PNHP

Medicaid reform for the clairvoyant

Medicaid reform for the clairvoyant

Florida’s Medicaid Reform: Informed Consumer Choice?

By Teresa A. Coughlin, et al
Health Affairs
October 14, 2008
Until recently, Medicaid recipients within a state typically had access to the same set of benefits. Recent federal changes, however, move Medicaid in a new direction by allowing states to offer different benefit packages to different Medicaid recipients and to emphasize consumer choice and personal responsibility.
Under reform, participating plans are now allowed to offer different benefit packages and impose different levels of cost sharing for nonpregnant adult enrollees, subject to state approval. Although plans must include all mandatory Medicaid benefits and most optional benefits, services can vary in amount, duration, and scope.
As a result, enrollees are newly required to consider differences in benefit packages when making a choice of plans. They must also consider other plan differences such as preferred drug lists, provider networks, and prior authorization requirements.
After Florida implemented reforms, a sizable minority of recipients were not even aware that they were enrolled in a reform plan, and many did not understand how their plan worked.
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w523v1

Medicaid was designed as a welfare program to pay for all necessary care for those who could not otherwise afford it. The program has not worked as well as it should, primarily because of chronic underfunding. Access has been impaired because of the lack of providers willing to participate in a program that often doesn’t even pay overhead expenses.
With the problem defined as such, the most obvious solution would be to increase funding to a level that would pay expenses and provide fair compensation. That is not a realistic solution since welfare programs are highly vulnerable to political efforts to control government spending.
Another solution would be to remove the welfare stigma by eliminating Medicaid and enrolling the participants in a program with comprehensive benefits that would cover all of us. We do keep talking about that, but political inertia continues to prevail.
So now we have an element in our society which suggests that we should shift the spending decisions to the individual, not only for Medicaid beneficiaries, but for all of us. Since almost none of us could afford the costs of significant health problems, we still need to rely on risk pooling. Understanding that, the consumer-directed advocates then suggest that our choice be amongst various health plans as a proxy for decisions on health spending.
With a market of various plans from which to choose, all we need to know is what unknown major acute or chronic disorder we will develop next year, if any. Once we know that, we can choose a plan that includes the specialists who have expertise in our undetermined problem. We can choose a plan with a hospital that provides the specific services that we will need and will be accessible to us. We can choose a plan that includes in its formulary the unknown expensive drugs that we will need. Finally, if we were to develop an expensive problem, we can avoid plans with high deductibles and other cost sharing provisions that might wipe out our personal assets.
What nonsense! Since none of us can predict the future, we cannot possibly choose the precise plan that eventually we may or may not need. Yet we are already headed down that path. The individual market is rife with these ridiculous choices, and employers are headed in that direction as they shift to high deductible plans and small individual cash accounts that could never pay for major medical problems.
Haven’t we had enough of these screwball ideas? We already have the money to pay for comprehensive, high quality care for everyone. Let’s throw out the crackpots and establish our own program that actually would work: a single payer national health program.
(Please do not confuse my use of “screwball” and “crackpot” as insensitive terms that in the past have been used inappropriately to describe unfortunate individuals with mental health problems. Here the terms simply refer to cruel, inhumane, and sometimes greedy humanoid life forms that may be found groveling around in Washington, D.C.)

Medicaid reform for the clairvoyant

Florida's Medicaid Reform: Informed Consumer Choice?

By Teresa A. Coughlin, et al
Health Affairs
October 14, 2008

Until recently, Medicaid recipients within a state typically had access to the same set of benefits. Recent federal changes, however, move Medicaid in a new direction by allowing states to offer different benefit packages to different Medicaid recipients and to emphasize consumer choice and personal responsibility.

Under reform, participating plans are now allowed to offer different benefit packages and impose different levels of cost sharing for nonpregnant adult enrollees, subject to state approval. Although plans must include all mandatory Medicaid benefits and most optional benefits, services can vary in amount, duration, and scope.

As a result, enrollees are newly required to consider differences in benefit packages when making a choice of plans. They must also consider other plan differences such as preferred drug lists, provider networks, and prior authorization requirements.

After Florida implemented reforms, a sizable minority of recipients were not even aware that they were enrolled in a reform plan, and many did not understand how their plan worked.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.6.w523v1

Comment:

By Don McCanne, MD

Medicaid was designed as a welfare program to pay for all necessary care for those who could not otherwise afford it. The program has not worked as well as it should, primarily because of chronic underfunding. Access has been impaired because of the lack of providers willing to participate in a program that often doesn’t even pay overhead expenses.

With the problem defined as such, the most obvious solution would be to increase funding to a level that would pay expenses and provide fair compensation. That is not a realistic solution since welfare programs are highly vulnerable to political efforts to control government spending.

Another solution would be to remove the welfare stigma by eliminating Medicaid and enrolling the participants in a program with comprehensive benefits that would cover all of us. We do keep talking about that, but political inertia continues to prevail.

So now we have an element in our society which suggests that we should shift the spending decisions to the individual, not only for Medicaid beneficiaries, but for all of us. Since almost none of us could afford the costs of significant health problems, we still need to rely on risk pooling. Understanding that, the consumer-directed advocates then suggest that our choice be amongst various health plans as a proxy for decisions on health spending.

With a market of various plans from which to choose, all we need to know is what unknown major acute or chronic disorder we will develop next year, if any. Once we know that, we can choose a plan that includes the specialists who have expertise in our undetermined problem. We can choose a plan with a hospital that provides the specific services that we will need and will be accessible to us. We can choose a plan that includes in its formulary the unknown expensive drugs that we will need. Finally, if we were to develop an expensive problem, we can avoid plans with high deductibles and other cost sharing provisions that might wipe out our personal assets.

What nonsense! Since none of us can predict the future, we cannot possibly choose the precise plan that eventually we may or may not need. Yet we are already headed down that path. The individual market is rife with these ridiculous choices, and employers are headed in that direction as they shift to high deductible plans and small individual cash accounts that could never pay for major medical problems.

Haven’t we had enough of these screwball ideas? We already have the money to pay for comprehensive, high quality care for everyone. Let’s throw out the crackpots and establish our own program that actually would work: a single payer national health program.

(Please do not confuse my use of “screwball” and “crackpot” as insensitive terms that in the past have been used inappropriately to describe unfortunate individuals with mental health problems. Here the terms simply refer to cruel, inhumane, and sometimes greedy humanoid life forms that may be found groveling around in Washington, D.C.)

Nobel Laureate Paul Krugman on single payer

One Nation, Uninsured

By Paul Krugman
The New York Times
June 13, 2005
Harry Truman tried to create a national health insurance system. Public opinion was initially on his side: Jill Quadagno’s book “One Nation, Uninsured” tells us that in 1945, 75 percent of Americans favored national health insurance. If Truman had succeeded, universal coverage for everyone, not just the elderly, would today be an accepted part of the social contract.
But Truman failed. Special interests, especially the American Medical Association and Southern politicians who feared that national insurance would lead to racially integrated hospitals, triumphed.
Sixty years later, the patchwork system that evolved in the absence of national health insurance is unraveling. The cost of health care is exploding, the number of uninsured is growing, and corporations that still provide employee coverage are groaning under the strain.
So the time will soon be ripe for another try at universal coverage. Public opinion is already favorable: a 2003 Pew poll found that 72 percent of Americans favored government-guaranteed health insurance for all.
But special interests will, once again, stand in the way. And the big debate among would-be reformers is how to deal with those interests, especially the insurance companies. These companies played a secondary role in Truman’s failure but have since become a seemingly invincible lobby.
Let’s ignore those who believe that private medical accounts – basically tax shelters for the healthy and wealthy – can solve our health care problems through the magic of the marketplace. The intellectually serious debate is between those who believe that the government should simply provide basic health insurance for everyone and those proposing a more complex, indirect approach that preserves a central role for private health insurance companies.
A system in which the government provides universal health insurance is often referred to as “single payer,” but I like Ted Kennedy’s slogan “Medicare for all.” It reminds voters that America already has a highly successful, popular single-payer program, albeit only for the elderly. It shows that we’re talking about government insurance, not government-provided health care. And it makes it clear that like Medicare (but unlike Canada’s system), a U.S. national health insurance system would allow individuals with the means and inclination to buy their own medical care.
The great advantage of universal, government-provided health insurance is lower costs. Canada’s government-run insurance system has much less bureaucracy and much lower administrative costs than our largely private system. Medicare has much lower administrative costs than private insurance. The reason is that single-payer systems don’t devote large resources to screening out high-risk clients or charging them higher fees. The savings from a single-payer system would probably exceed $200 billion a year, far more than the cost of covering all of those now uninsured.
Nonetheless, most reform proposals out there – even proposals from liberal groups like the Century Foundation and the Center for American Progress – reject a simple single-payer approach. Instead, they call for some combination of mandates and subsidies to help everyone buy insurance from private insurers.
Some people, not all of them right-wingers, fear that a single-payer system would hurt innovation. But the main reason these proposals give private insurers a big role is the belief that the insurers must be appeased.
That belief is rooted in recent history. Bill Clinton’s health care plan failed in large part because of a dishonest but devastating lobbying and advertising campaign financed by the health insurance industry – remember Harry and Louise? And the lesson many people took from that defeat is that any future health care proposal must buy off the insurance lobby.
But I think that’s the wrong lesson. The Clinton plan actually preserved a big role for private insurers; the industry attacked it all the same. And the plan’s complexity, which was largely a result of attempts to placate interest groups, made it hard to sell to the public. So I would argue that good economics is also good politics: reformers will do best with a straightforward single-payer plan, which offers maximum savings and, unlike the Clinton plan, can easily be explained.
We need to do this one right. If reform fails again, we’ll be on the way to a radically unequal society, in which all but the most affluent Americans face the constant risk of financial ruin and even premature death because they can’t pay their medical bills.
http://www.nytimes.com/2005/06/13/opinion/13krugman.html?hp

With today’s announcement that Paul Krugman is the 2008 recipient of the Nobel Prize, it seems appropriate to distribute once again one if the most important articles he has ever written, and the message could not be more timely.
Although economics is considered to be an amoral science, Paul Krugman and Uwe Reinhardt have proven to us that even economists can have a heart.
Celebrate Paul Krugman’s award by sharing his single payer article with others. Economics with a heart. Now isn’t that something.

Nobel Laureate Paul Krugman on single payer

One Nation, Uninsured

By Paul Krugman
The New York Times
June 13, 2005

Harry Truman tried to create a national health insurance system. Public opinion was initially on his side: Jill Quadagno’s book “One Nation, Uninsured” tells us that in 1945, 75 percent of Americans favored national health insurance. If Truman had succeeded, universal coverage for everyone, not just the elderly, would today be an accepted part of the social contract.

But Truman failed. Special interests, especially the American Medical Association and Southern politicians who feared that national insurance would lead to racially integrated hospitals, triumphed.

Sixty years later, the patchwork system that evolved in the absence of national health insurance is unraveling. The cost of health care is exploding, the number of uninsured is growing, and corporations that still provide employee coverage are groaning under the strain.

So the time will soon be ripe for another try at universal coverage. Public opinion is already favorable: a 2003 Pew poll found that 72 percent of Americans favored government-guaranteed health insurance for all.

But special interests will, once again, stand in the way. And the big debate among would-be reformers is how to deal with those interests, especially the insurance companies. These companies played a secondary role in Truman’s failure but have since become a seemingly invincible lobby.

Let’s ignore those who believe that private medical accounts – basically tax shelters for the healthy and wealthy – can solve our health care problems through the magic of the marketplace. The intellectually serious debate is between those who believe that the government should simply provide basic health insurance for everyone and those proposing a more complex, indirect approach that preserves a central role for private health insurance companies.

A system in which the government provides universal health insurance is often referred to as “single payer,” but I like Ted Kennedy’s slogan “Medicare for all.” It reminds voters that America already has a highly successful, popular single-payer program, albeit only for the elderly. It shows that we’re talking about government insurance, not government-provided health care. And it makes it clear that like Medicare (but unlike Canada’s system), a U.S. national health insurance system would allow individuals with the means and inclination to buy their own medical care.

The great advantage of universal, government-provided health insurance is lower costs. Canada’s government-run insurance system has much less bureaucracy and much lower administrative costs than our largely private system. Medicare has much lower administrative costs than private insurance. The reason is that single-payer systems don’t devote large resources to screening out high-risk clients or charging them higher fees. The savings from a single-payer system would probably exceed $200 billion a year, far more than the cost of covering all of those now uninsured.

Nonetheless, most reform proposals out there – even proposals from liberal groups like the Century Foundation and the Center for American Progress – reject a simple single-payer approach. Instead, they call for some combination of mandates and subsidies to help everyone buy insurance from private insurers.

Some people, not all of them right-wingers, fear that a single-payer system would hurt innovation. But the main reason these proposals give private insurers a big role is the belief that the insurers must be appeased.

That belief is rooted in recent history. Bill Clinton’s health care plan failed in large part because of a dishonest but devastating lobbying and advertising campaign financed by the health insurance industry – remember Harry and Louise? And the lesson many people took from that defeat is that any future health care proposal must buy off the insurance lobby.

But I think that’s the wrong lesson. The Clinton plan actually preserved a big role for private insurers; the industry attacked it all the same. And the plan’s complexity, which was largely a result of attempts to placate interest groups, made it hard to sell to the public. So I would argue that good economics is also good politics: reformers will do best with a straightforward single-payer plan, which offers maximum savings and, unlike the Clinton plan, can easily be explained.

We need to do this one right. If reform fails again, we’ll be on the way to a radically unequal society, in which all but the most affluent Americans face the constant risk of financial ruin and even premature death because they can’t pay their medical bills.

http://www.nytimes.com/2005/06/13/opinion/13krugman.html?hp

Comment:

By Don McCanne, MD

With today’s announcement that Paul Krugman is the 2008 recipient of the Nobel Prize, it seems appropriate to distribute once again one if the most important articles he has ever written, and the message could not be more timely.

Although economics is considered to be an amoral science, Paul Krugman and Uwe Reinhardt have proven to us that even economists can have a heart.

Celebrate Paul Krugman’s award by sharing his single payer article with others. Economics with a heart. Now isn’t that something.

McCain and Obama perceptions of health financing flaws

Candidates Disagree On Primary Flaws Of Health Care Financing

By Don McCanne
The Huffington Post
Off the Bus
October 10, 2008
John McCain and Barack Obama both recognize that there are serious problems with our health care system, and that the voters want something done about it. They would both use public policies to modify the private health insurance market to accomplish their goals. Although it would seem that their goals are similar, the specifics are quite different because they have started from very dissimilar perceptions of the primary flaws in health care financing.
http://www.huffingtonpost.com/don-mccanne/candidates-disagree-on-pr_b_133118.html

As we near election time, we are seeing numerous reports, some excellent and some distorted, on how effective the McCain and Obama proposals would be in reducing the numbers of uninsured. Rather than digressing into disputes over the details of these analyses, it would be more instructive to step back and look at the fundamental goals of each proposal.
Rather than repeating the theme here, it would be simpler to read the brief article at the link above.

McCain and Obama perceptions of health financing flaws

Candidates Disagree On Primary Flaws Of Health Care Financing

By Don McCanne
The Huffington Post
Off the Bus
October 10, 2008

John McCain and Barack Obama both recognize that there are serious problems with our health care system, and that the voters want something done about it. They would both use public policies to modify the private health insurance market to accomplish their goals. Although it would seem that their goals are similar, the specifics are quite different because they have started from very dissimilar perceptions of the primary flaws in health care financing.

http://www.huffingtonpost.com/don-mccanne/candidates-disagree-on-pr_b_133118.html

Comment:

By Don McCanne, MD

As we near election time, we are seeing numerous reports, some excellent and some distorted, on how effective the McCain and Obama proposals would be in reducing the numbers of uninsured. Rather than digressing into disputes over the details of these analyses, it would be more instructive to step back and look at the fundamental goals of each proposal.

Rather than repeating the theme here, it would be simpler to read the brief article at the link above.

Candidates Disagree On Primary Flaws Of Health Care Financing

By Don McCanne, M.D., PNHP Senior Health Policy Fellow
Huffington Post
October 10, 2008

John McCain and Barack Obama both recognize that there are serious problems with our health care system, and that the voters want something done about it. They would both use public policies to modify the private health insurance market to accomplish their goals. Although it would seem that their goals are similar, the specifics are quite different because they have started from very dissimilar perceptions of the primary flaws in health care financing.

John McCain believes that employer-sponsored plans and government health programs insulate individuals from the costs of health care, creating an excessive demand for health care. He believes that our financing problems would be solved if we put individuals in charge of purchasing their own health care and health care coverage in a marketplace that controls costs through competition. He does understand that coverage is now too expensive for the majority of us, so he would use government tax credits to help pay for private plans. He would also have the states establish “guarantee access plans” that would insure those who cannot otherwise obtain coverage because of preexisting conditions, though these high-risk pools would be exorbitantly expensive.

Barack Obama believes that the high costs of health care and health care coverage have created a financial burden for individuals and small businesses. He also recognizes that many health plans no longer prevent those with health care needs from facing financial hardship, because of inadequate benefits and excessive cost sharing. He would provide a regulated market of plans of a quality similar to those that federal employees have. Although both Sen. Obama and Sen. McCain recommend systemic reform measures designed to reduce costs, Sen. Obama understands that health plans would still be too expensive, so he would not require everyone to purchase them.

Under Sen. McCain’s proposal, greater numbers would go without insurance simply because health plans would still remain unaffordable even with the tax credits. In a deregulated insurance market, those who obtain coverage and have health care needs would find that affordable plans would no longer provide adequate protection against financial loss. It has been estimated that about 65 million people would be uninsured ten years into his program.

Under Sen. Obama’s proposal, ten years out about 33 million individuals would be without insurance simply because their incomes would be too high to qualify for welfare programs, but too low to be able to pay for private plans.

The problem with both proposals is that they depend on the obsolete model of private health plans. The costs of health care in the United States are much higher than in any other nation. They are so high that the private insurance industry is no longer capable of providing us with insurance products that cover all reasonable essential health care services at a premium that we can afford. Our national health expenditures are now $7900 per person. For a family of four, that’s over $31,000. With a median household income of $50,000, we could never expect to pay the health care tab through private health plans. (An employer-sponsored family plan currently averages $12,600, but we pay much of the difference in direct and indirect taxes for high-cost individuals in Medicare, Medicaid, the VA system, safety-net institutions, and other public programs.)

Our dysfunctional, fragmented system of financing health care through a multitude of private plans and public programs is highly inefficient, inequitable, wasteful, and ineffective in slowing the twin epidemics of uninsurance and underinsurance, while health care costs continue to spiral out of control.

Replacing our current financing system with a single, universal risk pool that is publicly-administered and equitably-funded through public financing would create an administratively-efficient system in which everyone is automatically included, for life.

The $2.4 trillion that we are already spending is more than enough to provide comprehensive services for everyone, providing that we adopt the efficiencies of a single payer system. With our own public, single payer monopsony, we would be able to demand much greater value in our health care purchasing by realigning incentives to improve our primary care infrastructure and to reduce administrative waste and the overuse of non-beneficial high-tech services, leaving more funds for high-tech care that does improve our health outcomes.

Sen. McCain wants each of us to go out and shop for our own health care and health insurance coverage, even if we can’t pay for it. His “you’re on your own” approach rejects the notion of social solidarity, even though all other wealthy nations accept solidarity as a fundamental foundation of a just society.

Sen. Obama has said that if we were starting from scratch, he would recommend adopting a single payer system. He’s right. The current financing system is such a disaster that we really should jettison it and start over with single payer system: a new and improved Medicare that covers every single one of us, at a price that we can afford.

Lewin analysis of candidates' proposals

McCain and Obama Health Care Proposals: Cost and Coverage Compared

The Lewin Group
October 8, 2008
In this study, The Lewin Group estimated the cost and coverage impacts (for 2010-2019) of the health reform proposals introduced by Senators McCain and Obama. Our key findings are that the McCain proposal would reduce the number of uninsured from a projected number of 48.9 million people in 2010 by 21.1 million people if fully implemented in that year. The Obama plan would reduce the number of uninsured by 26.6 million people. The McCain proposal would result in a net increase in federal spending (i.e., net of offsets) of $2.05 trillion over the 2010 through 2019 period compared with a net federal cost of $1.17 trillion under the Obama plan over this same ten-year period.
The Candidates’ Proposals
The McCain proposal would expand coverage through private insurance and decrease regulation of health insurance markets. His plan would provide a refundable tax credit of $2,500 for single filers and $5,000 for families that have private health insurance from an employer or as an individual in the non-group market. Insurers would be permitted to sell insurance across state lines, thus sidestepping state minimum benefit and insurance rating regulations.
The McCain proposal would establish federally subsidized high-risk pools called the Guaranteed Access Program (GAP) to cover those denied coverage due to health status. The Campaign indicates that half of the losses under the GAP would be paid with an assessment on private insurance with the federal government providing the remaining half.
The Obama proposal would expand coverage through public and private insurance and increase federal regulation of insurance markets. His proposal would expand Medicaid eligibility to include all very low-income adults and would provide premium subsidies for people with low to moderate incomes. Insurers would be prohibited from denying coverage or setting insurance premiums on the basis of health status. Also, the Obama plan would provide small employers with a tax credit for the purchase of insurance and would create a federally subsidized reinsurance program to cover “catastrophic health” expenses in employer plans.
Senator Obama’s plan would also create a “National Exchange” offering a selection of private health insurance options comparable to those now offered to members of Congress and federal workers. The exchange would be open to individuals, the self-employed and small employers. In addition, the Obama proposal would create a new publicly-operated insurance program called the “National Plan” that would be available as an alternative to private coverage in the National Exchange.
Unlike the McCain plan, the Obama proposal would establish a minimum standard of covered benefits.
http://www.lewin.com/dyn/healthpolicies

The release of this report from The Lewin Group has provoked a debate on whether it accurately reflects the numbers of individuals that would gain coverage under the McCain and Obama proposals respectively. Although this debate is legitimate, it misses the most important point. We don’t really care how many people nominally have health insurance; we want to know whether or not people are protected from financial hardship should they need health care.
The McCain proposal aims to make premiums for private health plans affordable by deregulating the market. Premiums can be kept low by (1) creating a market of underinsurance products (limited benefits and greater cost sharing, especially through high deductibles), and by (2) insuring only low risk individuals who can pass medical underwriting standards.
The Lewin report makes the assumption that when the McCain plan is fully implemented in 2010 the number of individuals with private employer coverage will decrease from 157 million to 148 million. That level of decrease might be true at the beginning of the program, but incentives are likely to cause a further dramatic decline in employer-sponsored coverage. If an individual can obtain a very inexpensive plan in a deregulated market, and the government is going to provide a $2500/$5000 tax credit, why would an employer want to continue to offer an expensive comprehensive plan, and why would an employee pass up a pay increase offered by the employer for those who decline coverage?
Once a large number of healthy employees move into the individual market, the employer-sponsored plans will be subject to adverse selection. The spiraling costs of premiums will cause employers to terminate their plans, especially since a President McCain’s proposal would have opened up the individual market to plans with affordable premiums, albeit underinsurance plans.
Since the deregulated market insures only healthy individuals, the individuals who actually need health will have to look elsewhere for coverage. Sen. McCain understands this, and that is why he has proposed the Guaranteed Access Program (GAP) to insure these individuals with greater needs.
This is where there is a problem with defining the success of a reform proposal by the numbers of insured individuals. The very large number of individuals purchasing underinsurance plans are healthy, but most of the spending is on the smaller group with needs that will be forced to obtain coverage under GAP. The Lewin Group estimates that of those with chronic health conditions who are currently uninsured, only 24 percent would be covered by the McCain proposal. These are people who most desperately need coverage, yet three-fourths of them would remain uninsured.
How does McCain propose to pay the high costs of those who do make it into GAP? Half would be paid by federal subsidies (taxes), but the other half would be paid by assessments on individual private insurance plans. Suddenly the cheap premiums for these underinsurance products aren’t so cheap anymore since half of the excess costs of the high-risk pools are moved back into the underinsurance pools. What will happen to the enrollment rates for these underinsurance products when the premiums are jacked back up to unaffordable levels?
When people tell you that the McCain plan is almost as good as the Obama plan in reducing the number of uninsured, you now have a response. The McCain proposal provides nominal coverage with uninsurance plans for those who are healthy, but it doesn’t pay the bills for those who actually need health care.

Lewin analysis of candidates' proposals

McCain and Obama Health Care Proposals: Cost and Coverage Compared

The Lewin Group
October 8, 2008

In this study, The Lewin Group estimated the cost and coverage impacts (for 2010-2019) of the health reform proposals introduced by Senators McCain and Obama. Our key findings are that the McCain proposal would reduce the number of uninsured from a projected number of 48.9 million people in 2010 by 21.1 million people if fully implemented in that year. The Obama plan would reduce the number of uninsured by 26.6 million people. The McCain proposal would result in a net increase in federal spending (i.e., net of offsets) of $2.05 trillion over the 2010 through 2019 period compared with a net federal cost of $1.17 trillion under the Obama plan over this same ten-year period.

The Candidates’ Proposals

The McCain proposal would expand coverage through private insurance and decrease regulation of health insurance markets. His plan would provide a refundable tax credit of $2,500 for single filers and $5,000 for families that have private health insurance from an employer or as an individual in the non-group market. Insurers would be permitted to sell insurance across state lines, thus sidestepping state minimum benefit and insurance rating regulations.

The McCain proposal would establish federally subsidized high-risk pools called the Guaranteed Access Program (GAP) to cover those denied coverage due to health status. The Campaign indicates that half of the losses under the GAP would be paid with an assessment on private insurance with the federal government providing the remaining half.

The Obama proposal would expand coverage through public and private insurance and increase federal regulation of insurance markets. His proposal would expand Medicaid eligibility to include all very low-income adults and would provide premium subsidies for people with low to moderate incomes. Insurers would be prohibited from denying coverage or setting insurance premiums on the basis of health status. Also, the Obama plan would provide small employers with a tax credit for the purchase of insurance and would create a federally subsidized reinsurance program to cover “catastrophic health” expenses in employer plans.

Senator Obama’s plan would also create a “National Exchange” offering a selection of private health insurance options comparable to those now offered to members of Congress and federal workers. The exchange would be open to individuals, the self-employed and small employers. In addition, the Obama proposal would create a new publicly-operated insurance program called the “National Plan” that would be available as an alternative to private coverage in the National Exchange.

Unlike the McCain plan, the Obama proposal would establish a minimum standard of covered benefits.

http://www.lewin.com/dyn/healthpolicies

Comment:

By Don McCanne, MD

The release of this report from The Lewin Group has provoked a debate on whether it accurately reflects the numbers of individuals that would gain coverage under the McCain and Obama proposals respectively. Although this debate is legitimate, it misses the most important point. We don’t really care how many people nominally have health insurance; we want to know whether or not people are protected from financial hardship should they need health care.

The McCain proposal aims to make premiums for private health plans affordable by deregulating the market. Premiums can be kept low by (1) creating a market of underinsurance products (limited benefits and greater cost sharing, especially through high deductibles), and by (2) insuring only low risk individuals who can pass medical underwriting standards.

The Lewin report makes the assumption that when the McCain plan is fully implemented in 2010 the number of individuals with private employer coverage will decrease from 157 million to 148 million. That level of decrease might be true at the beginning of the program, but incentives are likely to cause a further dramatic decline in employer-sponsored coverage. If an individual can obtain a very inexpensive plan in a deregulated market, and the government is going to provide a $2500/$5000 tax credit, why would an employer want to continue to offer an expensive comprehensive plan, and why would an employee pass up a pay increase offered by the employer for those who decline coverage?

Once a large number of healthy employees move into the individual market, the employer-sponsored plans will be subject to adverse selection. The spiraling costs of premiums will cause employers to terminate their plans, especially since a President McCain’s proposal would have opened up the individual market to plans with affordable premiums, albeit underinsurance plans.

Since the deregulated market insures only healthy individuals, the individuals who actually need health will have to look elsewhere for coverage. Sen. McCain understands this, and that is why he has proposed the Guaranteed Access Program (GAP) to insure these individuals with greater needs.

This is where there is a problem with defining the success of a reform proposal by the numbers of insured individuals. The very large number of individuals purchasing underinsurance plans are healthy, but most of the spending is on the smaller group with needs that will be forced to obtain coverage under GAP. The Lewin Group estimates that of those with chronic health conditions who are currently uninsured, only 24 percent would be covered by the McCain proposal. These are people who most desperately need coverage, yet three-fourths of them would remain uninsured.

How does McCain propose to pay the high costs of those who do make it into GAP? Half would be paid by federal subsidies (taxes), but the other half would be paid by assessments on individual private insurance plans. Suddenly the cheap premiums for these underinsurance products aren’t so cheap anymore since half of the excess costs of the high-risk pools are moved back into the underinsurance pools. What will happen to the enrollment rates for these underinsurance products when the premiums are jacked back up to unaffordable levels?

When people tell you that the McCain plan is almost as good as the Obama plan in reducing the number of uninsured, you now have a response. The McCain proposal provides nominal coverage with uninsurance plans for those who are healthy, but it doesn’t pay the bills for those who actually need health care.

Vetting McCain's Health Plan

Tax credits would move people out of group plans and into individual policies where the benefits aren't as good

By Jane Bryant Quinn
Newsweek
October 13, 2008

If you think that “The Market” — whatever market — always works for the best, you’ll love John McCain’s version of health insurance reform. It uses the tax code to shove you toward individual policies (more “choice!”) and away from comprehensive, employer supported plans. The nonpartisan Tax Policy Center puts the cost of his proposed subsidies at $1.3 trillion over 10 years.

But a funny thing happens on the way to spending that much money. Almost all of the subsidy goes to people who have health insurance already, says Sherry Glied, a professor of health policy at Columbia University. The Tax Policy Center figures that, after 10 years, the plan cuts the number of uninsured by only 1 million, out of 45.7 million now. Barack Obama’s $1.6 trillion plan would take 34 million off the rolls of the uninsured.

McCain’s idea is pretty simple. Tax the value of employer-paid health insurance as part of your regular income (62 percent of the nonelderly are in these plans). In return, he’d give everyone a refundable tax credit–$2,500 for individuals, $5,000 for family coverage–to offset the cost of any health policy they choose. Here’s how the McCain plan falls out:

* Initially, most of the people in employer plans would get a bonus from the government. Their new tax credit would exceed the amount of extra taxes they owed. For the young and healthy, the bonus could be quite large. Older workers with health problems might get a minimal bonus but still do OK. Over the years, however, the value of the credit would be eroded by health care inflation, and your tax cost would rise.

* If you already buy your own health insurance, the tax credit would chop your premium cost by $2,500 or $5,000. The self-employed lose the deduction they get for health-insurance premiums but would generally still come out ahead (again, until inflation intervened).

* If you’re uninsured, the tax credit helps you purchase coverage. The only hitch–a big one–is that you have to be able to afford the premiums up front. The tax credit comes later. The government will send it to the insurance company, which will apply it to your account.

To see how much the McCain plan helps, I asked Scott Leavitt, president of the National Association of Health Underwriters, to price typical policies for healthy singles, couples and families in the Chicago area. It appears that the credit could pretty much cover the premium in your 20s and 30s, even early 40s, making it a good deal. At 55, however, a couple might pay more than $12,000–difficult for older people with modest incomes.

* The Tax Policy Center estimates that 20 million workers will leave the employer-based system, not always voluntarily. Midsize and smaller companies are likely to drop their plans and tell you to use the credit to buy a policy yourself.

* It’s a shock to move from group plans into the harsh world of individual insurance. You get “choices” (rah, rah). But the policies cost more and cover less than company plans do–especially for women, older people and those whose health is less than perfect.

That is, if you can find coverage at all. In 2006, the Commonwealth Fund studied working-age adults hunting for individual policies. One-fifth were charged more or rejected for health reasons. More than half found it hard or impossible to secure a policy they could afford.

Conservatives love health plans that throw more of the costs on you. When it’s hard to pay the bills, you see the doctor less. Through the “magic of the marketplace,” that’s supposed to slow the rate of increase in medical costs.

Friends, there’s zero evidence that that works. In the long run, tax credits will raise your costs without changing the game. And we still won’t have helped most of the uninsured.

With Reporter Associate: Temma Ehrenfeld

URL: http://www.newsweek.com/id/162335

Lewin analysis of candidates’ proposals

McCain and Obama Health Care Proposals: Cost and Coverage Compared

The Lewin Group
October 8, 2008

In this study, The Lewin Group estimated the cost and coverage impacts (for 2010-2019) of the health reform proposals introduced by Senators McCain and Obama. Our key findings are that the McCain proposal would reduce the number of uninsured from a projected number of 48.9 million people in 2010 by 21.1 million people if fully implemented in that year. The Obama plan would reduce the number of uninsured by 26.6 million people. The McCain proposal would result in a net increase in federal spending (i.e., net of offsets) of $2.05 trillion over the 2010 through 2019 period compared with a net federal cost of $1.17 trillion under the Obama plan over this same ten-year period.

The Candidates’ Proposals

The McCain proposal would expand coverage through private insurance and decrease regulation of health insurance markets. His plan would provide a refundable tax credit of $2,500 for single filers and $5,000 for families that have private health insurance from an employer or as an individual in the non-group market. Insurers would be permitted to sell insurance across state lines, thus sidestepping state minimum benefit and insurance rating regulations.

The McCain proposal would establish federally subsidized high-risk pools called the Guaranteed Access Program (GAP) to cover those denied coverage due to health status. The Campaign indicates that half of the losses under the GAP would be paid with an assessment on private insurance with the federal government providing the remaining half.

The Obama proposal would expand coverage through public and private insurance and increase federal regulation of insurance markets. His proposal would expand Medicaid eligibility to include all very low-income adults and would provide premium subsidies for people with low to moderate incomes. Insurers would be prohibited from denying coverage or setting insurance premiums on the basis of health status. Also, the Obama plan would provide small employers with a tax credit for the purchase of insurance and would create a federally subsidized reinsurance program to cover “catastrophic health” expenses in employer plans.

Senator Obama’s plan would also create a “National Exchange” offering a selection of private health insurance options comparable to those now offered to members of Congress and federal workers. The exchange would be open to individuals, the self-employed and small employers. In addition, the Obama proposal would create a new publicly-operated insurance program called the “National Plan” that would be available as an alternative to private coverage in the National Exchange.

Unlike the McCain plan, the Obama proposal would establish a minimum standard of covered benefits.

http://www.lewin.com/dyn/healthpolicies

Comment:

By Don McCanne, MD

The release of this report from The Lewin Group has provoked a debate on whether it accurately reflects the numbers of individuals that would gain coverage under the McCain and Obama proposals respectively. Although this debate is legitimate, it misses the most important point. We don’t really care how many people nominally have health insurance; we want to know whether or not people are protected from financial hardship should they need health care.

The McCain proposal aims to make premiums for private health plans affordable by deregulating the market. Premiums can be kept low by (1) creating a market of underinsurance products (limited benefits and greater cost sharing, especially through high deductibles), and by (2) insuring only low risk individuals who can pass medical underwriting standards.

The Lewin report makes the assumption that when the McCain plan is fully implemented in 2010 the number of individuals with private employer coverage will decrease from 157 million to 148 million. That level of decrease might be true at the beginning of the program, but incentives are likely to cause a further dramatic decline in employer-sponsored coverage. If an individual can obtain a very inexpensive plan in a deregulated market, and the government is going to provide a $2500/$5000 tax credit, why would an employer want to continue to offer an expensive comprehensive plan, and why would an employee pass up a pay increase offered by the employer for those who decline coverage?

Once a large number of healthy employees move into the individual market, the employer-sponsored plans will be subject to adverse selection. The spiraling costs of premiums will cause employers to terminate their plans, especially since a President McCain’s proposal would have opened up the individual market to plans with affordable premiums, albeit underinsurance plans.

Since the deregulated market insures only healthy individuals, the individuals who actually need health will have to look elsewhere for coverage. Sen. McCain understands this, and that is why he has proposed the Guaranteed Access Program (GAP) to insure these individuals with greater needs.

This is where there is a problem with defining the success of a reform proposal by the numbers of insured individuals. The very large number of individuals purchasing underinsurance plans are healthy, but most of the spending is on the smaller group with needs that will be forced to obtain coverage under GAP. The Lewin Group estimates that of those with chronic health conditions who are currently uninsured, only 24 percent would be covered by the McCain proposal. These are people who most desperately need coverage, yet three-fourths of them would remain uninsured.

How does McCain propose to pay the high costs of those who do make it into GAP? Half would be paid by federal subsidies (taxes), but the other half would be paid by assessments on individual private insurance plans. Suddenly the cheap premiums for these underinsurance products aren’t so cheap anymore since half of the excess costs of the high-risk pools are moved back into the underinsurance pools. What will happen to the enrollment rates for these underinsurance products when the premiums are jacked back up to unaffordable levels?

When people tell you that the McCain plan is almost as good as the Obama plan in reducing the number of uninsured, you now have a response. The McCain proposal provides nominal coverage with uninsurance plans for those who are healthy, but it doesn’t pay the bills for those who actually need health care.