Health reform in the national debate

By Samantha Peek
TAFP communications intern

As a rule in the world of politics, the issues that most effectively perk voters’ ears receive the most attention from candidates. This presidential election is the first “since the AMA died at the Medicare Alamo...about a half a century ago,” as health policy expert Kim Ross says, that health care has weighed enough on voters’ minds to persuade the presidential candidates to take on the issue of a large-scale reform plan. Though the turbulent state of the U.S. economy has pushed all issues to the back burner, health care reform continues to receive some prime debate time.

Ross identifies several reasons for the candidates’ “sudden-onset insightfulness” on health care. First, the 47 million uninsured citizens—many of voting age—form a powerful cohort worth romancing. Second, there are measurable socioeconomic consequences to being uninsured or underinsured, the least of which is illness and bankruptcy, and the worst of which is death, which have metastasized throughout many previously unharmed communities and businesses. Third, this outcry has attracted the attention of many parties across business, workers’ unions, professional associations and others, and enticed them to form partnerships, propose initiatives, and amplify their calls for reform. Finally, this attention has leaked into the academic science field where researchers have published studies on the ins and outs of systemic reforms. Behind this body of evidence, health care reform seems to be a goal that is increasingly within reach.

Now it comes to choosing one of these methods. Health care advocates agree that Americans should have access to high-quality, cost-effective health care, and even use similar ideas that will contribute to a greater solution such as improved disease management, greater use of health information technology, and better payment methods.

However, the real debate, which divides the house of medicine as well as politicians, insurance, business and other lobbies, lies in the role of government in health care and how this role will affect the three largest concerns facing health care—cost, quality and the uninsured. Democratic presidential nominee Barack Obama puts forth a plan to preserve the role of the employer as the primary sponsor of private health insurance. Republican presidential nominee John McCain and the Wyden-Bennett legislation propose a plan to encourage individuals to purchase private, non-group insurance. As for the rest of these plans, the differences fall in their major components, cost, pros and cons.

Obama’s Plan

Sen. Barack Obama’s plan would create a national health plan, complete with subsidies for citizens falling below a financial threshold but who don’t qualify for Medicaid or SCHIP, or for small businesses who otherwise couldn’t afford to provide employees with health coverage. Employers that do not provide any coverage for their employees would have to contribute a percentage of their payroll to the national health plan.

Obama would also create the so-called national health insurance exchange, charged with regulating the insurance industry and facilitating the purchase of private health insurance in the individual market or through the national health plan. Obama’s plan would mandate that children have health coverage.

What would it cost?

Depending on whom you’re talking to, Obama’s plan could cost the federal government anywhere from $110 billion, the estimate from the Obama campaign, to $1.6 trillion over 10 years, according to the non-partisan Tax Policy Center. FactCheck.org estimates that Obama’s plan would cost between $50 billion and $65 billion each year.

Obama says his plan will reduce what the nation spends on health care by implementing health information technology, increasing competition in the insurance and drug markets and “modernizing the U.S. health care system.” Ultimately, Obama plans to pay for his reforms by allowing the Bush tax cuts to expire for households earning over $250,000.

Pros

• Drastic reduction of the uninsured. Obama’s plan would reduce the number of uninsured by 18 million people in the first year and 34 million within 10 years.
• Everyone’s welcome. The national health program, which is likened to the plan available to members of Congress, would open insurance up to all people, with the national health insurance exchange prohibiting exclusion or rate hikes for pre-existing conditions or current health status.
• Help for employers. Using a term called “reinsurance,” Obama’s plan would provide a subsidy to employers for catastrophic costs as long as they promise to reduce the cost of workers’ premiums.
• Savings for families. The average family could save up to $2,500 a year because of new federal subsidies and other proposals to slow the growth of spending, according to the campaign.

Cons

• The price tag. Obama’s plan does not address core economic incentives that drive health care spending, according to Health Affairs.
• More regulations. Obama’s plan relies heavily on government mandates, which critics like the Cato Institute say would ultimately result in limited patient choices and rationed care. The regulations on the private insurance market also could drive up insurance costs or distort insurance choices.
• Socialized medicine? While this plan doesn’t provide universal coverage and doesn’t require everyone to buy insurance, many Americans hear those buzzwords and recoil. Critics fear that a government-run national insurance program could eliminate competition in the market, especially in areas where only a few plans are offered.
• Business’ response. If the mandated “play-or-pay” tax on large employers is set too low, employers could opt to pay the fee rather than provide coverage to their employees, causing a surge of individuals accessing the national health plan. Other projected reactions from employers: cut jobs and paychecks.
• Bad news for physicians. Health Affairs says that if savings from HIT implementation, subsidies and improved coordination of care don’t materialize quickly, Congress would face pressure to cut costs similar to those they face in the Medicare program. Follow the same procedure as Medicare budget control, and fiscal pressure would fall on the shoulders of physicians and insurers, reducing access to care for patients.

McCain’s Plan

Sen. John McCain’s plan would reduce the role of the government and encourage consumers to move to a national, largely unregulated market to purchase non-group insurance. The main component eliminates the tax break for those with employer-sponsored health insurance. By treating the payments as taxable wages, this component of the plan would rake in $3.6 trillion over 10 years and fund a tax credit—$2,500 for individuals and $5,000 for families—for Americans who purchase insurance through their employer or in the private market.

McCain’s plan extends health coverage to the “medically uninsurable,” or those with expensive chronic conditions and others denied health insurance, through guaranteed access plans and multi-year health insurance plans. He would deregulate the insurance market and allow consumers to purchase health insurance policies across state lines, spurring competition between health insurers to keep premium costs low. Finally, McCain would change the way Medicare pays for services, bundling payment for episodes of care and paying for outcomes.

What would it cost?

The Tax Policy Center projects McCain’s plan will cost the federal government $1.3 trillion over 10 years starting in 2009. Add on the cost of subsidizing the cost of guaranteed access plans, which work when funded generously, and that’s another $70 billion to $100 billion over the next decade.

Pros

• Levels the playing field. McCain’s plan provides an equal tax credit in place of the current system, which disproportionately benefits higher-income Americans, and extends perks to the uninsured.
• Impacts the uninsured. The plan would cover about 5 million of the uninsured.
• Scales it down. McCain’s plan requires less government regulation, airing the traditional economic belief to let the market work it out.
• Power to the consumer. Consumers have more flexibility and choice in where to buy coverage

Cons

• Insurers gone wild. The plan relies heavily on an individual insurance market, which typically features higher costs, high administrative fees, medical underwriting to exclude the sick or higher premiums or no coverage for those with pre-existing conditions, and less comprehensive benefits than employer-sponsored insurance. Plus, in a national market where state licenses are not required, health insurers could gravitate toward states with more lenient coverage requirements.
• Business’ response. Removing the tax write-off for employers would likely cause companies to reduce or eliminate health benefits for their employees. Health Affairs projects more than 20 million people would lose employer-sponsored insurance.
• Young and invincible. Young, healthy workers would have less incentive to remain in employer-sponsored groups. An additional 20 million would leave the employer-sponsored system to find a better deal on their own, making it more difficult for older, sicker people to find coverage, according to an article in the Wall Street Journal.
• A drop in the bucket. Five million sounds like a lot, but most uninsured would probably stay uninsured under the McCain plan. The tax credit would lose value over time, likely pushing some newly insured back to the ranks of the uninsured. Plus, because individual coverage is traditionally less generous, the number of underinsured could skyrocket.

The Wyden/Bennett Plan

This non-partisan health reform proposal comes from Sens. Ron Wyden, D-Ore., and Robert Bennett, R-Utah, under the name “the Healthy Americans Act.” Senate Bill 334 accomplishes much of what McCain’s reform plan would by shifting the responsibility of providing health insurance away from the employer and putting it in the hands of the individual, as well as eliminating the tax exclusion that benefits only those in employer-sponsored health plans and providing a tax credit or subsidy to offset the cost of individual health coverage up to a certain income level.

The bill would create Healthy Americans Private Insurance plans, based on the one offered to federal employees, which would be offered through Health Help Agencies in each state. Adults would be required to enroll themselves and dependent children in a HAPI plan unless otherwise covered, or else face penalties. The proposal would eliminate Medicaid and SCHIP. HAPI plans would be regulated by Health and Human Services, could not discriminate based on pre-existing conditions, and would be required to cover certain procedures and screenings.

Employers would be required to convert health care premiums into higher wages for their employees, which would provide the means for employees to purchase their insurance plans. Employers who don’t offer health benefits would have to make “employer shared responsibility payments” to fund subsidies for poor Americans. After the initial two years, every employer would be required to pay this tax.

What would it cost?

The Wyden-Bennett bill would stay within the current U.S. health care budget of $2.3 trillion. Through “cost-containment measures” that include rewards for prevention and wellness, fewer administrative costs for employers and insurers, standardized billing and claims forms, increased use of health information technology, publication of cost and quality data, and others, the reform plan would save an estimated $1.48 trillion over 10 years, according to their proposal.

Pros and cons

Because of its similarities to McCain and Obama’s reform plans, many of the pros and cons are also similar. While changing the tax structure would expand health insurance benefits to a larger group, critics are wary of too much federal regulation and fear that options for consumers will be limited. The Heritage Foundation calls one of its major problems “the replacement of one tax inequity with another.”

Neither candidate has an infallible plan, especially since they don’t clearly define their entire scope, making it nearly impossible to know their true costs and effects. A study in Health Affairs recommends blending components from both McCain and Obama’s plans to create the best solution, though the author admits that the solution will not come from taking some items from Column A and some from Column B. The author supports Obama’s idea to offer public and private options with subsidies for lower-income households, as well as use McCain’s ideas to change the tax structure and use high-risk pools to cover the medically uninsurable. In the end, it will take thoughtful consideration of current weaknesses in the health care system, inevitable tradeoffs and ways to improve access to care, lower costs and increase quality.

At the very least, the foundation for reform in the near future has been laid, Kim Ross says. “There is enough economic reality shock to provoke movement, even at glacial speed, in the next Congress, and a growing bipartisan consensus starting from the political center to fix problems, not blame. It still depends on who gets eaten and who survives a budget neutrality-based package. As they are fond of saying in Washington, D.C., when the lion and lamb lie down together, neither gets much sleep. Don’t look up the words to ‘Kum Ba Yah’ just yet.”