ON THE ISSUES: What's In A Health-Care Plan? | Jackson Free Press | Jackson, MS

ON THE ISSUES: What's In A Health-Care Plan?

Photo by Chris Zuga

The American health-care system is the most expensive in the world, but the care patients need is not necessarily reflected on the sticker price, according to The Commonwealth Fund's analysis "Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care.

The report found that the U.S. ranked last among Australia, Canada, Germany, New Zealand and the United Kingdom in access, patient safety, efficiency and equity. The nation ranked last despite the average American health care expenditure per capita of $6,102 in 2004—as opposed to $2,546 in Britain, $2,083 in New Zealand, and $2,876 in Australia.

But, like the issues of infrastructure and education, health care is taking second tier to the economy on the list of most important issues orbiting the presidential campaigns of Democrat Barack Obama and Republican John McCain.

September polls from the Kaiser Foundation shows 56 percent of voters are sticking fast to the economy as issue No. 1. The war in Iraq came in at 25 percent, while health care came in at 21 percent. The issue's importance has grown steadily in the world of Independents from 18 percent to 26 percent over the last half-year, trumping even the Iraq war and making it issue No. 2 in regards to importance. (Health care is a lower priority with Republicans, according to the poll, who rank it at 11 percent.)

The Democrat's Argument
The campaign of Barack Obama (whose Democratic base rated health care at 25 percent in terms of importance, according to the Kaiser poll) is riding the importance of American health care and criticizing its comparatively high cost.

Obama criticizes the nation's health-care system for abandoning those unable to afford insurance. His plan, according to his Web site, builds on the current health-care system, using existing providers, doctors and plans to implement a new deal. If you like your current health insurance, the campaign claims, nothing will change for you. Those with no insurance will have a health-insurance option that the campaign describes as "affordable."

The Obama plan claims to require insurance companies to cover pre-existing conditions, including illnesses such as diabetes or a genetic history of cancer, and it creates a "Small Business Health Tax Credit" to help small businesses provide affordable health insurance to their employees. The Obama plan also claims to lower costs for businesses by covering a portion of the health costs they pay, so long as those businesses lower premiums for their employees.

Another aspect of the Obama plan is likely aimed specifically at corporate giants like Wal-Mart. The plan demands large employers that do not offer easy coverage to contribute a percentage of their payroll toward the costs of their employees' health care.

McCain criticized that portion of the Obama plan at an Oct. 9 campaign stop in Wisconsin: "(Obama) ... will fine employers who don't offer health insurance to put their employees in government health care. He'll fine them. You know what that does? That costs jobs for small business people in America."

Obama's Web site specifically demands employers "offer meaningful coverage or make a meaningful contribution" to a national fund dedicated to people who can't afford insurance or who have been rejected for coverage by insurance companies. It does not describe the new company payout to the government as a penalty, and paints it more as a payroll tax. Furthermore, Obama's Web site disputed McCain's assessment that the tax would hurt "small business people."

"Small businesses will be exempt from this requirement," the Obama campaign states flatly.

Obama has promised his audiences that he would extend eligibility for Medicaid and SCHIP, but then offer a plan called the National Health Insurance Exchange to individuals still not eligible for Medicaid or SCHIP—or employer-sponsored insurance. The plan could reach nearly all of the nation's uninsured children (8.9 million in 2007, according to the Health Policy Center) and perhaps more than half of its uninsured adults (36.1 million in 2007 by HPC's reckoning).

The Democrat plans for the federal government to invest in wellness programs, and claims it can cut costs by forcing insurance companies to drop their rates to compete with the new NHIE plan—the one funded through payouts from businesses who don't offer employee health-care plans. He also plans to repeal a highly unpopular ban (enacted by both Republicans and Democrats in 2003) on direct price negotiation between Medicare and drug manufacturers.

The White House strongly discouraged price negotiation for drug companies during the 2007 Democratic effort to repeal a non-interference clause in the 2003 Medicare Prescription Drug Improvement and Modernization Act, which prevented the federal government from negotiating prices with pharmaceutical companies. Conservative think tanks like the Heritage Foundation described Democrats' proposed negotiation prospect as "government price-fixing."

"Government intervention will undermine quality and patient choice," wrote Heritage Foundation Policy Analyst Greg D'Angelo in 2006. "... the government would have to tell drug makers to accept what it offers to pay or risk not having their drug available in Medicare. ... If the Medicare drug program adopts this practice, certain patients could be left without the drug that works best for them because they would no longer have access to competing plans in the private market. Faced with that circumstance, patients would be reduced to the time-consuming process of lobbying Congress to have specific drugs included in any Medicare offering, or pressuring Congress to intervene with the Medicare bureaucracy to ease or eliminate any administrative restrictions that would obstruct or compromise the availability of certain drugs."

Doctors seem to have few reservations about the plan, and are donating to the Democratic Party on a 2-to-1 ratio against the Republican Party. Conservative columnist David Brooks wrote in October that this could be more of a reflection on a long-standing trend of professionals voting Democratic over Republican thanks to the Republican Party's push for class warfare than an endorsement of Obama's health-care plan.

"What had been disdain for liberal intellectuals slipped into disdain for the educated class as a whole ... The Republicans have alienated whole professions," Brooks wrote. "Lawyers now donate to the Democratic Party over the Republican Party at 4-to-1 rates ... With tech executives, it's 5-to-1. With investment bankers, it's 2-to-1. It took talent for Republicans to lose the banking industry."

Bankers' preference for Democrats this year has little impact on The Wall Street Journal's assessment of the Obama health-care coverage pool. An Oct. 8 editorial heavily criticized the NHIE aspect of the Obama plan, claiming the nation will never be able to afford it.

"[T]he Obama plan is all about expanding government health care. Mr. Obama is proposing a 'public option' that is similar to Medicare but open to everyone of any age. With this new taxpayer-funded entitlement, private insurers would be crowded out as the government gradually paid all of the country's health-care costs."

The Wall Street Journal cites the Congressional Budget Office, which said federal spending on Medicare and Medicaid already takes up 4 percent of the nation's gross domestic product, and could easily rise to 9 percent over the next 20 years, as the baby-boom generation ages and retires.

"Mr. Obama wants to add even more costs to this taxpayer balance sheet. The inevitable result as spending explodes would be price controls and rationing," The Wall Street Journal notes.

The McCain Plan
The McCain campaign claims on its Web site that the Arizona senator will "reform the tax code to offer more choices beyond employer-based health insurance coverage."

While still leaving open the option of employer-based coverage, every family, McCain says, "will receive a direct refundable tax credit ... of $2,500 for individuals and $5,000 for families to offset the cost of insurance. Families will be able to choose the insurance provider that suits them best, and the money would be sent directly to the insurance provider."

The National Coalition on Healthcare reports this year that the annual premium for an employer-backed health plan covering a family of four averaged nearly $12,100 in 2007, while single coverage costs about $4,400. Private health plans with no employer co-payments average even higher. Nevertheless, those who manage to obtain insurance that can be afforded with $2,500 to $5,000 will have the option, under the McCain plan, to deposit the remaining money into a Health Savings Account.

James Kvaal, senior fellow with the Center for American Progress, said McCain's plan will discourage employer-based health coverage.

"McCain isn't about encouraging employer health coverage. He wants to take the health care system in the other direction. He would tax the health benefits you get from your job, which are currently tax free, and create an offsetting tax credit. It would raise $3.6 trillion—a huge amount of money—and put that money back into new tax credits," Kvaal told the Jackson Free Press.

The biggest incentive that businesses have to offer health insurance is that health benefits are—at the moment—tax free, which inextricably ties employer insurance to a tax benefit.

"McCain plans to sever that link between tax benefits and your job. For a lot of businesses that are already battling with the costs of health insurance, it will further persuade them to cut back benefits," Kvaal said.

The setup could leave many employees to the tender mercies of private health-care plans, where customers must pay tax on their insurance premiums. Many customers won't get far enough to worry about the taxes, however. Insurance companies, by nature, exist to make a profit—they're very picky, and routinely abandon older people or victims of chronic illness. McCain's ready for that, though, by his willingness to expand states' Guaranteed Access Plans.

Perhaps in a nod to Ronald Reagan's famous states' rights arguments, McCain feels that state governors would best be able to determine what kind of mass health-care plan would enable states to provide the most health-care coverage for the least amount of cost.

One approach, claims the campaign, would be to form a nonprofit corporation to "contract with insurers to cover patients who have been denied insurance and could join with other state plans to enlarge pools and lower overhead costs."

The nonprofit option, McCain believes, would be available to Americans below a certain economic level.

Professor Kenneth Thorpe, chairman of the Department of Health Policy and Management at Emory University's Rollins School of Public Health, said McCain is understating the cost of his Guaranteed Access Plans.

"His plan offers no guarantee that insurance companies will have to take people with chronic disorders, so he's calling for a guaranteed access plan for each state where, allegedly, the uninsurable will go for insurance. But if everybody who needed it actually turned to those plans, the cost of their insurance would be extraordinarily high," Thorpe said.

McCain's Guaranteed Access Plans are actually state high-risk pools. Most states have them, but many don't, primarily because state residents prefer not to participate in them. They're historically expensive, even without high participation; a bottom-of-the-barrel option for the truly desperate.

"Nationally, there's only about 200,000 people in them. They're very, very small," Thorpe said. "(McCain has) proposed expanding them by adding $7 billion, but it would take $70 million or $80 million for them to remain affordable for the millions of people with heart disease or cancer who will be turning to them."

Another aspect of the McCain plan involves a healthy pursuit of tort reform. The senator from Arizona hasn't yet climbed off the tort-reform train that hit Mississippi in 2002, and he's still touting the benefit of making it nearly impossible to sue doctors.

"We must pass medical liability reform that eliminates lawsuits directed at doctors who follow clinical guidelines and adhere to safety protocols. Every patient should have access to legal remedies in cases of bad medical practice, but that should not be an invitation to endless, frivolous lawsuits," McCain stated on his campaign Web site.

Mississippi is a Petri dish for how effectively tort reform has worked to reduce medical costs. The state enacted tough anti-lawsuit legislation in 2002, which provided liability immunity to many health-care providers and a reduction of the statute of limitations on actions against nursing homes to two years. With nursing home lobbyists peeking over their shoulders, the Legislature also mandated 60 days' notice for any lawsuit against nursing homes. The law's most glaring change—and a triumph for the U.S. Chamber of Commerce—was limiting non-economic damages to $500,000 until 2011 and $1 million after July 1, 2017.

That wasn't enough. Riding a frenzy of anti-plaintiff zeal, the state Legislature came back around in 2004 and made the $500,000 cap on pain-and-suffering damages in medical malpractice cases permanent, placing a new $1 million cap on pain-and-suffering in all other cases. Insurance rates dropped a fraction, with Medical Assurance Company of Mississippi (which provides malpractice insurance for more than half of Mississippi's doctors) eventually reporting a 10 percent drop in its annual medical malpractice rates for 2007, following a 5 percent drop in 2006.

J. Robert Hunter, director of Insurance for the Consumer Federation of America, told the Jackson Free Press last year that the company's generosity was more deeply tied to the stock market than tort reform.

Insurance companies heavily invest in the market, particularly bonds. The market plummeted in 2001, causing a spike in their rates to cover the costs, which in turn provided weaponry in the crusade for tort reform. The year 2007, in comparison, was a "soft market."

"Rates have dropped double digits over the last few years, and it had nothing to do with tort reform," Hunter said in 2007.

The true test of his argument will inevitably be revealed this year, as the U.S. stock market continues to tumble thousands of points every 60 hours.

MACM President and Chief Executive Officer Michael D. Houpt did not return calls to discuss the prospect of future malpractice rates in relation to the market. He denied in an earlier JFP article that the market was a factor in the 2001 rate increases.

Mary Troupe, executive director of the Mississippi Coalition of People with Disabilities, sees a flaw in the argument that falling insurance rates equal falling medical bills, in any case.

"I'm on the phone with people complaining all the time that not only are their health bills going up, but many hospitals are even refusing to take some patients without money up front," Troupe said. "If doctors' insurance rates are going down, it certainly isn't connecting with their bills, yet."

Final Assessments
Both Kvall and Thorpe endorsed the Obama plan over the McCain plan, though neither endorsed the candidates.

Kvall said he believed the Obama plan would be easier to implement, despite the $65 billion price tag that the campaign sticks to it.

"It's about McCain's aversion to employment care and the implications for people with existing illnesses. There's too much insecurity about the fate of people with cancer and diseases like that. For Obama, the important thing is that it builds on an existing structure. Even though it's nearly universal, it's less radical," Kvall said.

Even the U.S. Chamber of Commerce encouraged the government to build on the employer-based system rather than steer people toward private market insurance.

"To some in the business community, (McCain's plan) is very discomforting," said Chamber Executive Vice President for government affairs Bruce Josten in an Oct. 6 New York Times article. "The private market, in my opinion, is ill prepared today with an infrastructure for an individual-based health insurance system."

Josten stopped short of endorsing or rejecting either of the candidates' health care plans.

Thorpe dismissed the cost of the Obama plan.

"Can we afford it? Of course we can afford it. It's a matter of the timing and pace you put in. We spent almost $500 billion in Iraq in the last couple of years. We afforded that, and we just did a $700 billion bailout. It's a matter of priorities on where you want to allocate money, and Obama's plan is the easiest to do.

Previous Comments


New England Journal of Medicine today: The specifics of candidates' proposals matter. But more important is what health plans communicate about a prospective president's fundamental beliefs and character. By this standard, John McCain emerges not as a maverick or centrist but as a radical social conservative firmly in the grip of the ideology that animates the domestic policies of President George W. Bush. The central purpose of President Bush's health policy, and John McCain's, is to reduce the role of insurance and make Americans pay a larger part of their health care bills out of pocket. Their embrace of market forces, fierce antagonism toward government, and determination to force individuals to have more "skin in the game" are overriding — all other goals are subsidiary. Indeed, the Republican commitment to market-oriented reforms is so strong that, to attain their vision, Bush and McCain seem willing to take huge risks with the efficiency, equity, and stability of our health care system. Specifically, the McCain plan would profoundly threaten the current system of employer-sponsored insurance on which more than three fifths of Americans depend, increase reliance on unregulated individual insurance markets (which are notoriously inefficient), and leave the number of uninsured Americans virtually unchanged. A side effect of the McCain plan would be to threaten access to adequate insurance for millions of America's sickest citizens. [...] Senator McCain would end the exemption from federal income tax for employer-sponsored insurance. One result is predictable: a reduction in the number of companies providing and subsidizing health insurance for their employees. Over the years, multiple studies have shown that as the tax benefit to employees of receiving employer-sponsored insurance declines, employers are less likely to offer it. On the basis of these studies, economists project that 10 million to 28 million of the 160 million Americans with employer-sponsored insurance will lose it as a result.2,3,4 These newly uninsured Americans will enter the tumultuous individual insurance market. Many employers that continue to subsidize insurance will probably reduce their contributions, forcing employees to bear a larger portion of the costs. Senator McCain denies that this is a likely effect of his policy, but his denials defy the economic logic of the marketplace, which he otherwise embraces. View larger version (36K): [in this window] [in a new window] Voters' Views on Moving to an Individual Insurance Market. Data are from "Key Findings: Kaiser Health Tracking Poll: Election 2008 — August 2008," from the Henry J. Kaiser Family Foundation. Percentages are of registered U.S. voters who are insured through an employer. The percentages do not total 100 because some respondents chose the option "Don't know/Refuse." If your goal is to make Americans bear more of the costs of illness, forcing them into individual markets and making them pay more for any remaining employer-sponsored insurance policies is certainly appealing. Conservatives theorize that tough, motivated, wily consumers will battle the insurance companies into submission, compelling them to offer cheaper, better plans. The reality, however, is very different. In the individual market, administrative costs consume 30 to 50% of premiums, as compared with 12 to 15% in the large-group, employer-sponsored insurance market. The McCain plan, therefore, could cause administrative waste to skyrocket. Read the rest ...


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