Obama, McCain, and health care reform

Now that the Democratic primary season is over (and boy don’t we miss it!), it is time to focus on the presumptive nominees’ rather different approaches to health care reform. (If Hillary ‘unsuspends’ her campaign and Obama drives off a cliff between the time I write and you read this, don’t despair, the Democratic candidates’ plans are more similar than they are different.)
The differences between the McCain and Obama plans are big – really big. Philosophically, McCain’s approach is market-based and tax policy driven, relying on individuals to make the best decisions on health care procedures and treatment. His plan would remove the favorable treatment of employer-funded health insurance, instead providing a refundable tax credit of $2500/individual or $5000 per family to help them buy insurance (note – the average individual policy now costs over $4000 and the average family policy cost exceeds $12,000). Conversely, Obama’s plan is more pragmatic, focused on fixing the problems with the current market-based system with a ban on medical underwriting, a comprehensive ‘minimum’ benefit design, financial help for small employers buying health insurance, and some sort of stop-loss insurance for high dollar claims.
As does McCain, Obama relies on private insurers to provide health insurance, but from there the two candidates’ plans diverge dramatically. One area where the plans appear to be similar is their stance on mandated universal coverage. While neither mandates coverage, Obama comes much closer, requiring universal coverage for children. But the Senator’s plan and public statements are a little disconnected; in Obama’s speeches and ads the Senator does appear to endorse mandated coverage – eventually.
Obama’s plan requires insurers take all comers, regardless of pre-existing medical conditions. Notably, although McCain’s original talking points did not mention guaranteed insurability, his campaign website now at least speaks to the issue – but his plan does nothing to change the status quo.
McCain wants to allow wide variation in benefit plan design and speaks glowingly of HSAs, while Obama is calling for a plan similar to the Federal Employee Health Benefit Plan. Both candidates’ policies appear to dramatically reduce states’ ability to mandate certain types of care (e.g. acupuncture) with the result that regulation of health plan benefits will shift from a state to a Federal responsibility.
While most other candidates are talking about covering the uninsured, McCain is focused on cost. More specifically, the cost of chronic conditions such as diabetes, asthma and CAD which account for 75% of the US’ entire $2 trillion health care bill. McCain is not just pointing out the obvious, he also plans to attack these costs by altering reimbursement – paying providers for maintaining health rather than reimbursing for specific procedures.
Here’s how McCain put it: “We should pay a single bill for high-quality health care, not an endless series of bills for presurgical tests and visits, hospitalization and surgery, and follow-up tests, drugs and office visits,”
McCain is dead on when he talks about the need to pay for health, not reimburse for procedures. His focus on the need to aggressively improve care and outcomes for patients with chronic conditions is creditable.
But he’s dead wrong in his blind faith in the market to solve the problem of insurability, and just plain blind in his belief that the individual insurance market is the answer. Today, in the vast majority of states, there is a free market for insurers writing individual insurance. And no insurers that can medically underwrite don’t, with the result that those who most need insurance can’t get it. You can’t blame the insurers; why would they want to cover an individual with heart disease, cancer, MS, depression, or asthma, or all of the above? They wouldn’t, no matter what kind of ‘risk adjustment’ plan is in place. It would be irresponsible, especially for those insurers that are owned by stockholders (think Aetna, United HealthGroup, CIGNA, Humana, Coventry, Wellpoint…)
Notably, nowhere on McCain’s website or in his policy papers does he say what the plan will cost. But his statements leave little doubt as to what he wants to do, and the Joint Committee on Taxation’s report on the McCain health plan clearly demonstrates the financial impact of his plan. The cost of the tax credits would be $206 billion in FY 2009 and $3.6 trillion over 10 years. That is about double what Obama’s plan is projected to cost.
Equally notable, Douglas Holtz-Eakin, one of McCain’s key advisers agreed that the McCain plan would increase the budget deficit, saying “It will make deficits expand up front, no question…”
The difference between the elephant and the donkey can perhaps be best summarized in two slogans.
For McCain, it might be “More expensive, less coverage.”
For Obama “Coverage just like I have, for only a hundred billion.”