Posted on 04/05/2008 8:09:45 AM PDT by K-oneTexas
McCain's health proposal aims to tackle costs MarketWatch News Clipping By: Kristen Gerencher 4.3.2008
MarketWatch, April 3, 2008
SAN FRANCISCO (MarketWatch) -- Given the amount of attention focused on the differences between the Democratic presidential candidates' health-care proposals, you might think presumed Republican nominee Sen. John McCain didn't have one of his own.
But he does. As Democratic senators Hillary Clinton and Barack Obama spar over whose proposal would cover more people, McCain has taken a different tack that's in line with a traditional Republican approach, experts say.
He doesn't talk much about universal coverage. Instead, he's said he wants to focus on cost drivers that put coverage out of reach for the 47 million Americans who don't have health insurance and that hit the wallets of those who do.
McCain's proposal aims to rein in rising costs while offering tax credits for individuals to purchase their own health insurance. That sets him apart from past Republican rivals such as former New York Mayor Rudy Giuliani, who favored tax deductions. McCain proposes tax credits of $2,500 for individuals or $5,000 for families as a step toward decoupling health insurance from employment, which is how the majority of Americans get their coverage.
"What I'm excited about is he wants to give Americans control of their health-care dollars and take it away from employers and the government," said John R. Graham, director of health-care studies at the Pacific Research Institute, a nonprofit group that prefers free-market-oriented public policy, in San Francisco.
Details are scant, but McCain lays out his policy ideas in broad terms on his campaign Web site. He supports chronic-disease care, the adoption of generic drugs, greater patient responsibility and the purchase of health insurance across state lines and through any organization or association people choose. He also backs the reimportation of prescription drugs from countries such as Canada and wants more federal research into autism.
His health system reform statement includes a passage that suggests sweeping changes, but the means are unclear: "Controlling health-care costs will take fundamental change -- nothing short of a complete reform of the culture of our health system and the way we pay for it will suffice."
No one from the McCain campaign returned calls seeking clarification.
Tax treatment
The tax-credit idea is one of the most interesting and potentially perilous elements in McCain's proposal, several analysts said. They also warned that allowing consumers to buy health insurance in any state likely would undermine consumer protections that some states have, such as health-plan solvency requirements, guaranteed issue and minimum benefit standards.
A tax credit would be much more valuable to people with low incomes than a tax deduction, said Paul Ginsburg, president of the Center for Studying Health System Change, a nonprofit, nonpartisan research group in Washington.
"McCain is much closer to what policy wonks have been talking about for years," Ginsburg said. "Whereas the other Republican proposals were talking about deductions for health insurance, which frankly would not do the job of expanding coverage because they're worth so little to lower-income people, McCain's has really talked about a tax credit."
Tax credits would do a better job of leveling the playing field between workers, he said. "Low-income people have cheaper health-care policies, if they have them at all, and are in lower tax brackets, if they pay [taxes] at all.... If your goal is to stimulate more people to buy insurance, making it a credit is much more effective."
Still, Ginsburg noted the U.S. has very little experience using tax credits to entice people to buy coverage.
Linda Blumberg, an economist and principal research associate at the Urban Institute's Health Policy Center in Washington, said the proposed tax credits, while more generous than previous Republican credits, are still too financially modest to help low-income people buy adequate policies without state-funded or other assistance.
What's more, if healthy workers take the tax-credit money and buy cheaper coverage in the individual market, their actions may lead to spiraling costs for the remaining older, sicker workers in the employer pool, she said. Those sicker workers then may find themselves unable to secure affordable coverage or any offers of coverage on the individual market if they need it.
"There's a real danger to breaking apart the employer-sponsored insurance market without having adequate protections and reforms and systems in place to catch the people falling out of it," Blumberg said. "That's a tremendous difference between the traditional Republican approach and the proposals coming from Democrats."
By contrast, Clinton and Obama propose purchasing pools and other mechanisms that would spread risk broadly, she said. Tax credits are a feature in Clinton's proposal as well, and both Democratic candidates want to mandate that health insurers accept everyone who applies, even if they're ill. See previous Vital Signs.
Balancing risk
While people like to hear about principles such as freedom and choice, it's not that simple in the health coverage context, Blumberg said. "With insurance, the more flexibility and choice you have, the more selection problems you create."
"Whenever you put a policy in place that reduces the amount of risk-pooling that's required, it does create financial savings for the healthy but at explicit cost to those who are unhealthy," she said.
"To say this is only a positive, to allow this kind of flexibility, is disingenuous," Blumberg said. "It's a positive for people who are healthy at a particular moment. It's clearly a direct cost to people who are unhealthy and need to use medical services more. I think that's the conversation we should be having, frankly. What are our social values? What is it we want to do with our health-care system? It may be the country is willing to sacrifice the less healthy for the healthy, but I don't think we've had the conversation."
Graham acknowledged that McCain's proposed tax credits might create unintended consequences.
"If we're going to transition from employer-based health care to individual health care, you're going to have a whole bunch of people in late middle age who are not healthy getting thrown into the individual market," he said. "We do need a transition plan, and it's not clear to me [McCain has] thought of that."
Last week, Elizabeth Edwards, wife of former Sen. John Edwards, who dropped out of the Democratic presidential race in January, criticized McCain's health plan as inadequate, especially for people with preexisting conditions.
Speaking at the Association of Healthcare Journalists' annual meeting in Arlington, Va., on Saturday, Edwards said neither she, who's fighting breast cancer, nor McCain, who had skin cancer, would be covered under his proposal since health insurers "wouldn't have to cover preexisting conditions like breast cancer and melanoma."
Douglas Holtz-Eakin, one of McCain's senior policy advisers, told the Los Angeles Times that Edwards' comments showed she misunderstood the Arizona senator's plan and failed to grasp "the power of competition to produce greater coverage for Americans," Holtz-Eakin said, according to the L.A. Times.
Concerned that more government involvement in health care would quash innovation and competition, Graham said he favors McCain's approach above those of the Democratic candidates.
"If you allow people to keep their health insurance that is of their choice, you can buy a policy when you're 19 and keep it until you die," he said. "That's one really good thing, and it doesn't expand government programs."
Kristen Gerencher is a reporter for MarketWatch in San Francisco.
McCain should take the “straight talk” approach about health care and tell people with Soc Security and Medicaid out of control we simply can not afford another socialized program without huge tax increases that would stifle jobs. This would leave the Democrats having explain how much their programs would cost.
Please send that to his campaign manager.....
“McCain has taken a different tack that’s in line with a (traditional Republican approach)”
Wow. So he’s breaking with his own traditions?
Why don’t we just put the government in charge of the price of food, movie tickets, booz, everything. That way we can just send all our money to them and they can pay for everything. This would probably help Hillary get elected...........she’s the biggest socialist around.
But how will hospitals be able to get by if they are unable to charge 4.75 for a single off the shelf aspirin?
Errrrr... isn't a tax "credit" simply the govrnment giving you that money?
Looser! When will rich Republicans realize that if you don’t have the money to up front the cost of insurance a damned tax credit isn’t going to help.
As a former group health insurance underwriter, I know the ways to cut health insurance:
The premium on group insurance plans is based on a combination of actual “experience” (medical bills paid for the group) and actuarial tables on general population experience. The combination depends on a ratio that reflects how big the particular group is. For instance, a big corporation’s premium structure would stand on its own employee experience and a very small one of 100 employees would be based mostly on actuarial tables.
The result of these raw figures is then trended up for inflation (based on past inflation for medical/dental care prices.) Then a 10% margin is added. The 10% margin was refunded to the policyholder if not needed as a “dividend.” The insurance company made its profits on the life and Long Term disability insurance premiums, retirement annuities and any cash float between receipt of premium and payout in benefits. It was in the medical insurance business just to get at the other business. They made no money on it.
Republicans tend to think that the answer to the health care crisis is more private insurance. I do not think this will work and this is why.
The variable elements of a plan that determine cost and make it competitive are:
(1) the benefits provided/limited by the plan – plan variables such as covering only ten chiropractic visits a year; deductibles such as $100 or $50000; co-insurance from 50% -80%; plan maximums; high out of pocket maximums or limits on deductibles plus coinsurance; flexibility in design is further limited by legislative requirements, such as covering maternity the same as any other illness.
(2) risk exposure of the group being covered (folks with chronic conditions are more likely to utilize the plan and claim benefits – thus increasing exposure. Folks in the L.A. area will likely have greater expenses and providers charge more for their services than a rural area.); and
(3) cost containment through limiting access to care or capping costs of care through PPO agreements, HMO contracts, reducing malpractice exposure or other(?) such as loan forgiveness or other incentive for charging less or serving in an underserved area.
According to the market solution, private insurance companies should actually be able to come up with products now that are competitive and fill the need of the uninsured. So, why haven’t they?
Healthy folks without insurance are that way because they (1) choose to be uninsured and want to spend their money elsewhere; (2) cannot find a plan with the right benefits or premium costs they can afford. If the free market has been unable to meet their need now at an affordable cost, it is unlikely it will in the future without major cost containment measures to lower the raw costs. Medicare, Medi-Cal coverages control costs by price controls. PPOs are contracts where the provider agrees to a price in exchange for funneling business to them. HMOs are managed care for members. Out patient surgical practices or immediate care are a cheaper alternative than the hospital. This is where innovation has lowered costs although some are less free-market in spirit than others. It has to be some entirely different ingredient than is currently available.
Neither of the conditions explaining the healthy uninsured would be likely solved through a tax deduction. If you can’t afford the premium, you can’t claim the deduction. A subsidy may be needed at least to close the time gap between paying out premiums and getting relief for that on their taxes to pay the next year’s premium forward.
Unhealthy folks may currently be excluded from private (non-group) insurance by pre-existing condition limitations. They give the group a high exposure to risk of incurring expenses and utilizing the medical plan. If included in a group, they will drive the costs/premiums up for all, unless they are a small number in comparison to a large healthy group. The higher costs, in turn, reduce participation in the plan by the healthy people who can no longer afford the plan. The unhealthy folks may have to be covered with some sort of public subsidy or have restricted access to care under a plan.
In my experience, premature infants and heart surgeries were the killer claims topping several hundred thousands of dollars. Perhaps certain conditions could be carved out for public subsidy. Another possible approach migh be to capitate the claims presentation risk exposure of the insurance company underwriting people with chronic health conditions by providing a public stop loss policy. In other words capitate the private companies payout exposure at a certain ceiling and have the public underwrite the rest. This would leave the whole private care and private insurance system instuitutions in place.
There would be no need for money then... everything would be on the net. bwhahahaha! ;-)
How about changing the family versus individual options so a family of 2 isn’t charged the same as a family of 12? I’ve had to pay family care all my life and my family has never been more than 3 at the most.
The McPain “straight Talk Express” has been out of gas for a long time. It’ll finally get going after Osamabama is sworn in Jan’09.
I hope that a major component of reducing health care costs borrows a line from Shakespear!
“First, Kill all of the lawyers!”
ok...minor overstatement...BUT, tort reform is a must!
This reporter is braindead. At least half, if not far more of those 47 million following fall into one of the following categories:
1. People eligible for an existing govt program, but too incompetent/disinterested/expert at procrastinating to have signed up yet.
2. People with good jobs eligible for employer health insurance who would rather spend the money on a BMW.
3. Young people who see no need for health insurance because they think they are immortal.
4. Persons who lack the personality trait of future orientation; they live for today so are unable to appreciate the importance of insuring for tomorrow.
5. People who want health insurance but only if someone else pays the entire tab.
6. People who are temporarily uninsured because they are between jobs.
Remove the illegals and people in the above categories and the number of people who are truly struggling to find insurance is surprisingly low. I am all for trying to solve the problem for those individuals.
Handing out billions in tax credits is a Republican approach? I also recall that his plan provided for treating employer-sponsored health benefits as taxable income--about a $1 trillion dollar tax increase.
McCain proposes tax credits of $2,500 for individuals or $5,000 for families as a step toward decoupling health insurance from employment, which is how the majority of Americans get their coverage.
Why is his objective to "decouple" the vehicle that covers the majority, today? It seems that will only increase the number of uninsured and destroy the part of the system that has actually been working for most Americans.
I think GWB has spoken of working towards that, too. It's not an idea I like one bit.
The problem with McCain’s approach is that if you buy your own coverage, the first time you are seriously ill, the company raises the premiums sky high or simply cancels the policy. Also, my husband had a towel left in him during an appendicitis surgery. He had severe intestinal problems and has had multiple surgeries. We think the last surgery did the trick, but he could not purchase health insurance. Thanks God his employer still offers insurance. Conservatives believe people should buy policies and be responsible for their own health care, but it won’t work with the present system.
Hillary’s plan does not create national health care. Rather it forces people to buy individual policies like in Massachusetts which has been a disaster. People who can not afford insurance are being fined.
Obama’s plan uses existing state health insurance plan to ensure that children are covered. He has no other mandates. None of the plans will really work. I do not know what the answer is really. Maybe companies should be encouraged to offer benefits with tax credits. Also, the self employed should be able to join the plans that government workers use in a state. This would increase the group size and keep premiums down. We need to get our trade policies corrected also so that American business does not have its back to the wall and can afford to offer benefits.
How about people who have been ill and can not buy reasonably priced insurance? No offense but this is what Repubs have been saying for years-personal responsibility. Well people get sick and unless you are a millionaire, you can not save enough money for that rainy day. The first year of my husband’s illness cost over 200,000 dollars.
I do wish people would also be better consumers of medicine. Accidents and catastrophic disease aside, clearly some medical and pharmaceutical industry folks oversell to less educated consumers. But a doctor is not to be questioned or so so many of them demand. Take these pills, now take these tests... hmmm, this is high, this is low...here's more pills and more tests... More doctors paid, more drugs sold. All in the name of prevention.
I like my teachers to teach the three R's - not diversity and white guilt.
I like my cops to be chasing rapists and killers - not pot smokers.
I like my doctor to be treating catastrophic accidents and diseases not hucking pills and chasing recommended testing levels set by drug companys .
Still, a consumer gets what a consumer wants. In the current system it's caveat emptor. If you don't want the pills why do you keep coming back?
Finally, I do have some knowledge of what's going on in Mass as my son is a resident and he goes to school down there. It's still somewhat new but I haven't heard too many people describe it as disaster as yet. Of course the original plan crafted by Romney has been tinkered with quite a bit and will continue to blow with the whims of a single party Gov't. I'm not hopeful. I expect tax payer subsidies will rise as will the cost of medicine and insurance rates.
I am so sorry to hear of your husband’s illness. And I take no offense at your comment.
Maybe I did not make myself clear. There are many people who don’t have insurance but not due to flaws in the system. Those are my numbers 1 through six. I estimated them at at least half of the 47 million.
The remaining half or less include people like you, and as I said, we need to find solutions to their problem, which is basically the price barrier.
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