An interview with PNHP Senior Health Policy Fellow Dr. Don McCanne on McCain and Obama's health care proposals.
Dr. McCanne served as PNHP President in 2003-2004 and writes a daily health policy “quote of the day” for single payer advocates. Subscribe by dropping a note to don@mccanne.org.
PNHP: How would you characterize Sen. McCain’s health care plan?
Dr. Don McCanne: Of the two candidates, McCain would rely more on the private sector and market forces to produce changes in the health care system. He says he would free up the market to allow private insurers to compete with each other to create plans with premiums we could afford.
Compared to Obama’s proposals, McCain’s program represents a much greater change from what we have now. He would shift responsibility for health care from employers to individuals by providing tax incentives for people to move to a deregulated, individual private insurance market.
What would be the impact?
McCain’s plan will likely result in many more people being uninsured and underinsured.
First of all, with workers receiving a government subsidy for health insurance - $2,500 for individuals, $5,000 for a family - employers are going to be motivated to terminate their health insurance programs and turn people over to the individual market.
McCain is basically proposing to change health insurance from a defined benefit to a defined contribution. In today’s market, what kind of family health insurance can be purchased with a $5,000 defined contribution? The average family premium is about $12,000, and that doesn’t include deductibles, co-pays and other out-of-pocket expenses.
I believe the private insurance companies will treat people in the marketplace very shabbily. Many people will be unable to afford any insurance - and it won’t only be those who are older or who have pre-existing conditions, sectors the insurance companies don’t want to cover at all.
Second, his proposal for less regulation of the insurance industry means that industry will be offering grossly inadequate insurance products to people in order to compete on price. The insurers can’t afford to provide real, comprehensive insurance and at the same time make their premiums affordable.
As a result, there will be a huge increase in the underinsured population. People will be losing their employer-based insurance and will be swelling the ranks of the uninsured and underinsured. This will result in a massive, catastrophic failure of the system. It will be horrible.
What about his claim that he’s not turning his back on people who have difficulty getting insurance, e.g. those with pre-existing conditions?
McCain proposes to cover such people through his “guaranteed access plan”, but that’s just a continuation of the state high-risk pools that we already have in place for individuals who typically can’t obtain insurance. These plans don’t work.
States are supposed to do their part in this scenario. But currently only about 190,000 people nationally are in these pools of high-risk individuals. These are very expensive pools. States just don’t have the funds to adequately finance them. So turning to the states - that’s no solution at all. It’s not a serious approach.
Would McCain’s plan give people more choice or control costs?
No.
Most insurance companies have preferred provider lists and most HMOs have closed panels that restrict patients to doctors in the HMO. Although McCain touts the freedom to choose your insurer or HMO, these institutions actually take away your freedom to choose who your doctor is or which hospital you can use - the choice we really want.
McCain’s proposals for containing costs are very weak.
The greatest source of administrative waste in U.S. health care today is our dysfunctional, fragmented private insurance system. That’s where the largest administrative costs are. And the individual insurance market - the market that McCain wants to expand - involves even higher administrative costs. So costs will likely go up.
Cost control is only achieved when you have real control over the health dollars. Only then can you develop incentives, for example, to expand primary care. Only then can you realign financial incentives away from an array of excessive, non-beneficial high-tech services that yield little value, and redirect it to primary care, which delivers greater value at lower cost.
What about Sen. Obama’s proposals?
Obama’s plan emphasizes increased government regulation and oversight of private and public insurance plans, leading to an incremental expansion of the existing system. As part of this, he would introduce a new Medicare-like plan for persons under 65 to serve as an alternative to private health insurance plans.
In terms of universal coverage, Obama’s plan probably will not expand coverage very much, mainly because his plan doesn’t do much to bring down the cost of health care. It continues to use the defective private insurance model.
The problem is that private insurers will not accept everyone in the risk pool, lest their costs go up. Even if regulations require them to do so, they still game the system through measures such as selective marketing. So people who are at higher risk will head for the new public or semi-public plans.
These plans, which under Obama’s proposal would be available through a new National Health Insurance Exchange, would be required to accept people with pre-existing conditions. But they would still involve payment of premiums, co-pays and deductibles.
He says these plans will be as good as what members of Congress get, right?
Obama says they would be patterned after the Federal Employee Health Benefits Program, but that may not be all that great. The plans that are offered to federal employees vary in price and a Senator can afford a plan that has far better benefits that his staffers. The FEHBP plans are not totally stripped down, but they still have deductibles, co-pays and other out-of-pocket expenses, and restrict people to a limited list of providers. In fact, 100,000 federal workers eligible for the FEHBP plans remain uninsured primarily because they cannot afford their share of the costs. Obviously that program wouldn’t work for far too many of us.
Additionally, the program Obama describes will be costly. He says individuals who can’t afford the premiums offered through the health insurance exchange plans will receive subsidies. But I think these subsidies will have to be much larger than estimated and will have to be provided to a much larger number of people than he currently estimates - not only low-income, but middle-income people and even those at the lower end of the high-income group.
So Obama’s stated goal of universal coverage will be foiled by the lack of availability of affordable plans that have adequate benefits. His approach is flawed because the private health plans are not going to be able to have enough benefits if they’re going to have affordable premiums.
Some say Obama’s new public plan could lead to something bigger and better.
The offering of a public plan option, which, incidentally, he shares with Sen. Hillary Clinton and professor Jacob Hacker, is not as simple as it would seem. Depending on the details and amount of funding, it has the potential to be the most important feature of his plan, or it could be a disaster. But even so, it alone won’t lead to anything even close to universal coverage. Obama has stated repeatedly that he knows that single payer is a superior solution for health care reform.
It’s likely that the public plan will be impacted by adverse selection - i.e. that individuals who are sick, or small businesses who have workers with costly disorders such as diabetes or cancer, will tend to seek out the public plans because the private plans would likely withdraw from markets that include high-cost individuals - markets in which they would be losing money. These individuals and small businesses will end up in relatively high-risk pools. It is essential those pools be adequately funded.
To fund the public high risk pools, either the private insurance companies would have to shift some of their funds into the public program through risk adjustment, or, as the public program uses up its funds, the government would have to make a greater contribution. To compete with the private plans, the public program and private plans would have to be funded at the same levels accurately corrected for the level of risk in their pools. That’s not technically feasible. Nobody has a way to do that. So insurers are always able to game the system.
Even if you could get private insurers to compete with the public program on a level playing field, that still leaves a lot of problems. You still don’t get the administrative savings you would under a single-payer system. Providers would still have to deal with multiple insurers. And both the Organization for Economic Cooperation and Development and the World Health Organization say systems that leave private plans in place are more expensive, less efficient and less equitable than a single public system.
What about cost control?
Again, Obama’s proposals, like McCain’s, are weak in this area. The defective private insurance model, to the extent in remains in place, drives up costs and blocks effective group bargaining and health planning.
The private health insurance plans of the 21st century have decided that they should cover only the healthy, putting an end to risk pools that enable a transfer from the many who are healthy to those with sickness or injury. They also realize that they should avoid competing with each other based on lower premiums, but should instead use their oligopolies to push premiums up to the maximum that the market will bear.
Only this month the two largest publicly traded health insurers, WellPoint and UnitedHealth Group, said they would not try to hold down premiums in the name of getting more members. “We will not sacrifice profitability for membership,” said one WellPoint official.
Yet both McCain and Obama propose to leave this industry in charge.
What’s the alternative?
What we really need is a system that removes the financial burden from patients and more effectively pools our funds into a public program that is able to address costs more effectively by introducing greater efficiency and value into our health care system.
Such a system would guarantee comprehensive health care to everyone by replacing the private insurance industry with a tax-supported government agency or agencies that would pay all medical bills, similar to the way Medicare operates today, but even better than Medicare. People would have the freedom to choose their own doctors and hospitals.
That’s a single-payer system. Such a system is embodied in H.R. 676, the “U.S. National Health Insurance Act,” introduced by Rep. John Conyers. It currently has 90 co-sponsors in Congress, more than any other health reform proposal.
How do you reply to those who say single payer is politically infeasible?
There are some in the political arena and health policy field who say the 2008 policy debate is over. They say single payer has lost out, and it’s time to move on.
The only problem is that single payer is the only plan that will work.
Keep in mind that any health care reform will have to be crafted and enacted by Congress. Whatever bill Congress comes up with will most likely not resemble either of the presidential candidates’ proposals very much. Only the general concepts will come into play. Congress will need to enact the specifics.
So it’s important to continue to educate people on basic health policy, contrasting the defective private insurance model with single-payer national health insurance. For members of groups like Physicians for a National Health Program, that means continuing to speak at forums and grand rounds, to write op-eds and letters to the editor, and to attend campaign-related events and raise the issue of why we need single payer.
At a glance
McCain’s proposal
- Increases number of uninsured and “underinsured”
- Increases administrative overhead (currently 31 percent of health spending)
- No effective cost containment
- Relies on private insurance market to shape system
- Moves people away from employer-based system to the individual market by offering tax credits ($2,500 individual, $5,000 family) that can be used to buy individual insurance
- Deregulates insurance markets, e.g. by dropping state-defined standards
- Encourages Health Savings Accounts
- Offers vague “Guaranteed Access Program” to address problem of the historically uninsurable - e.g. people with pre-existing conditions - that involves state-based risk pools
Obama’s proposal
- Partially reduces number of uninsured with $100 billion in new public funding
- Requires some employers to provide insurance or pay into a public insurance program, i.e. “play or pay”
- No effective cost-containment
- Mandates that all children be insured
- Expands Medicaid and State Children’s Health Insurance Program
- Sets up public insurance program as alternative to private insurers
- Sets up “National Health Insurance Exchange” through which insurers could not deny coverage to people with pre-existing conditions with tax subsidies to low-income
- Provides government reinsurance to employers for handling catastrophic illness or injury