Romney Critic Crafted Giuliani Health Plan

Aug. 1, 2007 — -- Befitting his status as the GOP's presidential front-runner, Rudy Giuliani has avoided all direct attacks on Republican rival Mitt Romney.

It was a strategy that continued when Giuliani unveiled his health care plan earlier this week, aiming his criticism at the top three Democrats running for president.

But in assembling his team of health care advisers, the former New York mayor tapped Sally Pipes, a sharp critic of the state-level mandates and regulations backed by Romney, who leads in the crucial states of Iowa and New Hampshire.

Pipes, a health policy expert now advising the Giuliani camp, has been vocal in her criticism of the former Massachusetts governor.

"Massachusetts Will Fail," blared the headline of her April 10, 2006, USA Today op-ed. In The Wall Street Journal, Pipes accused Romney of being "in cahoots" with liberal Sen. Ted Kennedy, D-Mass., in a June 28, 2007, op-ed. She warned in a May 15, 2007, op-ed for the Boston Globe that the structure of the Massachusetts health care plan is a "gourmet recipe for runaway spending."

The battle lines emerging between Giuliani and Romney on health care reverse the established pattern on social issues. Where Romney falls to Giuliani's right on abortion rights and a federal amendment banning same-sex marriage, on health care it is Giuliani who has positioned himself as the more strident conservative.

Giuliani vs. Romney on State Mandates

Giuliani and Romney both oppose a federal requirement that individuals purchase health insurance.

The two Republicans differ, however, on whether it is wise for an individual state to mandate that its residents purchase health insurance as Massachusetts did under Romney.

Addressing Giuliani's take on mandates from San Francisco, where she heads the Pacific Research Institute, a free-market think tank, Pipes said, "I would say in principle he doesn't support individual mandates. Because he supports a consumer-driven, ownership society, that would preclude the individual and employer mandate at the state level."

Massachusetts adopted an individual mandate in order to address the free-rider problem that occurs when emergency rooms, required under federal law to provide a certain level of treatment to everyone, are forced to treat a patient who is unable to pay. Those costs end up shifting to taxpayers as well as to those in the state who have insurance. Romney wanted to cover the uninsured so they could be treated in less expensive ways.

"One of the data discoveries that emerged from the process of crafting the Massachusetts plan was that many of those that didn't have coverage were younger, healthy citizens who could afford insurance, but didn't purchase it because they figured they were healthy and if anything went wrong they could go to an emergency room and the taxpayers picked up the bill," Romney spokesman Kevin Madden told ABC News.

Taxing the 'Young and Healthy'

On the philosophical level Giuliani's adviser objects to a system that indirectly taxes "the young and healthy -- who typically have both less income and less wealth -- to subsidize those who are older and less healthy" by requiring them to purchase insurance.

Pipes also takes issue with Massachusetts imposing a fee on employers who do not make any provision for insurance.

"Businesses that don't provide health insurance will be taxed $295 a head," she warned in her 2006 USA Today op-ed.

Romney used his line-item veto power to delete the employer assessment from the Massachusetts health care legislation, but the Democratic-controlled legislature overrode his veto and it became law.

Pipes also objects to the individual mandate in Romney's state plan because she believes the young and healthy would rather pay a fine than buy an expensive policy.  In her Boston Globe op-ed, Pipes wrote that the $216 fine imposed by Massachusetts on individuals who do not purchase health insurance would be "more attractive than the premiums."

The Romney campaign responded to Pipes' criticism by pointing to a 2007 state report showing that the average uninsured individual in Massachusetts -- whom the state calculates to be 37 years-old -- can get private health insurance, including coverage for prescription drugs, for somewhere between $184 and $279 per month, depending on the region of the state.

If purchased on a pretax basis through the plans that employers with 11 or more full-time employees are required to make available, the average net cost of insurance in an inexpensive region is reduced to $115 for a single individual earning $50,000 per year, according to the 2007 state report.

Despite his support for an individual mandate at the state level, Romney will not propose that an individual mandate be prescribed at the federal level.

"There are some states that could choose an individual [mandate] approach in order to control costs, and others that might not," said Madden.

Giuliani vs. Romney on State Regulations

Giuliani's plan and the plan Romney is expected to unveil at some point over the next two months are on the same page when it comes to correcting the tax bias against insurance that is individually purchased, rather than that which is employer purchased.

The two men differ, however, on whether the United States would be better served by creating a national health-insurance market.

"Rather than force people to buy plans approved by their state," Giuliani would "allow people to shop anywhere," Pipes wrote in The Wall Street Journal in June.

Pipes told ABC News that allowing for the purchase of health insurance policies across state lines would make less-expensive catastrophic plans available to more people.

"Psychiatric treatment and alcoholic treatment and in vitro fertilization all add to the cost," she said.

The downside of buying insurance across state lines is that many of the treatments required under various state regulations are popular and medically important, a key reason why efforts to pursue such a reform failed last year when attempted by the Republican Congress.

Citing statistics compiled by the National Conference of State Legislatures, the Democratic National Committee argued this week that the state regulations which would be undermined include direct access to OB/GYNs in 44 states, colorectal cancer screening in 23 states and mental health parity in 45 states.

When asked about Giuliani's call for a national health-insurance market, Romney spokesman Madden told ABC News: "I don't expect an initiative like that to be part of the approach" Romney unveils. Coming out against a national health-insurance market would inoculate Romney against the Democratic charge (already facing Giuliani) that such a plan would have the effect of "gutting" state health-insurance regulations.

If Giuliani begins to articulate some of the arguments that Pipes has already formulated about Romney, the former New York mayor might appeal to some of the free-market conservatives who play an influential role in the GOP's presidential nominating process.

Gingrich Weighs In

Former House Speaker Newt Gingrich does not fault Romney for enacting an individual mandate but pointed to estimates showing the plan's cost rising as a cause for concern.

Speaking of Romney in February, Gingrich told ABC News, "He's had a little bit of a rough patch with the cost of the health plan in Massachusetts."

To allay conservative concerns, Romney is quick to say that his focus in Massachusetts was on expanding "private, market-based" health insurance rather than on expanding public health insurance programs. His campaign is also quick to stress that the emphasis of his federal plan would be on flexibility.

The "best approach," said Madden, is to give states "flexibility" to "leverage their federal dollars so that more people can be covered with private-market based insurance."

If early-state victories catapult Romney ahead of Giuliani in the race to become the GOP's standard bearer, his health care plan is likely to play a key role in his effort to present himself as a competent CEO who can work across the aisle to solve problems that have befuddled Washington.

Romney's Health Plan Challenges Democratic Hopefuls

Democratic strategists view Romney's record of extending health coverage to nearly 125,000 previously uninsured individuals as presenting a stiff 2008 matchup.

Speaking about Romney's health care record during a 2006 political conference sponsored by the Hotline and the University of Virginia, Steve Murphy, a Democratic strategist advising New Mexico Gov. Bill Richardson's presidential campaign, said, "A nominee who has passed universal health insurance is a formidable animal in the general election."

After avoiding all references to his health care record while delivering a major speech to the Conservative Political Action Conference in March, Romney is beginning to frame the health care issue in a way that might resonate in a general election.

When asked by CNN's Wolf Blitzer to address conservatives who might object to the individual mandate contained in his health care plan, Romney said, "I want to talk to the people, not just to those conservatives who are critical, and the people of this country recognize that they got some real concerns in health care. … This is a big issue for this country. … We have to stand up and not just talk about it."

ABC News' Leigh Hartman contributed to this report.