Obama v. McCain: A Tale of Two Health Care Plans

The difference between Barack Obama’s and John McCain’s health care reform proposals couldn’t be starker. Obama’s plan is based on the reforms enacted under Mitt Romney in Massachusetts. McCain’s plan has some roots in existing plans in about 34 states, which have met with some degree of success. But a good deal of his proposal is untried and is based more on free market ideology and wishful thinking than proven remedies. Let’s start with Obama’s plan.

Under his proposal, most people would stay in their current employer-based health care plan. Large companies that didn’t offer a health benefit would have to pay penalties. That would encourage those businesses that can afford it to provide health coverage for their workers. But people who work for small businesses that can’t afford to pay for health benefits would be encouraged to buy their own insurance from the individual markets. In Massachusetts it’s mandatory to have health insurance – just as most states make car insurance mandatory. If you refuse to get coverage, you too could pay a penalty. But if you can’t afford coverage, the state would subsidize it for you.

In fact, that’s the one sharp difference between the existing plan and Obama’s idea. He wouldn’t make it mandatory. He caught flack for that from Hillary Clinton and even Paul Krugman, both of whom feel that making it required by all would be a better way to make sure it's truly universal. I think they’re right, but Obama is correct that politically it would be much harder to get such a bill passed. Even with a Democratic majority in Congress, you would still have the conservative Blue Dogs uniting with the remnant of GOPers to block its passage. So, if politics is the art of the possible, you go with what you can get. But back to the Massachusetts plan.

In addition, in Massachusetts the private insurance companies can’t deny coverage to those with pre-existing condition or charge them more for coverage.

So far, this plan is working well. It’s popular with citizens and has increased the number of insured. But it hasn’t been without drawbacks, as reported by this Washington Post article.

In the 31 months since the experiment here began, the share of working-age people without health insurance has plunged -- from 13 percent to 7 percent by one estimate -- more sharply and quickly than anyone expected, leaving Massachusetts with the lowest uninsured rate in the country. But the unexpected number of people also has translated into higher-than-expected costs. Massachusetts has been forced twice to scrounge for extra money, totaling more than $250 million this year and last, from state funds and other places.

But even its biggest supporters agree that it’s less than perfect.

"It isn't like you come up with a perfect plan and turn it on and see how it works," said Brian Rosman, research director at Health Care for All, the nonprofit that runs the state's largest private health help line. "Washington needs to understand that as well."

John McCain’s plan, however, could be so much worse. For starters, some believe that it would be more expensive than the Massachusetts plan. And the major part of it is completely untested. Here’s the run down of how McCain’s plan works.

Under his proposal, everybody would get a tax credit to buy their own insurance on the open market. To pay for that tax credit, McCain would tax the existing employer-based health insurance benefit. This is the first time this was ever done and even some of McCain’s own advisers admit it could discourage businesses from continuing to offer health coverage to their employees. In addition, McCain would allow people to buy their coverage in companies out of their own states ostensibly to increase competition.

But this would encourage many insurance companies to set up headquarters in states that have the least restrictions and leave customers with less protection from predatory and unfair industry practices. Some likely outcomes include insurance companies charging deceptively low premiums up front but with large deductibles, limits on coverage, refusal to pay out for many different types of conditions, and denial of coverage to large numbers of consumers. In fact, large private insurance companies would cherry pick the healthiest customers, dropping those who prove to be too expensive. Those are already common industry practices and allowing people to buy their insurance across state lines, practices like that would only exacerbate the problem.

Worse, even with a tax credit or subsidy, many people would be unable to afford insurance. The proposed tax credit is only $5,000 per person and decent insurance costs about $12,000. That would leave middle class families scrambling to pay an extra $7,000, much more than what they’d have to pay for an employer-based plan. Douglas Holtz-Eakin admits that many people who currently enjoy employer-based health care would be left out in the cold with no insurance.

And those who have health risks, such as being overweight or just being too old, would be thrown into high risk pools. It’s the high risk pools that the Washington Post examined in this article. And they found real problems with them.

First you deserve to know what is right with them. Thirty-four states already have these plans and some of them do their job fairly well for those covered. The oldest and best high risk pool is probably in Minnesota. And the treatment they provide is excellent.

Here in Minneapolis, Lynn R. Gruber, MCHA's president, said: "We treat them like gold. It's all we do, focus on these chronically ill members, what their needs are." Members get discounts on specialty drugs. Those who are particularly sick get letters or phone calls coaching them on how best to manage their ailments.

Despite that the drawbacks to high risk pools are significant. Most importantly, they cost more than Obama’s plan. They cost the state more and they cost the consumer more too. Here are some quotes.

The Maryland Health Insurance Plan, the only high-risk pool in the Washington area, has been growing so fast that it needed to raise the fees on hospitals that help pay for the program and require new members to wait longer for coverage of existing illnesses -- or pay extra for it.

And referring to Minnesota:

Its finances are strained and getting worse, but less so than in other states. California's high-risk pool is so strapped that it put a limit on enrollment this year and lowered the maximum it would spend on anyone's treatment. Tennessee's pool has had to eliminate low-income subsidies for new members. Florida's pool has not let in anyone since 1991.

And the burden of high costs are also borne by those enrolled in the pool.

No one in Minnesota can say for certain how many people who need MCHA stay away because of the price or the waiting period. But the American Cancer Society says that only a tiny fraction of the more than 100 Minnesotans it has referred to the program because they were rejected by insurance companies ever signed up, according to Stephen Finan, the society's associate director of policy.
As another sign of the financial burden, an increasing number of MCHA's members lately have been choosing to pay more out of their pockets -- deductibles as high as $10,000 -- in order to have less expensive monthly premiums.

So, higher costs for the state and the consumer and also higher deductibles and less coverage. It is, of course, better than nothing. But as even one of its own top administrators admits, this is a stopgap measure, not a solution to the health care crisis.

Still, even MCHA's most ardent supporters believe a risk pool is not the best solution for those who are hard to insure. "It is not a panacea. . . . We need to be moving in the direction of universal coverage," said Gruber, who has run MCHA for 18 years. "No one should be rejected because of their health conditions. Our federal government has failed us . . . if we are still here in five or 10 years."

As I said at the beginning, the contrasts in these two different approaches couldn’t’ be more different. Nor could the response of those most intimately involved with them. On the one hand, there’s the Massachusetts approach that Obama favors. Both citizens of that state and those who work with the program are enthusiastic about it. Its main drawback is higher than anticipated cost.

McCain’s proposal, the high risk pool, also higher costs but less service and its own administrators admit it’s a stopgap not a solution. And then there’s the rest of the McCain program, which is untried and based on faulty free market, anti-regulatory ideology that is rapidly becoming discredited in every other enterprise where it has been tried.

Here I have to add that the free market proponents keep claiming that one of the advantages of their approach is that if people have to purchase their own health care on an open market, they will make better, more cost conscious decisions.

The truth is choosing medical care is not like shopping for a new Chevy van or a new dress. It is not elitist to state that most patients are not in a position to make a clear headed decision about the best course of treatment for a catastrophic illness when they are in the throes of it. Even most doctors admit that once they are patients with conditions outside their specialties, they are as daunted and confused as any other patient. The amount of knowledge, technology and treatment options are dizzying. The cheapest option may not in the long run be the best option and asking people to make a decision based upon their pocket book at such a time is ridiculous.

A patient may well be able to shop around for the cheapest place to get treatment for a strep throat and the best price on the antibiotics with which to cure it. But give that person a Stage IV throat cancer and he shouldn’t be wasting his time consulting his banker before choosing between treatment plans.

So, there you have the choice. Two very different approaches to health care. Next Tuesday, vote as if your life depends on it – because it very well may.