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Romney, Perry, and Huntsman: A Tale of Three Governors

Tuesday, January 10, 2012

How did these three presidential aspirants do when it comes to healthcare spending?

When it comes to healthcare reform, there is much to learn by studying the records of the three GOP governors vying to be the party’s nominee for president. For example, in a recent blog post, I showed that both ambulatory care and health facilities spending, relative to the national average, rose more quickly in Massachusetts during the Romney administration than did such spending in Texas under Governor Rick Perry or in Utah under Governor Jon Huntsman. In this article, using newly released figures from the Centers for Medicare and Medicaid Services, I show that this general finding also played out in terms of state spending per resident (figure 12.6e).

Conover Figure 12.6e JPEG

Unlike the earlier figures I provided, the above figure takes into account any border crossing that might otherwise have artificially inflated health spending in Massachusetts relative to more isolated states such as Utah and Texas. Nevertheless, my earlier observation still holds true: governors have control over some, but not all, of their state’s health expenditures.

To better examine one major component of health spending over which state policymakers have a great deal of policy discretion, we can look at Medicaid spending. To determine how effectively governors have managed to keep overall levels of Medicaid spending in check, it would be most appropriate to use Medicaid spending per state resident. To the extent that a state’s Medicaid program has grown merely due to a rapidly growing population, such a measure will automatically adjust for that increase. Using this measure, we can see that Romney appears to have done better at keeping Medicaid spending in check than overall health spending (figure 12.6f).

Conover Figure 12.6f JPEG

Interestingly, relative to the nation as a whole, Medicaid spending per resident rose under Perry even as overall health spending was declining (relatively speaking). Likewise, relative spending on Medicaid rose and then fell during Huntsman’s administration even as relative health spending overall was steadily declining.

One reader wondered whether age, health, or income differences might explain the sizable cross-sectional differences in health spending between these three states. Utah, for example, has the lowest smoking rate in the country and the third-lowest elderly share of the population. These are surely important factors, but of the three, income is likely the most significant. When we compare per capita health spending across countries, for example, roughly 90 percent of the differences can be attributed to differences in GDP per capita. Moreover, neither the age distribution of the population nor the percentage of adults who smoke change that much (relative to the national average) over less than two decades. Thus, over such short periods, changes in relative income are more likely to drive shifts in health spending than are changes in the age mix of the population or smoking rates. The same would be true of changes in other demographic characteristics such as race or ethnicity or other health factors such as obesity.

This brings me to another measure we might use to gauge the relative performance of these three governors when it comes to health spending. Did the relative burden of health spending rise or fall during their administrations?

Trends in the Burden of Health Spending

Our rough measure of this burden is calculated using resident health spending as a percentage of gross state product. I again have indexed this burden so you can see how it rises or falls relative to the national average (the national burden rose from 11.6 percent of GDP in 1991 to 14.9 percent by 2009). When we index this burden measure relative to the U.S. average, we find that, just as with health spending, the burden in Massachusetts exceeded the national average, but not nearly as much as per capita health spending itself. In short, higher GDP per capita explains much of the higher health spending observed in Massachusetts. But by tracking how the relative burden rises or falls, we can quickly see whether health spending was rising faster or slower than the rate of increase in a state’s income (which gross state income roughly approximates). In Massachusetts, the relative burden rose steadily during the Romney administration, whereas this burden declined in the states governed by Perry and Huntsman (figure 12.6g).

Conover Figure 12.6g JPEG

The most recent recession officially began in December 2007, which makes interpreting the last few years of this graph a bit murky. The relative burden of health spending rose steadily during Romney’s administration, but that was a continuation of a trend he inherited. The relative burden peaked in 2007 and then declined in both 2008 and 2009. Was the latter due to Romneycare, which was first starting to be implemented in July 2006, or was it due to the recession? Choosing between these explanations is not straightforward. Likewise, the relative burden generally declined under Perry until a noticeable upturn in 2009: should this be chalked up to his policies or the adverse effects of the recession?

Trends in Health Spending by Service

One last thing we can do with these data is examine the trends in spending by specific medical services. All figures that follow are based on spending by location of residence rather than location of service. Thus, all spending by Massachusetts residents includes whatever spending they might have done outside their own state and excludes any spending done by non-Massachusetts residents within that state. Hospital care (37.8 percent), physician and clinical services (24.2 percent), prescription drugs and non-durable medical goods such as band-aids (11.1 percent), and nursing home care (8.4 percent) together accounted for more than four-fifths of spending in Massachusetts in 2009. With the exception of prescription drugs and non-durables, relative spending rose during the Romney administration itself (figure 12.6h). However, relative spending on hospital and nursing home care declined after Romneycare was put into place (albeit after Romney had left office). In contrast, physician spending continued to rise.

Conover Figure 12.6h JPEG

Keep in mind that all the figures shown track relative spending. They do not imply that actual per capita spending on hospitals or nursing homes declined, simply that spending on such services did not rise as quickly in Massachusetts as in the nation as a whole. But once again, the arrival of the recession contaminates any conclusions about the effect of Romneycare. Unfortunately, there is no bulletproof way of proving for certain whether the decline in spending for health facilities should be chalked up to implementation of the state’s new health reform law or the recession.

What conclusions can we draw from all these charts? First, Romney can legitimately claim he inherited rising relative healthcare spending. He did, but did nothing to arrest this trend: if anything, it got worse during his administration. It was only after he left office that the relative rate of increase slowed, but this may have been due to the recession rather than the new health law he left in place. In contrast, trends in relative health spending unambiguously improved under Governors Perry and Huntsman even though they inherited spending trends that were flat (Perry) or rising (Huntsman).

Second, Romney inherited falling Medicaid spending relative to the nation, but he had reversed this trend by the end of his administration. Similarly, Governor Perry inherited falling relative Medicaid spending, but steadily grew Medicaid faster than the national average throughout his term even during the recession. In contrast, Governor Huntsman inherited rising Medicaid expenditures, but had reversed this trend by the end of his administration. By the end of his tenure, Medicaid spending per resident was only half the national average, but this is identical to what it was four years before he took office.

Third, Romney inherited a rising burden of health spending compared to the national average and this burden steadily rose in Massachusetts under his tenure. It did not decline until the recession began, so one cannot unambiguously credit Romneycare with this reversal. Perry inherited a much more modest decline in the relative burden, but this decline accelerated under his tenure, only reversing itself in 2008 and 2009. There is no way of determining whether this reversal would have occurred absent a recession. Huntsman likewise inherited a declining relative burden, but this continued to decline during his term in office—flattening, but not reversing during the recession.

Finally, for hospitals, nursing home care, and physician services, relative health spending trends under Romney accelerated compared to the trends he inherited. Relative spending began to decline for health facilities only after he left office; but because this occurred during recession years, we cannot definitively attribute this to the beneficial effects of Romneycare. In contrast, physician spending accelerated both during and after his administration. For prescriptions and non-durable medical supplies, rising relative trends were reversed during Romney’s tenure.

The available evidence suggests that Huntsman has a slightly better record than Perry in “bending the cost curve” both for health spending in general and Medicaid spending in particular, along with a decidedly superior record in that regard compared to Governor Romney. Also, Romney has overseen a rising burden of health spending during his time in office, whereas both Perry and Huntsman have seen this burden fall relative to the rest of the nation. The caveat is that Romneycare may possibly have begun to reverse the trend of relatively rising health spending for health facilities in Massachusetts. But we cannot be absolutely certain of this, given that the recession arrived just as Romneycare was being implemented. As with so many indicators of performance and characters, voters will simply have to make up their minds using imperfect information.

Christopher J. Conover is a research scholar at Duke University’s Center for Health Policy and Inequalities Research, an adjunct scholar at the American Enterprise Institute, and Mercatus Affiliated Senior Scholar. The charts shown are from his new book American Health Economy Illustrated, to be released in January 2012 by AEI Press. See PowerPoint versions of Figure 12.6e, Figure 12.6f, Figure 12.6g, Figure 12.6h, and Excel spreadsheet containing indexes for a) health spending per resident; b) Medicaid spending per resident; c) resident health spending as a percentage of gross state product, and d) resident health spending by type of service for data, sources, and methods.

FURTHER READING: Conover also writes “In Sickness or in Wealth,” “The Family Healthcare Budget Squeeze,” “Is Medicare a Ponzi Scheme?” and “Entitled to Leisure?” Scott Gottlieb contributes “Medicaid Is Worse Than No Coverage at All” and “Obama's Medicaid Provisions Are an Albatross to Economic Recovery.”

Image by Rob Green | Bergman Group

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