Economics, Entitlements

Health spending trends under Romney, Perry, and Huntsman: Healthcare fact of the week

Mitt Romney has been attacked by many for his record on healthcare while he was governor of Massachusetts. But with three governors in the Republican race, it is useful to compare the track records of all three as they relate to health spending. No matter how the figures are sliced and diced, it is clear that health spending, relative to the national average, rose more quickly during the Romney administration than during either the administrations of Governor Rick Perry or Governor Jon Huntsman. For example, ambulatory healthcare spending per capita was declining relative to the national average when Governor Romney first took office, but has steadily increased every year since then, climbing from 19 percent above the national average in 2003 to 29 percent above the national average by 2007 (figure 12.6c).

In contrast, ambulatory health spending in Texas was steadily declining prior to the arrival of Governor Rick Perry and continued to do so for the first four years of his term. Subsequently, it has risen only slightly, from a low point of 8.8 percent below the U.S. average in 2006 to being 6.3 percent below the average by 2009. Jon Huntsman inherited a somewhat similar situation except that relative spending already had begun to rise slightly before he took office and continued to rise for his first two years, followed by a noticeable relative decline.

The pattern for health facilities is somewhat different, but the big-picture result is the same. In this case, Governor Romney inherited rising relative expenditures on health facilities, which fell slightly in his second year, but then continued to rise (figure 12.6d).

Governor Rick Perry inherited relatively stable health facilities expenditures (i.e., rising at about the same rate as the rest of the nation). Relative spending has declined in subsequent years. Governor Huntsman inherited a stable pattern of health facilities expenditures which continued throughout his tenure.

What conclusions can we draw from this? First, the figures shown focus on the gross domestic product attributable to the two large categories of health spending shown and divides this amount by state population to obtain per capita estimates. This is similar but not equivalent to each state’s expenditures on these services. It reflects sales generated within a state, but not necessarily only to that state’s residents. Thus, it is not an exact measure of how much Massachusetts residents spend relative to those in Texas. But it is a rough approximation. And unless there is a great deal of year-to-year variation in the fraction of cross-border spending by a state’s residents, the trends in per capita health-related GDP should approximately mirror trends in health spending. It would be quite unusual for per capita health-related GDP to be steadily rising when correctly measured health spending of that state’s residents was falling, for example.

Second, the figures only include spending on ambulatory care services (including services of physicians, dentists, and other health professionals) and spending on health facilities. Notably excluded are spending on prescription drugs and durable medical equipment (which account for one seventh of national health spending), among other things. So the figures admittedly do not provide the whole picture of health spending, but they do include the lion’s share of medical costs.

Third, state governors clearly are not responsible for aggregate health spending in their state. That said, state policy most assuredly has some effect on health spending. Medicaid spending accounts for nearly one fourth of state government spending, exceeding the amounts spent on elementary and secondary education. Even though the federal government contributes a larger share of Medicaid spending than state and local governments, state policymakers historically have had a great deal of discretion over eligibility standards, benefits, and payment rates. Likewise, in most states, state employees, dependents, and retirees typically constitute the largest single group obtaining employer-sponsored health insurance. All told, state and local policymakers control more than one quarter of health spending through Medicaid, state employee health benefits, and other categorical health spending (e.g., local health departments). Thus, gubernatorial health policy decisions most assuredly have some impact on trends in health spending.

As well, there are vast differences across states in their degree of health services regulation, with some states requiring the state’s permission for every hospital bed built and others imposing no state restrictions whatsoever on health facilities expenditures. Here the story gets quite interesting. As of 2009, Utah had the 13th least regulated health system in the country whereas Massachusetts had the second most regulated health system and Texas was in between, having the 29th most regulated system. As one example, Utah and Texas eliminated their certificate-of-need restrictions on hospitals in the mid-1980s, whereas Massachusetts not only retained its CON program, but made the program even more stringent two years after enacting their health reform law. One would be hard put to infer from the figures shown above either that the Massachusetts CON program was effective in restraining spending or that failure to have CON programs has led to an “explosion” in health spending in either Utah or Texas.

Healthcare spending is surely not the most important issue in the 2012 election. But for those who care about this issue, the available evidence suggests that Jon Huntsman and Rick Perry boast much better records than Mitt Romney in holding down health expenditures.

Christopher J. Conover is a research scholar at Duke University’s Center for Health Policy and Inequalities Research and an adjunct scholar at AEI. 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 12.6c and Figure 12.6d and Excel spreadsheets on a) total population, total GDP, GDP for ambulatory health care services, and GDP for hospitals and nursing & residential facilities; b) per capita GDP, ambulatory healthcare services, and hospitals and nursing & residential facilities, and c) index per capita amounts for these measures of merit for data, sources, and methods.

14 thoughts on “Health spending trends under Romney, Perry, and Huntsman: Healthcare fact of the week

    • You’re quite right. We had marked the beginning of his first elected term to office, but he should get credit or blame for whatever transpired post-December 2000. We’re making this correction.

    • In terms of spending per person, MA has had higher spending than NY since at least 1991 (the first year for which Centers for Medicare and Medicaid Services has spending by state of residence). Currently, MA spending per capita is 36.1% above the national average, while NY’s is “only” 22.4% higher. There are some components where NY “beats” MA (for home health, MA is 77.3% above the national average, vs. 79.8% for NY; for prescription drugs, MA is 6.2% above average, NY is 14.0% etc.). These figures are reported at: https://www.cms.gov/NationalHealthExpendData/Downloads/res-tables.pdf

      • Using your own link, I’m curious why you failed to point out that Medicaid’s cost per enrollee actually went down during Romney and Medicaid’s cost per enrollee under Perry has increased…. was that an oversight?

        • In a follow-up piece, I look at Medicaid spending. But I don’t think that examining trends in spending per enrollee is the best way to do this since a state that dramatically expanded its Medicaid population by adding children, for example, might see its average costs per enrollee actually decline. This would be a misleading indicator of that state’s ability to constrain Medicaid spending, since actual spending would have risen a lot in this instance even though cost per enrollee declined. So I use Medicaid spending per state resident and show how this changed under each governor. The results may surprise some readers. Stay tuned.

  1. Of course the fact that Gallup reported MA has the fewest uninsured and Texas the most could impact the cost of care … not to mention that the residents of each state chooses how much they want to spend on healthcare. Neither is a wrong decision for a state, but is wrong for an entire country IMHO.

      • We have long known that compared to people with full-year private coverage, annual health spending for the full-year uninsured is less than half as high (http://content.healthaffairs.org/content/27/5/w399.full). This figure takes into account all sources of payment, including subsidized care for the uninsured as well as their out-of-pocket spending. Thus, even though the uninsured have greater use of the ER than those with private insurance and a higher rate of medically avoidable hospital admissions (http://www.kff.org/uninsured/upload/Jack-Hadley-s-Testimony-to-the-Senate-Subcommittee-on-Labor-and-HHS-Appropriations.pdf), they nevertheless have lower spending overall. Therefore, all other things equal, a state with a high uninsured rate such as Texas will have lower per capita health spending than a state with a very low uninsured rate. What is apparent from the MA numbers is that universal coverage is not a free lunch. Expanding coverage inevitably will cost more as the spending of those who previously were uninsured gradually rises towards the average level of those with public or private coverage. Thus, the policy question is whether the benefits of universal coverage are worth these added costs.

    • You are quite correct that the uninsured rate may explain some of the cross-sectional differences between states at any given slice in time; other factors such as the population age distribution and income play a role as well. But such factors would not necessarily explain the TRENDS in health spending unless the factors themselves were changing greatly over time relative to the national average. The purpose of these comparisons is not to say whether Massachusetts or any other state is “right” or “wrong” in whatever level of spending is chosen. Instead it is to shed light on which individuals have the greatest experience in actually “bending the cost curve”–a stated objective of health reformers even at the national level.

    • This is quite right. An intriguing question is whether the overall burden of health spending rose or fell during the tenure of these governors. I plan to examine this in an upcoming piece, so stay tuned.

    • That’s a fair point. Perhaps I should have characterized it as the 3 leading contenders with previous gubernatorial experience. Tim Pawlenty already formally had withdrawn at the time this was written, and Gary Johnson likewise now has withdrawn his name, leaving only former Louisiana governor Buddy Roemer still a declared Republican candidate. There are, of course, more than a half-dozen governors or former governors who have formally declined to run. Part of the reason I publish my supporting data is so that users can examine for themselves whatever comparison states they might view relevant to making sense of the charts I’ve included.

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