The United States is the only developed nation without a health care system that provides universal care and coverage. In fact, it is one of the most expensive health care industries in the world, held in contempt for its inefficiency. Furthermore, it is perceived to be dysfunctional in its ability to treat and care for the average American. As a result, the United States lags behind many of its peers with many of the national measures of health such as infant mortality and life expectancy.
Health care reform is therefore deemed a critical and deciding issue in the Presidential election, and it could not differ any more than it presently does between Vietnam War veteran turned Republican nominee Senator John McCain and civil rights attorney turned Democratic nominee Senator Barack Obama. The former favors increasing competition and removing government apparatuses he perceives to be obstacles in allowing market forces to generate better health care, while the latter favors the use of increased regulation to essentially mandate health care industry services to better themselves in the face of legislation.
Essentially, McCain’s plans reflect his skepticism towards health coverage mandates and public funding of health care. He intends to introduce tax credits for individual health insurance, remove tax exclusions for employer-sponsored health coverage and the deregulation of non-group insurance through allowing the purchase of health policies beyond state lines. The effect is to deregulate the market in order to increase competition and increase the role which non-group policies play. (Buchmueller, Glied, Royalty & Swartz, 2008)
Tax exclusions encourage employers to provide coverage and furthermore, they require that employers do not discriminate in providing health coverage. The result is that low-wage, low-skilled employees receive similar health benefits as their high-wage or high-skilled peers, and risk is pooled together in such a manner as to make the costs of insuring higher-risk workers lower. Eliminating the tax exclusion would increase the cost of employer-sponsored health coverage, and the non-discrimination rules would cease to be in effect.
That would remove the incentive for employ-sponsored health coverage. But even if employers were to continue offering coverage, the non-discrimination rule would no longer be in play in offers of coverage. At worse, employer-sponsored health coverage could disappear. Based on the research estimates aggregated by Buchmueller, Glied, Royalty & Swartz (2008), ten to twenty-eight million Americans would lose their employment-based coverage.
To be fair, this is a deliberate design geared towards moving Americans towards independently acquired health coverage. This is however, problematic for those who are already well-provided for through existing employer-based health coverage. However, with the tax credit in play some insurers may choose to tailor policies to the tax credit in order to create low-cost, competitive policies that are actually deficient in coverage provided. Thus, McCain’s proclamation that his presidency would provide access to health care is misleading. Instead, it could result in universally mediocre insurance.
Granted, McCain envisions a laissez faire market approach in which geographical coverage boundaries, employer restrictions and group market constraints are no longer limitations in acquiring coverage and the tax credit enables people to find coverage that suits them. (Arnst, 2008) However, McCain’s plan also overlooks many of the benefits of group coverage, such as reduced administrative expenses and the effects of an economy of scale on medical underwriting. In effect, the ability of health insurers to provide comprehensive coverage could be compromised by the difficulties in managing nongroup accounts.
Furthermore, intensely privatized for-profit non-socialized health insurance schemes have proven to have dysfunctional rates of coverage denial, usually citing pre-existing medical conditions. Employer-sponsored group coverage has consistently been able to prevent this through the above mentioned risk pooling, effectively incentivizing health insurers to provide coverage for such individuals via group premiums. To address this, McCain also wants to work with states to create ‘Guaranteed Access Plans,’ which are basically high-risk pools for the sick. But for these Guaranteed Access Plans to work, they would require massive funding at levels far from those McCain has proposed. McCain proposes spending north of seven billion dollars to subsidize such plans, but even then, that would be not enough to provide adequate coverage for a significant percentage of the American population.
McCain also proposes the use of multi-year health insurance plans, which would basically give long-term coverage at an ostensibly affordable predetermined price. However, this would run contrary to his professed intentions of making health coverage ‘flexible’. A multi-year health insurance effectively locks people into a plan for long periods of time and denies them of the ability to change policy plans without undue cost and binds them to maintain residence or employment within the coverage area of the insurance policy. This means that for multiple years, a lock-in policy could create the constraints that McCain wants to avoid in the first place.
Even if McCain’s vision of a competitive and unregulated national market for non-group insurance were to be consistent and true, it would be made problematic by the fact that at present, most providers of health care insurance attempt to ‘compete’ by providing attractively priced premiums with very limited forms of coverage, while denying coverage to those they deem too ‘unhealthy’ to qualify for insurance, the very people who need coverage the most. By leaving health coverage to a national market, health care as a whole loses many of the balances and checks provided by state laws, such as external review of decisions made by health care providers, mandatory requirements for coverage scope and regulations limiting who can be excluded from a health plan and how much can be charged.
Obama’s health care reform strategy matches the template of Democratic interventionist thinking: dramatic change through significant upfront spending. The essence of Obama’s plans for health care reflect his campaign’s belief that the present institutions do not need to be abolished but rather they need to be reformed and made accountable, and that the spiraling costs of health care itself must be regulated such that they are manageable for all Americans.
By making costs for health insurance go down, removing the patent protections which pharmaceutical companies use to keep the prices of pharmaceuticals up and by making employer contributions to health care mandatory, the Obama health care platform intends to guarantee that a reduced cost of care and strategic regulations will make health care more ‘universal’
Promises notwithstanding, the most notable features of Obama’s health plan are the new National Health Plan or NHP, the national Health Insurance Exchange, the reinsurance subsidy, the mandate of insuring children and the “play-or-pay” on larger employers. However, Antos, Willensky & Kuttner (2008) express concerns that these would drive up the cost of health insurance even as it extends government’s control over it.
The National Health Plan is intended to provide insurance to all. This means no exclusions made due to pre-existing conditions and no differences in the premium charges based on health status. Antos, Willensky & Kuttner (2008) maintain that the National Health Plan is comparable to the health plan made available to members of Congress and that its benefits could be broadly similar to those given to federal employees under the Federal Employees Health Benefits program. If the similarities hold true, then the National Health Plan would not be affordable for many families without subsidies larger than what is already being contributed by the government for the Federal Employees Health Benefit Program, rendering it a costly option.
The national Health Insurance Exchange is premised upon giving the same kind of health coverage flexibility which is promised by McCain albeit on a federally regulated level. Effectively, this would mean that a broad range of health plans would be made available through the Exchange and mandated to offer benefits at least at the level of the National Health Plan, while being held subject to regulation standards and prevent discriminatory pricing. Increases to premiums would be subject to review, while above average (what constitutes above average has yet to be defined) increases would require Exchange approval.
Obama also plans to reimburse employers for the costs incurred by catastrophically ill individuals. This is known as reinsurance. When a small number of patients become seriously ill or develop multiple chronic conditions, they begin to exert a financial toll on employer-sponsored coverage. In effect, their continuing charges become factored into the group insurance premiums, effectively raising the costs of coverage for everyone. Obama wants to provide reinsurance to employers who explicitly agree to use the funds to reduce the cost of the worker’s premiums.
Obama’s “play-or-pay” system means that employers must play along with acknowledging the necessity of health coverage for its workers, or pay the federal government to take care of it for them. In practice this means that employers who do not offer high quality health coverage or make a meaningful contribution to its cost, would be required to contribute a percentage of the payroll towards the National Health Plan.
This actually incentivizes developing competitive health plans and introduces flexibility to the nature of employer-based coverage. An employer can either pay towards the National Health Plan, or they can attempt to obtain better benefits for lower costs than the National Health Plan as a means of making employment in the company a lucrative choice.
In any case, Obama’s plan is much more preferable to McCain’s. The core problem of Obama’s health care reform strategy is that it still fails to answer the question of where he is going to get all the money for this. But at the very least, it actually attempts to enact tangible reforms that go directly towards the goal of providing health insurance to Americans.
It is dramatically goal directed. (Boyles, 2008) McCain expects market solutions to arise naturally from competition, and I do not disagree with that tenet on principle. However, the problem is that there is no guarantee when these market solutions will arise. Will it be one year, one term, two terms? To call his health care policies a ‘plan’ or a ‘strategy’ undermines the definition of those words. There is no strategy there, and worse still, there is absolutely no sense of urgency to it. It is willing to let millions of Americans remain uninsured while the market ‘sorts it out.’
Obama on the other hand, has a comprehensive strategy in place: making policy plans more subject to regulation in order to set the standards of coverage, reinsuring to provide for the catastrophically ill, mandating insurance for children to address the growing infant mortality rate, and developing a federal health care plan to more comprehensively reach the millions of Americans without coverage.
If anything, the massive funding requirements of Obama’s plan could be fulfilled by dramatically reducing expenditures in other areas, which he has already spoken of. Obama has insisted that he would implement massive reductions in military expenditures, which presently under the Bush administration, receives massive levels of funding. In effect, Obama would be redirecting taxpayer dollars to where they should go, away from the security of the homeland and towards the security of the individual, especially in matters of health.
REFERENCES
McCain, J. (2008) Straight Talk on Health Reform. McCain-Palin ’08. Retrieved October 14, 2008 from: http://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm
Obama, B. (2008) Barack Obama and Joe Biden’s Plan to Lower Health Care Costs and Ensure Affordable, Accessible Health Coverage for All. Obama-Biden ’08. Retrieved October 14, 2008 from: http://www.barackobama.com/pdf/issues/HealthCareFullPlan.pdf
Pauly, M. (2008, September 16) “Blending Better Ingredients for Health Reform.” Health Affairs 27, no. 6.
Antos, J; Wilensky, G. & Kuttner, H. (2008, September 16) “The Obama Plan: More Regulation, Unsustainable Spending.” Health Affairs 27, no. 6.