads, and the custodial time spent mopping the floors of patients’ rooms.
We weren’t the only ones surprised by what we discovered—the differences in cost for the same procedure done in separate hospitals were large, sometimes by as much as 100 percent. Quality and outcomes also differed. One hospital, for example, had averaged much better recovery rates and half the length of stay for hip-replacement surgery than the other three. Differences like those pointed us toward changes that would yield meaningful cost and quality improvements. We also thought they might be of great interest to the patients getting hip replacements. We took those innovations we developed at Morristown Memorial nationwide. Bain & Company was ultimately engaged by nearly one hundred hospitals.
Really Helping People
I’m sure this experience was part of the reason why I didn’t just dismiss my friend Tom Stemberg’s admonition soon after I had been elected governor. He had a simple message for me. Mitt, if you really want to help people, find a way to get everyone health insurance.
I told him that was impossible; I’d have to break my promise not to raise taxes, because after all, getting everyone insured would cost hundreds of millions of dollars, if not billions. Yeah, he replied, but if you really want to help people, you’ll find a way.
I knew that he was right. Over the previous twenty years or so, I had served in various community and church service roles that gave me the opportunity to know quite a large number of people on a very personal basis. Some were poor, some were wealthy, and most were in between. Many were single; some were single parents.
Quite a few of the people I came to know and befriend were unable to afford health insurance, even if they had middle incomes. One was a young man who had been stricken with inoperable cancer. His doctor and hospital had provided the most basic care, but his hope for cure or longer life involved treatments that would be expensive and unaffordable to someone without insurance. Another was a single mom, a waitress. Her cancer, then in remission, had made it almost impossible for her to find work: employers didn’t want someone with her health costs in their insurance pool. The number of people with these kinds of circumstances is far from small. And as governor, I was in a position to do something about it.
I’ve learned that when politicians say they want to help people, there is often cause for a good deal of skepticism. People are used to promises made and promises forgotten. On
ce when I was governor, I went to the scene of a flood in one of our cities. The first floor of a large nursing home was filled with water three to four feet deep. The patients were being carried out on stretchers by emergency workers and placed on buses to be taken to other facilities. I stepped into one of the buses to reassure the evacuees. I remember one very old, very small woman sitting with her health attendant in the front row. She looked so sweet and so worried. I smiled at her and proceeded with my promise to the people on the bus: We will make sure that all of you are dry and warm and that you are taken to a facility where you will be well taken care of. That sweet old lady looked up and said, loud and clear, Bullsh–!
The hard-won wisdom of many decades had taught her what to think of men from the government arriving with promises of help.
I didn’t want to overpromise and underdeliver on health care, so without fanfare or public announcement, we went to work to see if we could find a way to insure the uninsured and to make sure that no citizen in our state would ever need to worry about losing their health insurance. The group I formed wasn’t made up of the usual political mix. Instead, it included a former investment banker, a Bain & Company partner, a Washington policy guru, an expert in federal health programs, and even some help from a professor at MIT and experts from the Heritage Foundation.
After about a year of looking at data—and not making much progress—we had a collective epiphany of sorts, an obvious one, as important observations often are: the people in Massachusetts who didn’t have health insurance were, in fact, already receiving health care. Under federal law, hospitals had to stabilize and treat people who arrived at their emergency rooms with acute conditions. And our state’s hospitals were offering even more assistance than the federal government required. That meant that someone was already paying for the cost of treating people who didn’t have health insurance. If we could get our hands on that money, and therefore redirect it to help the uninsured buy insurance instead and obtain treatment in the way that the vast majority of individuals did—before acute conditions developed—the cost of insuring everyone in the state might not be as expensive as I had feared.
When we surveyed those who were uninsured, we became even more optimistic. About 40 percent of the uninsured were making enough money to buy insurance on their own and wouldn’t need a subsidy at all. (The reasons for not buying insurance could be many and varied, including the typical young person’s belief in their own invulnerability, even if they ski, parasail, ride motorcycles, or skydive.) Another 20 percent of the uninsured qualified for Medicaid, so half the cost of their care would be covered by the federal government. And most of the remaining 40 percent who were not making enough money to buy insurance could afford to pay for some portion of their premium. We envisioned the possibility of splitting the cost of health insurance with them. The subsidy would become smaller as their income grew, but not so much that we would create a disincentive for them to grow their income.
The survey of the uninsured also dispelled some of our misconceptions. A number of people had imagined that the largest group of the uninsured would be unemployed single moms. In fact, the survey showed that the largest cohort was white, employed, young single males. This group was not a population that private insurers would likely resist covering because they were healthier than the population as a whole.
Most of the uninsured young men were working, but they were employed by small businesses—such as restaurants, garages, and software developers—or they worked for themselves. They told the survey takers that when they went to buy insurance, the insurers weren’t interested. First, insurance companies told them that it was simply too expensive for them to service an individual who was not part of a larger group, and second, the companies suspected that young males, for instance, would be interested in health insurance only if they believed they were likely to get sick or already had a preexisting condition. The companies called this adverse selection.
Massachusetts insurance regulations also didn’t help. The Commonwealth required insurers to offer only benefit-rich, low-deductible, limited co-pay policies—and consequently, such policies were very expensive. Further, the state didn’t allow insurers to adequately discount policy premiums for young healthy people. As a result of all these regulations, premiums for individuals who were not part of a pool were excessively high, and young healthy people not surprisingly declined to pay them. When we asked the insurance companies what would happen to those premiums if we could solve the servicing problem, update our regulations, and get everyone insured—in effect, making the entire state their group pool—they calculated that premiums for an individual, nongroup young person could be cut roughly in half.
It began to appear that the cost of getting private health insurance for all our citizens would be much less than I had imagined. Many of the then-uninsured wouldn’t need a state subsidy to buy health insurance, and the premiums we would subsidize would be less expensive because a good portion of the population pool would largely be relatively young and healthy.
The plan we ultimately constructed and proposed to the legislature relied on three basic components.
First, those who could afford insurance would either buy it or pay their own health-care costs—no more free riders showing up at the hospital expecting to get care at the taxpayers’ expense. If they did not buy insurance or establish an account to pay for their medical expenses, they would forgo the benefit of a tax exemption.
Second, for those who couldn’t afford health insurance on their own, the state would pay a portion of their premium with the amount of the subsidy determined on a sliding scale by income. Importantly, no one got health insurance for free—even the poor would pay some amount they could afford.
Finally, to make it easier for insurers to service individual customers, the state would create a connector or exchange that would collect premiums and pass them on to the insurers. The Heritage Foundation helped us construct an exchange that would make individual premium payments tax-advantaged, lowering cost even further.
The plan would work only if we could get our hands on the money that was then being used to pay for the health care of the uninsured, most of which came from the federal government. The U.S. Health and Human Services Department provides subsidies, known as DSH payments, directly to hospitals that have a disproportionate share of patients who are poor and without insurance. We wanted to redirect these monies from going to hospitals to go instead to individuals to help them buy their own health insurance from private insurance companies. Why would the feds agree to such a proposal? Our pitch was simple: if they agreed, we could get everyone in Massachusetts insured—an accomplishment never before achieved in that state or any other.
Our first stop in Washington in the winter of 2004 was the office of Massachusetts’s Senior Senator Ted Kennedy, a respected health-care advocate on Capitol Hill. The late Senator Kennedy and I disagreed on almost every major issue of public policy, and we had waged a knock-down battle for the Senate seat he held in 1994. Teddy was a tough, take-no-prisoners political opponent.
But to his credit he saw an opportunity to work in a bipartisan fashion to try an experiment that might become a model for other states. He quickly grasped the structure of our program, and following a few meetings, he agreed to support our approach. Together, we pitched former health and human services secretary Tommy Thompson. Our meeting was scheduled for the secretary’s last day in office, and he agreed with our proposal in principle, but wanted to apply a number of qualifying benchmark provisions. We worked out a letter of agreement, and were on our way. Thompson’s replacement, Mike Leavitt, was just as enthusiastic as his predecessor.
Back in Boston, I presented our plan to the Blue Cross Blue Shield Foundation and leaders from across the state. Massachusetts Senate President Robert Travaglini, a thoughtful and pragmatic Democrat, had made it a priority to get everyone insured. He liked our plan, and he liked the fact that Senator Kennedy had approved it. He agreed to suppor
t it with a few modifications, none of which I seriously objected to. The Democratic-controlled House, on the other hand, insisted on adding a number of features, a process that took an entire year. When it was finished, we had a bill that retained the original vision, plus added features. Their bill was projected to add just over 1 percent to the state budget; we had calculated that mine would not have added any cost. So I vetoed measures I felt were expensive or counterproductive, but these were overridden by the legislature.
At the April 2006 signing ceremony in Boston’s famous Faneuil Hall, Senator Kennedy had the best line: When Mitt Romney and Ted Kennedy are celebrating the same piece of legislation, it means only one thing: one of us didn’t read it. It was a good joke, but this time there was no truth in the humor: We both had worked very hard to make the plan a reality. Beyond our personal collaboration, what was most noteworthy was that every interest group in the state supported the bill—business, labor, hospitals, and advocates for the poor. And the bill passed the 200-member houses of the legislature with only two dissenting votes.
All of us knew the bill wasn’t perfect; nothing that groundbreaking could be. But it was a big improvement over what we had. It would need to be fine-tuned as it was implemented and it would undergo midcourse correction as time went on. From the outset, I and my team knew that some of the features the legislature had added would be expensive, including the full complement of coverage mandates such as unlimited in vitro fertilization treatments and dental care, a small fee paid by employers who didn’t insure their employees, and no opt-out provision for people who wanted to forgo insurance and pay their own way. I was also concerned by the implementation decisions of the administration that followed my own: It decided to provide insurance entirely free to the lowest income people, whereas I had insisted that everyone should pay some portion of their premiums, even if only a small amount. I believed that the new administration set the state’s share of premiums above the level I thought were affordable for the Commonwealth. It also provided for certain hardship individuals to receive free care without having to purchase insurance. Even the best written legislation is subject to rule-making and interpretation by political appointees, and it can be adjusted by subsequent administrations; their predisposition to grow or restrain spending has a major impact on cost.