Reality vs. Rhetoric

While Sen. John McCain's health reform plan is being labeled as "radical" by many critics, in fact the changes that he is proposing are designed to save the private health sector and bring 21st century information and efficiencies to health insurance and health care.

At the same time, Sen. Barack Obama says his plan is simply building on and improving the current system, but analyses show that his plan moves at cross purposes to the fundamentals of our private health care markets and threatens to undermine them.

Two colleagues from the American Enterprise Institute, Joe Antos and Tom Miller, are the latest to take up the challenge of explaining the implications of Sen. Barack Obama's plan. A few highlights from two of their recent articles:

• Joe Antos explains in The New England Journal of Medicine that, "The Obama plan offers a host of policy proposals that, in the main, address the symptoms but not the underlying disease that afflicts the health care system."

   

• He explains that the "play-or-pay" policy would require employers to make a "meaningful contribution" to the cost of their employees' health plan or pay a new tax to help pay for their coverage in a new public plan. But he points out that this mandate on employers would be fully borne by workers, lowering their wages or reducing employment or both. And for the damage it would do to employment, he says it would still not likely increase access to job-based insurance.

   

• Antos also is concerned about the new government health plan that Sen. Obama would create with coverage similar to the typical plan offered to federal workers and members of Congress. "That means a pricey plan," he says, likely costing $12,000 a year for a family. The plan would likely be "unaffordable to many of the uninsured unless there was also a generous subsidy from taxpayers."

   

• This new government-sponsored health plan would be offered, along with private insurance, through a new health insurance exchange. The exchange would not permit underwriting and premiums would be community-rated (everyone pays basically the same premium), guaranteed issue (people can wait until they are sick to buy coverage), and the plans must offer "benefits at least as good as those of the national health plan." Antos says the result would be to reduce the number of affordable options available to consumers.

   

• Antos concludes that "Failing to address the perverse incentives that drive health care spending inexorably upward, making insurance unaffordable for millions and shaping (or misshaping) the practice of medicine, will leave us worse off than we are today."

   

• Tom Miller, in a Health Affairs blog post, also criticizes nationwide implementation of provisions of Sen. Obama's health plan, which has "a checkered history at best in state-level insurance regulation in recent decades," including guaranteed issue, community rating, premium price controls, and mandated coverage benefits.

   

• He says that under the new health insurance exchange, "Eligible plans in this politically brokered pool must first follow a thick and growing set of rules written in Washington."

   

• Miller warns that "the more serious danger remains that the underlying structure of the Obama plan's fine print, absent explicit changes to disavow it, actually promises workers and others that they can keep the current coverage they have if they like it…until they can't find it anymore. "

   

• And he notes that the savings that Sen. Obama is claiming ($2,500 for the average family) "look smaller and smaller the farther one drives away from the mirrors at campaign headquarters."

   

• Miller mounts a scholarly defense of many of the criticisms of the McCain plan, asking: "What is the basis for wild claims that 20 million Americans will lose their employer-sponsored coverage under Senator McCain's alleged 'radical' transformation of health care?"

   

• He says the numbers are based upon "some questionable, embedded assumptions about how markets might work at least in theory, if not in practice, and that then failed to deal with the actual structure of the McCain plan."

   

• The charges that the McCain plan taxes health benefits and leaves most workers much worse off simply isn't based upon the realities of the McCain plan, as I described last week in my own Health Affairs post.

Charges are flying wildly as each candidate tries to jockey for the advantaged position. But as we learned in the last chapter of a major national health reform debate, voters will see past the rhetoric and figure out the reality of how the policy affects them. The sooner the implications are clear, the better the decision voters will be able to make.

Grace-Marie Turner

Recent News Articles and Studies

Insurance Companies Need a Federal Regulator
2008 Employer Health Benefits Survey
The Truth Behind the Census Bureau's Insurance Figure
Health Insurance Choice and Product Segmentation Put Us All At Risk?
Across Mass., Wait to See Doctors Grows
Innovation and Technology Adoption in Health Care Markets
Medical Licensing: An Obstacle to Affordable, Quality Care

HEALTH INSURANCE

Insurance Companies Need a Federal Regulator
John Sununu, Tim Johnson, Melissa Bean and Ed Royce
The Wall Street Journal, 09/23/08

It's time for Congress to reform how insurance companies are regulated, write these Members of Congress from both parties. The system of confining people to the insurance regulations in their states is no longer a pragmatic -- or responsible -- option. Letting this 19th-century regulatory model govern a 21st-century global marketplace poses risks to the health of the insurance industry, American taxpayers, and our capital markets, write the authors. They call for the creation of an optional federal charter for insurance companies that would remove regulatory blind spots and establish a world-class regulator within the federal government capable of properly overseeing insurers operating in the global marketplace. Today's financial crisis demands that we respond with reforms to fundamentally improve the regulatory structure of our financial systems. Creating an optional federal charter for insurance companies would remove systemic blind spots that could have major implications for our capital markets and national economy.

2008 Employer Health Benefits Survey
The Kaiser Family Foundation and Health Research & Educational Trust, 09/24/08

In 2008, average annual premiums for employer-sponsored health insurance rose to $4,704 for single coverage and $12,680 for family coverage, up about 5% from last year, according to an annual survey released this week by the Kaiser Family Foundation and HRET. This year many workers are also facing higher deductibles in their plans, including a growing number with general plan deductibles of at least $1,000 -- 18% of all covered workers in 2008, up from 12% last year, partly driven by enrollment in Health Savings Accounts. Enrollment in all consumer-directed plans has increased to 8% from 5% last year and 4% in 2006. The survey includes a wide range of information on trends in employer-based health coverage, including data on drug benefits, retiree health benefits, and wellness programs.

Forbes.com describes how consumers can maximize HSAs to save money on health care without giving up benefits.

The Truth Behind the Census Bureau's Insurance Figure
Sally C. Pipes, Pacific Research Institute
The Examiner, 09/21/08

The U.S. Census Bureau's classification of 45.7 million Americans as uninsured is an imprecise snapshot of a heterogeneous group of Americans, many of whom wouldn't benefit from additional government intrusion into the health care market, writes Pipes. Many of the survey respondents counted as "uninsured" may have experienced only a temporary interruption in their insurance and are usually in transition between one employer-provided insurance policy and another. Further, more than 17.5 million of the uninsured make more than $50,000 per year, nearly 10 million aren't even U.S. citizens, and another 14 million of the uninsured are fully eligible for government assistance programs like Medicare, Medicaid, and SCHIP. But there are eight million chronically uninsured -- the working poor who earn less than $50,000 per year but too much to qualify for government help. The key to helping these people isn't to create more government red tape, writes Pipes. What they need is straightforward, affordable coverage. They should be able to purchase insurance in the state that has the best plan for them, regardless of where they live.

Health Insurance Choice and Product Segmentation Put Us All At Risk?
Interview with Linda J. Blumberg, Ph.D., Urban Institute
Economic Research Initiative on the Uninsured, 09/08

The Urban Institute's Linda Blumberg discusses the role of risk segmentation, its effect on health insurance markets, and how it hinders efforts to expand coverage and reform the health care system.

Across Mass., Wait to See Doctors Grows
Liz Kowalczyk
The Boston Globe, 09/22/08

The wait to see primary care doctors in Massachusetts has grown to as long as 100 days, while the number of practices accepting new patients has dipped in the past four years, with care the scarcest in some rural areas, reports The Boston Globe. Many of the roughly 439,000 people who obtained health coverage under the state's 2006 insurance law are struggling to find a doctor. Physicians and patient advocates report growing stress for patients trying to get care, and for doctors trying to squeeze them in. One doctor said he is working up to 60 hours a week to handle the increased patient load. Another began accepting new patients this year, but was so inundated by newly insured people that she had to shut her doors to new patients again six weeks later. The Legislature has approved an unprecedented set of financial incentives for young physicians and other programs to attract primary care doctors, but health care leaders fear the new measures will take several years to ease the shortage.

Innovation and Technology Adoption in Health Care Markets
Tomas J. Philipson and Anupam B. Jena
American Enterprise Institute Press, 09/18/08

Health economists Philipson and Jena argue that the use of cost-effectiveness criteria, while lowering the cost of health care in the short term, threatens to harm future patients by stifling vital medical innovations. They argue that cost-effectiveness criteria:

• Ignore the costs and risks to the producer in developing the new technology; instead, they consider only the transaction immediately at hand, taking the existence of medical technology as a given.
• Do not consider how a decision to deny reimbursement for an innovative drug, device, or procedure will affect the incentives of innovators to produce new technologies. If producers are not adequately reimbursed for their innovations, they will not be inclined to innovate further.
• May limit health care costs in the short term, but gains to today's buyers may be more than offset by potential losses to future patients, who may be deprived of more advanced technologies that have yet to be invented.

Medical Licensing: An Obstacle to Affordable, Quality Care
Shirley Svorny, California State University
Cato Institute, 09/17/08

Health care professionals sell medical licensing to Americans as a vital public health safeguard. But Svorny argues that medical licensing not only fails to protect consumers from incompetent physicians; raising barriers to entry makes health care more expensive and less accessible. Consumers would benefit if states eliminated professional licensing in medicine, leaving education, credentialing, and scope-of-practice decisions entirely to the private sector and the courts. Without legislatively-mandated requirements or restrictions, hospitals and other providers could better adjust their workforces when demand shifts or when opportunities arise to reduce costs -- either by making care more convenient or by saving patients money -- while maintaining quality.

Upcoming Events

Public Health, Innovation and Intellectual Property: A Regional Perspective
The George Washington University Law School Event
Tuesday, September 30, 2008, 7:30 a.m. - 10:00 a.m.
Washington, DC
For more information, please contact Steven Lott at slott@whadvocacy.com or 905-577-6200 ext. 2.

Eliminating Fraud: The Solution for Funding the Electronic Health Care System
Center for Health Transformation Event
Tuesday, September 30, 2008, 10:00 a.m. - 12:00 p.m.
Washington, DC
For more information, please contact Heather May at rsvp@healthtransformation.net or 202-375-2001.

Consumer-Driven Health Care Workshop
The Heartland Institute Event
Wednesday, October 1, 2008, 12:00 p.m. - 2:00 p.m.
Chicago, IL

Grace-Marie Turner speaking on The Jason Lewis Show
KTLK-FM Radio Broadcast
Wednesday, October 1, 2008, 6:00 p.m.
Minneapolis, MN

Developing a National Framework for Supporting Delivery System Reform at the State Level
The Brookings Institution Event
Wednesday, October 8, 2008, 8:30 a.m. - 3:00 p.m.
Washington, DC

Health Care Solutions for Americans
Society for the Education of Physicians and Patients Conference
Wednesday, October 8, 2008, 6:30 p.m. - 9:30 p.m.
Pittsburgh, PA

National Consumer Driven Healthcare Summit
October 19-21, 2008
Washington, DC

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features a commentary by Grace-Marie Turner on the major developments and issues of the week as well as summaries of writings by participants in the Health Policy Consensus Group and other articles of interest from the health policy world, plus announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.

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