McCain´s health care plan

A Detailed Analysis of Senator John McCain's Health Care Reform Plan

John McCain is now the presumptive Republican nominee for President. As a result, what he thinks about health care policy will be out front in the Presidential campaign this fall.

McCain’s thinking couldn’t be more different from Democrat Barack Obama.

McCain very rightly points to health care costs as the biggest health care issue, "We are approaching a 'perfect storm' of problems that if not addressed by the next president will cause our health care system to implode."

Therefore, his focus is on the health care costs that make health insurance so expensive that many individuals can't afford it for themselves, employers can't afford to provide it to their employees, and government can't afford a wider safety net for the poor and long-term solvency for senior benefits.

He also reminds us that costs can't be improved without dealing with quality in tandem.

His plan would also provide very strong incentives for employers to transfer the primary responsibility for purchasing health insurance from the employer to the individual health insurance market. His plan is very much about individual choice and responsibility and the conservative view that consumer control is critical to cost containment.

While McCain’s conservative credentials have been questioned during the campaign, there is no doubt his health plan reflects a strong conservative ideology.

Senator McCain's health plan clearly reflects a belief that we need to put as our first priority getting at the things that make health care so expensive and frustrating for consumers rather than, as he would put it, promising everyone a painless access to a system that isn't working.

In his words:
"For all the grandiose promises made in this campaign, has any candidate spoken honestly to the American people about the government's role and failings about individual responsibilities? Has any candidate told the truth about the future of Medicare? Its costs are growing astronomically faster than its financing, and leaving its structural flaws unaddressed will hasten its bankruptcy. Has any candidate warned that we have a personal responsibility to take better care of our children and ourselves? Yet that is the only way to prevent many chronic diseases. Has any candidate insisted that genuine and effective health care reform requires accountability from everyone: drug companies, insurance companies, doctors, hospitals, the government, and patients? Yet that is the truth upon which any so-called solution must be based.

“Democratic presidential candidates are not telling you these truths. They offer their usual default position: If the government would only pay for insurance everything would be fine. They promise universal coverage, whatever its cost, and the massive tax increases, mandates, and government regulation that it imposes. I offer a genuinely conservative vision for health care reform, which preserves the most essential value of American lives—freedom.”
So, how effective would Senator McCain's plan be in making health care, and health insurance, affordable and better? Let's take a look at his very brief outline:

Allowing people to buy health insurance nationwide instead of limiting them to in-state companies.

His focus here is on making individual health insurance lower in cost so people can buy it. Creating one national health insurance policy form, which would save insurers the need to comply with insurance regulators in each of the states, would make things more efficient. However, this tackles only the non-medical expense portion of a health insurance policy and only a small part of that.

Non-medical policy expenses (overhead) increases each year with inflation—maybe 3% a year—while by far the larger portion of individual health insurance--medical costs--have been trending at 10% or more in recent years. While making the distribution of insurance more efficient is a good thing, it is the far smaller part of the problem—and it's a one-time fix. Often when we hear of these proposals, we also hear that the states should continue to do the consumer protection work since they tend to be closer to their citizens than one big national regulator could ever be. McCain is not clear on this.

Apparently, McCain would also attempt to do away with many of the state benefit mandates that are often pointed to as a cause of higher health insurance costs by giving consumers a federal policy option. Some states are estimated to add as much as 30% to the cost of a policy by loading on the mandates.

While many of these benefit mandates do unnecessarily jack up the cost of a health insurance policy, most are fairly common sense--requiring a policy to cover a mammogram or to cover adult children while they are in college, for example. If McCain believes he can substantially reduce the cost of health insurance by eliminating benefit mandates he needs to also tell us which ones he could exclude. My experience is that when you see the list of the really "unnecessary mandates" the impact of this reduction shrinks substantially.

By creating an optional federal health insurance regime in addition to the various state rules, McCain would also set up a market where national health insurance products would compete with existing state products. That could easily set-up a situation where the federally regulated product could "cherry pick" business from the more regulated state product. The healthiest consumers would tend to gravitate to the more stripped down federal policy while sicker people who used more benefits would tend to stay in the more benefit rich state plans. This could create some very serious anti-selection problems between state and federal markets that could have very negative consequences.

But McCain’s market proposals would create a more vibrant individual health insurance market and reenergize what has become a smaller portion of the business.

In this context, we also sometimes hear proposals to give insurance companies greater freedom to set policy and rating provisions . That begs the question, would McCain allow insurers to have greater flexibility in rating the healthy versus the sick and allow insurers to continue to be aggressive in applying pre-existing condition provisions?

It will be most important for McCain to make the individual health insurance system more workable than it is now. The McCain campaign has made reference to providing assistance on a “cost adjusted basis” to older and sicker people but they have not detailed this idea.

It is not entirely clear how Senator McCain will make the individual market more viable and robust beyond dealing with the marketing expenses and streamlining regulation.

And he would have to make huge strides with individual market reforms to make individual policies more expense competitive. Individual health insurance tends to have expense factors of 25% to 30% of premium--leaving only 70% to 75% of premiums for medical costs. Group policies allocate more like 12% for expense overhead. The notion that he can even make up this huge difference by streamlining the individual health insurance market is hard to see.

Permitting people to buy insurance through any organization or association they choose as well as through their employers or buying direct from an insurance company.

Here Senator McCain again endorses a vibrant insurance market as a way to use competition to meet the very different needs one consumer has compared to another. The buzzwords we very often hear in regard to this point are "choice" or "freedom of choice."

His mentioning of trade associations as one way to purchase health insurance reminds me of the big debate we had a few years ago in Washington about letting trade associations offer their own health plans and exempting them from certain rating and underwriting laws the rest of the insurance market had to follow. That debate led many to believe that brand of association heath plans would take us back to "cherry picking." Senator McCain needs to clarify what he means here.

Providing tax credits of $2,500 to individuals and $5,000 to families as an incentive to buy health coverage.

This provision is not unlike the proposal first made by President Bush at last year's State of the Union Address. The President called for ending the longstanding tax exemption consumers get on any health insurance benefits paid for by their employer. The President would replace that with a standard $7,500 deduction for individuals and a $15,000 deduction for families.

McCain would also end the employer tax exemption—meaning that if an employer spends the average $12,000 a year on family health insurance, the worker would now have a tax bill on the portion of the $12,000 of benefits paid for by the employer.

Like Bush, McCain would offer a personal tax offset, but he would do the new offset a bit differently than Bush.

McCain would give each single person a $2,500 tax credit and a $5,000 tax credit for a family who had health insurance. A tax credit means that when taxpayers calculate their taxes, instead of taking a deduction, as Bush would do, under McCain's plan they would subtract the tax credit ($5,000 for a family) from their final tax bill (and they would likely be able to take advantage of the credit during the course of the year to pay their monthly premiums).

By exchanging the longstanding employer tax exemption for this tax credit, McCain swaps money around and creates what should be a revenue neutral scheme in the short term. President Bush's 2008 budget numbers actually showed a lower cost program in the long run for the government as health care inflation out-striped his new deductions. But that would also mean higher costs for consumers over the longer-term. Senator McCain did not provide financial projections.

If a person is in a 33% tax bracket, McCain’s idea works out the same for consumers as Bush’s plan. But, McCain's way of doing it helps low income people the most. If a person is in a 15% tax bracket, a $15,000 tax deduction is worth only $2,200 off their taxes toward their health insurance bill. By making it a flat $5,000 credit for a family, McCain is giving low-income people more and high-income people less—consistent with a progressive tax policy strategy.

However, the real question is, will McCain's plan give people enough to be able to afford health insurance? With the average cost of employer-provided family health insurance at $12,000 a year, a $5,000 tax credit will often come up way short—especially for higher age people and those who don't have the benefit of an employer contribution. High deductibles and HSA plans will help but families who don't have employer contributions should be prepared to pay at least a few thousand extra dollars.

He calls for the states to develop a "risk adjustment" bonus for high cost, otherwise uninsurable, and low-income families to supplement tax credits and Medicaid funds. But just who will pay for this (the states alone?) and how it would close the cost gap is not explained.

Families who continue to have an employer paying a large part of their health insurance costs may actually come out ahead—at least in the early years before health care inflation erodes some of the tax credit's impact.

This kind of tax credit structure is also designed to encourage the individual market over the traditional employer-based market. Many conservatives believe the employer market has led to health coverage that is too benefit rich and shields consumers from the true costs—all of which contributes to overspending and the high health care costs we have.

If McCain were to be successful in moving the system from the employer to the individual with his individual tax credit proposals, the employer arguably would have a smaller incentive to continue providing these benefits. Many employers might simply say, "Here's the money I was paying—go find your own coverage." It may just be easier for the employer to drop the coverage and give the employee the cash value of the health benefits in the form of higher wages.

However, McCain's individual health insurance system would allow for age rating--the younger paying a lot less and the older a lot more. If an employer were to increase worker wages by the average employer contribution of almost $8,000, the younger employees would get a lot more than they needed to buy an individual policy and the older would be way short.

There is the real danger that there could be a huge mismatch of any new wage increases to compensate for the dropping of health coverage and the age-adjusted costs workers would then have to pay on their own in the individual health insurance market.

The employer would also have the new advantage of having the difference in wages go up each year by the wage rate while the employee saw his health care costs rise at the rate of health care inflation—which has averaged two to three times more than wage increases.

McCain does not have a mandate to buy insurance for individuals or employers. So, people can still opt to go without coverage.

Again, the big question is how does McCain see his individual health insurance market working. How will he deal with age rating, medical underwriting, and pre-existing conditions? If McCain does not develop an individual health insurance market everyone can access, no matter how old or how sick they are, his plan will fall way short. He needs to detail his “risk adjustment bonus” scheme for older and higher cost families.

For those that are uninsurable, McCain has suggested allowing them to join state-based risk pools or "Guaranteed Access Plans" (GAP) plans. However, state-based risk pools for the uninsured have never worked well because they tend to be swamped by people and underfunded. McCain's proposal would seem to allow health plans to insure the healthy and push the sick to state-run pools.

See a detailed review of state-based risk pools: State High Risk Pools For the Uninsured--Who Would Want To Be In Them?

The use of state-run risk pools for the uninsured also sounds like a "unfunded state mandate" as the states would be forced to deal with a problem the feds won't.

Allowing veterans to use whatever provider they want, wherever they want by giving them an electronic health care card or through another method.

McCain has always had a special place for veterans and his health plan is no exception. While his goal of giving veterans access to any provider is noble, it will also be very expensive and there is no mention of what he estimates the costs will be or how he will pay for it.

Supporting different methods of delivering care, including walk-in clinics in retail outlets across the country.

McCain makes the common sense suggestion here to deliver care in more efficient places. However, there is no estimate for just how much this would save. It's like his health insurance proposal to cut administrative costs—a good idea on the surface but likely relatively small in scope. It is also not without controversy as the physician lobby has been opposing walk-in clinics that use nurse practitioners rather than physicians to deliver care.

Developing routes for cheaper generic versions of drugs to enter the U.S. market, including allowing for safe reimportation of drugs.

In fact, drug "reimportation" from Canada has dropped in half from its height a few years ago. With Part D, seniors are now able to get prescription drugs, in great part because of the managed care discounts that underlie the plan, for a lot less than before the program. Generic drugs are already very cheap and readily available. It is not clear how McCain sees any major savings here.

It is also not clear to what degree this free market conservative would use drug "reimportation" schemes to leverage-off the single-payer systems in places like Europe and Canada to negotiate his drug prices ("allowing for safe importation of drugs"). His reimportation proposal begs the question, if he believes using the Canadian government to negotiate drug prices, why not the U.S. government?

Revamping Medicare payment systems to pay providers for diagnosis, prevention, and care coordination without paying them for preventable medical errors or mismanagement.

McCain would use the Medicare program to lead the market in the development of a system of bundled service payment—often referred to by him as "coordinated care." Effectively, he would create a budget for each treatment program thereby putting providers at risk for delivering the care effectively and efficiently. He's really talking about pushing the market back toward capitation, or bundled at-risk payments for providers, as a means of controlling costs. This may be the only real cost containment proposal that any of the candidates, Democratic or Republican, has made.

However, as we learned, when capitation was in vogue in the mid-1990s, it is hard to do and providers don’t like it.

Senator McCain is a big believer in the value of "coordinated care." He would likely suggest that the Kaiser Permanente medical group is a good example of a system of coordinated care. While lots of data points to that kind of system as the best provider model to follow for both cost and quality, some doctors love it and most say they will never allow themselves to be "managed" by it.

This McCain payment system proposal needs to be developed further and McCain will have to show us how he is going to get the broad provider community to allow themselves to be put at risk once again and how we have the data and management systems to do a better job then we did the last time.

If the cheapest way to get high quality care is to use advances in web technology to allow a doctor to practice across state lines, then let them.

His proposal to let doctors practice across state lines is another idea that makes sense. However, it will be the physician community looking to protect their markets that will question this on quality grounds.

We cannot let the search for high-quality care be derailed by frivolous lawsuits and excessive damage awards. We must pass medical liability reform, and those reforms should eliminate lawsuits for doctors that follow clinical guidelines and adhere to patient safety protocols.

Senator McCain also favors medical malpractice reform that would place a cap on the damages a patient can collect. This traditional approach to tort reform went nowhere when George Bush and his Republican Congress pushed it when they controlled both the execututive and legislative branches of the government between 2001 and 2006. So long as at least 40 Democrats are in the U.S. Senate—almost a certainty during a McCain presidency—his medmal proposal will also go nowhere.

McCain would go further on tort reform by eliminating lawsuits to doctors that followed established clinical guidelines and adhered to patient safety protocols—a good idea. But here again, the details are difficult because getting agreement among doctors about "appropriate protocols" has been a struggle. The trial bar will also likely expect their Democratic allies to block it.

Senator McCain has also called for a greater use of health information technology to confront the cost and quality problems. So have about all the other Democratic and Republican candidates. While this is a good idea, these efforts have been underway in the U.S. health care system for many years. It has been slow going because like every other effort to control health care costs it’s always harder to do than it first sounds.

And like all of the other Democrats and Republicans he would promote disease prevention, healthy diets, and exercise.

So, how does Senator McCain come out toward his objective of dealing with both health care costs and quality?

Would the McCain proposal work?

Like all of the other presidential health care proposals, this is a political proposal in outline form—well short on details.

His program won't cost a lot since most of his spending comes from rearranging the existing tax exemption on employer-provided health insurance. But it is not at all clear how he would give the individual health insurance market the fundamental overhaul it would need to become the primary insurance market he would make it. How he would deal with age rating, medical underwriting, and pre-existing condition provisions are on top of that list of overhaul questions.

He also needs to show us how a $5,000 tax credit will give a near-poor uninsured family enough assistance to buy a health insurance policy with meaningful benefits when the average cost of employer-provided care is $12,000 a year. Even HSA-style employer-based plans still develop costs in the $10,000 area. Cheaper plans are available to young and healthy people in the individual market, but it will be the sick and old we will need to hear more about. And if the employer drops their coverage and gives all of their employees the same raise to compensate that will likely be far too much for the young to buy an age-rated policy and far too little for an older worker.

Any meaningful contribution McCain would make available to low-income people who do not have employer support for health insurance would drive the cost of his program way up. It may not be realistic for McCain to say he would help people who need help paying for their health insurance but that his plan will not cost taxpayers a lot of money.

He says that cost containment and improved quality are essential to a sustainable system—and he is clearly right on that point. But he has very little in the way of cost and quality improvement in his outline. The primary proposal here is to put providers at risk in Medicare by taking us back to the early days of managed care when the market believed the same thing and unsuccessfully tried to implement capitation. We need to know more about how it would be different this time.

It is doubtful McCain's cost containment ideas will accomplish any major savings.

McCain’s health reform plan is a patchwork of largely good ideas built on solid market-based principles.

He makes a good point when he says we need to fix the cost and quality problems before we just load tens of millions more uninsured people on a dysfunctional system.

Senator McCain's health care proposal is one that will appeal to conservative Republican voters as well as centrists.

The McCain proposal, unlike the Democrats’ proposals, also does more than give lip service to the marketplace. McCain is offering a proposal that would truly put the market front and center in a largely conservative prescription to solve America’s health care cost problems

ROBERT LASZEWSKI

USA election 08 (2)

A Detailed Analysis of Barack Obama's Health Care Reform ROBERT LASZEWSKI link

Obama Care Reform Plan

A Detailed Analysis of Barack Obama's Health Care Reform Plan
Barack Obama’s health care plan follows the Democratic template—an emphasis on dramatically and quickly increasing the number of people who have health insurance by spending significant money upfront.

The Obama campaign estimates his health care reform plan will cost between $50 and $65 billion a year when fully phased in. He assumes that it will be paid from savings in the system and from discontinuing the Bush tax cuts for those making more than $250,000 per year.

That the Obama health care reform plan would cost between $50 and $65 billion a year is highly doubtful. Obama claimed his plan was nearly identical to Hillary Clinton's and her plan was projected by her to cost more than $100 billion a year.

By contrast, the McCain Republican strategy for health care reform would first emphasize market reforms aimed at making the system affordable so more Americans can be part of the system and he claims that there would be no additional upfront cost.

Obama breaks his health care reform plan down into three parts saying that it builds “upon the strengths of the U.S. health care system.”

The three parts are:
1. Quality, Affordable & Portable Health Coverage For All
2. Modernizing The U.S. Health Care System To Lower Costs & Improve Quality
3. Promoting Prevention & Strengthening Public Health

Obama claims that his health care reform plan will save the typical family up to $2,500 every year through:
• Health information technology investment aimed at reducing unnecessary spending that results from preventable errors and inefficient paper billing systems.
• Improving prevention and management of chronic conditions.
• Increasing insurance industry competition and reducing underwriting costs and profits in order to reduce insurance overhead.
• Providing reinsurance for catastrophic coverage, which will reduce insurance premiums.
• Making health insurance universal which will reduce spending on uncompensated care.
Will Obama be able to cut the typical family’s health care costs by $2,500 a year?

Well, yes and no.

All of the candidates, Republican and Democratic, called for most of what is on the Obama cost containment list; expanding health information technology, improving prevention and better management of chronic conditions, and a more vibrant health insurance market.

Obama is unique in calling for catastrophic reinsurance coverage in order to reduce the cost of family health insurance. Really, this is not a cost reduction but a cost shift. This idea, first proposed by Senator Kerry in his failed bid for the presidency, would have the federal government absorb a large portion of the highest cost claims thereby taking these costs out of the price of health insurance. That would reduce the price of family health insurance but would also increase federal spending by the same amount. It would also water down the incentive for insurers and employers to manage these claims since most of these costs would be transferred to the government.

Obama’s assertion that covering more people would reduce the overall cost of insurance is likely correct because it would mean less uncompensated care that would have to be shifted onto the rest of the system. Since the McCain health plan emphasizes making the insurance system affordable before ensuring widespread coverage as the first priority, one could argue that Obama would make gains toward near universal care well before McCain.

In the end, Obama’s claim that he would save families $2,500 every year are based upon a number of initiatives that McCain also argues he would undertake. More, these ideas, such as health IT and prevention, are under way in the market anyway.

Obama’s claim that he would save $2,500 per family beyond a simple cost shift to the federal government of large claims is unsubstantiated and highly doubtful.

Let’s take a look at the three main parts of the Obama health plan:

1. “Quality, Affordable & Portable Health Coverage For All”

Obama follows the Democratic health care template by building on existing private and public programs such as employer health insurance, private individual health insurance, Medicare, and Medicaid. This is unlike the Republican approach that would refashion the private market by providing incentives to encourage a reinvigorated individual health insurance platform focused on personal choice and responsibility

Obama’s key components here include:
• Establishing a new public program that would look a lot like Medicare for those under age-65 that would be available to those who do not have access to an employer plan or qualify for existing government programs like Medicaid or SCHIP. This would also be open to small employers who do not offer a private plan.
• Creating a “National Health Insurance Exchange.” This would be a government-run marketing organization that would sell insurance plans directly to those who did not have an employer plan or public coverage.
• An employer “pay or play” provision that would require an employer to either provide health insurance or contribute toward the cost of a public plan.
• Mandating that families cover all children through either a private or public health insurance plan.
• Expanding eligibility for government programs, like Medicaid and SCHIP.
• Allow flexibility in embracing state health reform initiatives.
Obama would also mandate guaranteed insurability, a generous minimum comprehensive benefits package such as that required for federal workers, the ability to take their policy from one job to another (portability) when it is purchased through the new Medicare-like public plan or the "National Health Insurance Exchange," and he would require providers to participate in a new plan to collect and report data about standards of care, the use of health information technology, and administration.

Obama would provide premium subsidies to individuals and families who are not eligible for employer-based care or a government program. Just how much these subsidies would be is not indicated. In Massachusetts, thousands of families have been exempted from that state's mandate to buy coverage because subsidies are inadequate for those making too much to qualify or too little to still afford coverage.

How would Senator Obama do on improving coverage for all?

This is the section that separates him most from Senator McCain.

In Europe they have a way of explaining the general philosophy toward universal health care for all. You often here the term, “solidarity.” The concept implies that everyone is in it together—all are covered in the same pool and share the burden equally.

Democrats, like Obama, tend to make an Americanized attempt at health care solidarity by crafting a structure that ensures everyone will be covered, not by a single government-run plan but by guaranteeing access to a mix of government and private plans. Obama understands that the vast majority of Americans are not ready to give up their private health insurance plans and that creates a political imperative to continue making private health insurance a part of any “unique American solution.”

Republicans, like McCain, on the other hand, build their health reform plans on the classic American foundation of “rugged individualism” promoting choice and personal responsibility.

Therefore, Obama puts as his first priority getting everyone in the system by spending lots of money up front to ensure that everyone can afford a benefit rich traditional private plan—or have access to a public plan.

McCain argues that we already spend too much on health care and says his plan will not cost more than that since he will rearrange existing tax benefits to provide the incentives and support necessary for a more efficient system. It is hard to see how McCain can rearrange the existing employer tax benefits those who are insured now get, reapply them on an individual basis to those same people and also have extra money to provide assistance for the millions of uninsured who don't get these employer tax benefits today.

Obama sets as his goal quality, affordable, and portable coverage for all.

Let’s take them one at a time:
• Quality- Obama’s quality initiatives look a lot like McCain’s as well as those things that are going on in the market anyway. All good points—but no advantage here or expectation there will be quick savings.
• Affordability – Affordability is more about shifting the cost of insurance to the government then it is making a more efficient U.S. health care system. Health insurance is more affordable for people because he spends many billions of dollars subsidizing access for everyone.
• Portable Health Coverage For All: While Obama does not have an individual mandate to purchase health insurance; it is likely that he would cover most of those who are uninsured today because of his generous subsidies for low-income Americans. Compared to McCain, he puts far more emphasis on getting people covered upfront.
Obama would be successful in getting most of the uninsured covered and securing coverage for those that now have it. But when it comes to crafting a system that will not continue to outstrip the rest of the economy in what it costs, I see no evidence that he has tackled the drivers in health care costs—in fact he has likely poured some highly inflationary “gas on the fire” by adding tens of billions more to the system with no effective cost containment features to offset the new inflationary pressures.

The Obama health care reform plan is very similar to the new Massachusetts health care reform plan that was first implemented a year ago. The Massachusetts plan is proving to be falling short of covering everyone for an affordable cost. It's second-year costs look to be coming in 50% higher than were projected when the plan became law in 2006 and its insurance is still unaffordable for most families making between $60,000 a year and $110,000 a year. See: First Year Results in Massachusetts' Health Care Reform Undercut Barack Obama's Health Care Reform Strategy

2. Modernizing The U.S. Health Care System To Lower Costs and Improve Quality

Obama would argue that I am wrong about the notion that he has no effective cost containment ideas. In this section of his plan he argues he will contain, if not reduce costs, with a long list of proposals.

He would reinsure employer plans for a portion of their catastrophic costs. This would reduce employer costs but it would do so by simply shifting them onto the government. He runs the risk of shifting these costs away from a market that now has incentives to manage them to a big government program that likely will not have the same incentives to confront and manage them. I don’t see this as cost saving as much as just cost shifting.

Obama goes on to outline a long list of quality initiatives that include disease management programs, coordinated care, transparency about cost and quality of care, improved patient safety, aligning incentives for excellence, comparative effectiveness reviews, and reducing disparities in health care treatments for the same illness.

McCain has virtually the same list—all good ideas and all things the market has been tackling for years with only incremental success. The notion that Obama will suddenly make any or all of these more successful than others have with all the billions spent on such programs in recent years constitutes a leap of faith. Why will Obama be any more successful in this area than any other candidate or than those who have been tackling these things for years—no new ideas here and no cost containment “silver bullet?”

Obama would also reform the medical malpractice system by strengthening “antitrust laws to prevent insurers from overcharging physicians for malpractice insurance.” Clearly a malpractice reform strategy supported by the trial bar! He also makes a vague pledge to “promote new models for addressing physician errors that improve patient safety.”

Obama makes investments in health information technology an important part of his cost containment strategy. This is something every other candidate supports and is generally regarded at the heart of what’s needed to improve both cost and quality. And it is something the market has been spending billions at for many years and has shown only slow but steady progress on.

Obama would make the insurance markets more competitive and efficient by creating the “National Health Insurance Exchange” to promote more efficient competition and he would set a minimum health cost ratio for insurers—not defined in detail. Reducing insurance company overhead is important but constitutes only a small percentage of costs and those overhead costs have been increasing at the rate of general inflation while health care costs have been increasing by two to four times the basic inflation rate in recent years. The biggest cost containment challenge is in the fundamental cost of health care itself.

He would legalize drug reimportation. However, the amount of drugs imported from Canada, for example, has fallen by half in recent years, as this once popular scheme hasn’t produced the savings to even maintain itself at past levels. Somewhat surprisingly, even Republican McCain favors drug reimportation.

He would emphasize the use of generics by making it harder for drug companies to payoff generic makers to stay out of their markets—a good idea that also has bipartisan support.

He proposes lifting the ban on Medicare being able to negotiate drug prices—including those for the senior Part D program. However, recent Democratic proposals to do so do not allow Medicare to take a drug off the Medicare formulary when the manufacturer is not willing to reduce its prices. If Medicare doesn’t have the power to walk away from a drug maker, its power to negotiate is a hollow one. Obama does not tell us if he would give Medicare the leverage it would need to get real results.

When the day is done, Obama gives us a list of generally good cost containment ideas that are more often than not also in Senator McCain’s health proposal and have been part of a market struggling to bring costs under control—nothing really new and nothing that promises to get better results than each of these cost containment ideas are going to be able to get us anyway.

What would it take to really contain costs?

McCain would say a more robust market and more reliance on personal responsibility and consumer choice to make the market work better.

Obama, like McCain, has come up with the same generally good list of things that are underway in the market anyway with only a limited success to point to so far.

To really get at costs you have to gore some very powerful political oxen among all of the key stakeholders.

McCain won’t do it because he simply doesn’t believe that a direct assault on the market players is the right thing to do—put market incentives in place and it will encourage and reward efficient behavior.

Obama won’t do it, not because he doesn't like government intervention, but because he doesn't want to offend key stakeholders who could derail any meaningful health care reform effort.

The Democrats learned a very powerful lesson in 1994 when many of the special interests all united in opposition to the Clinton Health Plan.

Capping or even reducing costs means you have to cap or reduce costs. There are no magic bullets that reduce payments without doctors, hospitals, insurers, and lawyers getting less than they would have gotten. All of the health IT, prevention, wellness, and the like will not reduce costs by any big amount at least in the short term.

McCain avoids the notion that aggressive cost containment is important because he just doesn’t believe in it—a vibrant market will do the job.

Obama avoids the notion that their cost containment list will be inadequate because it is politically expedient to do so—they aren’t going to risk their health care reform proposals by taking on the big stakeholders head-on.

I have been convinced for some time that we will actually do health care reform in two parts—access first and cost containment second.

This Democratic proposal is all about access—getting just about everyone covered. Getting everyone into this unsustainable system will then make things even more unsustainable creating an imperative for a second wave of real cost containment when the feel good list of cost containment proposals now in their plans falls short. My sense is that most Democratic health policy experts already know this but see no other political alternative.

3. Promoting Prevention & Strengthening Public Health

At the core of this Obama health care proposal is the notion that, “Each must do their part…to create the conditions and opportunities that allow and encourage Americans to adopt healthy lifestyles.”

Obama lists employer wellness programs, attacking childhood obesity in the schools, expanding the number of primary care providers, and disease prevention programs as part of his effort.

Again, his emphasis on healthier lifestyles is embraced by all of the other candidates and doesn’t give him an advantage.

Perhaps the most important thing a new president can do in this regard is to use the “bully pulpit” to place far more emphasis on just how unhealthy Americans are becoming. We can pass all of the health care reform proposals we like and spend many more billions of dollars each year but that will do little as we watch our youngest generation on its way to becoming the first in American history to be less healthy than the prior generation.

Will the Obama health reform plan work?

The Obama health reform plan would get most of those who are now uninsured covered.

The Obama plan focus is on access by making it possible for everyone to have coverage in an existing private or public plan and by making a Medicare-like program also available for those who don’t have private coverage.

The Obama plan is not really a universal health care plan. A universal plan, like those in Europe and Canada, start out by including everyone in a plan they are automatically enrolled in and that is paid for by various mandatory taxes. While people in these truly universal systems can sometimes opt out for a private plan, as in Britain, they are in one on day one. As the Massachusetts plan is showing us, Obama's plan structure will still leave a significant number of the uninsured without coverage.

Obama builds on the American tradition of people having to buy their coverage. He claims to make it affordable to buy—but the consumer must make the purchase. Obama makes that an option for adults. In the end what matters is not the mandate but whether coverage is in fact affordable to everyone.

McCain takes a completely different view continuing to build on options and choices and relying upon the market to do the work in creating an affordable system.

Would the Obama health care system work?

It would clearly get most of the unisured covered sooner rather than later.

The real question is how would it be sustained. Are his cost containment strategies going to support a system that is affordable in the long run?

No.

As the Massachusetts plan is showing us, the Obama health care reform plan would likely have an incomplete result for an unsustainable cost.

The Obama cost containment proposals are only incremental cost containment proposals that are layered over $100 billion of upfront spending to cover tens of millions of more people—far too little cost containment for the new massive injection of money, almost overnight, into the health care system.

Obama offers us a long list of good cost containment ideas—most of which he shares with McCain. Most have been underway in the market for many years with limited success. Undoubtedly, a government infusion of resources or requirements aimed at a more efficient system would have a positive impact but it is hard to see how they would be enough fundamentally alter things and bring the system under real control.

More likely, a $100 billion infusion of new health care spending by an Obama health plan would actually increase the rate of health care inflation and ultimately create an imperative for more draconian government intervention in the health care markets Obama would preserve.

Cost containment is the big missing link here.

The big question John McCain has to answer is how will his health care program cover everyone—particularly the older and sicker—and how will he be able to provide enough assistance to those who are now uninsured by simply redistributing the tax breaks now only enjoyed by those currently covered?

The big question for Obama is not in how he will get almost everyone covered—his plan spends enough money up front to likely do that—the question for Obama is how he will create an affordable and sustainable health care system with only minor incremental cost containment ideas?

ROBERT LASZEWSKI

Usa election o8

Comparing John McCain's Health Care Plan to Barack Obama's Health Care Plan--What's the Big Idea Difference?

This election is different than any other on the issue of health care because both candidates are giving us serious blueprints to reorganize America's health care system and those blueprints are very very different.

As voters, you have a huge and critically important choice on health care.

There are dozens of details upon which they differ and for those I would point you to my comprehensive posts on the McCain Health Care Plan and the Obama Health Care link

But to understand their big idea differences, I would point you to our pension system to better understand where McCain and Obama are going on health care.

Back in the 1960s and 1970s, it was common for workers to have what is called a defined benefit pension plan. The worker got a promise from the employer that when retirement came he'd get a certain monthly benefit--often about 60% of his final average earnings. That might be $2,000 a month--every month for the rest of his life. Therefore a defined benefit.

But starting in the 1980s, employers came to find that they couldn't afford these very expensive defined benefit pension plans. Employers started backing away from these plans often by no longer making new employees eligible for them or simply terminating them and freezing the benefits for those who had been participants.

Instead, employers more often offered a defined contribution plan - usually in the form of a 401(k) plan. A 401(k) pension plan is generally dependent on employee contributions that are made pre-tax. Often, the employer matches the employee's contribution at some percentage of what the employee contributes--a defined contribution plan.

401(k) plans are popular with employers because they have no big funding requirement--defined benefit plans required them to contribute whatever it costs to keep the expensive benefit promise. Now, the risk of having enough money to retire on was shifted from the employer to the employee.

With workers changing jobs more often than in the 60s and 70s, employees also had a portable plan. Defined benefit pension plans have vesting schedules so a worker that stayed less than 10 years perhaps left with no pension benefit. With a 401(k), the employee leaves with all of his contributions and investment earnings as well as most or all of the employer's contributions. The departing employee can roll his account over to his own IRA or his new employer's plan and continues to accumulate toward retirement.

401(k) plans are popular with workers because they own them, control them, and make investment decisions for them.

The pension plan story is what the big idea difference between McCain and Obama's health plan is really about.

Obama: Do we continue down the same incremental line with health care reform--building on the employer-based system where the employer provides so many of us with generous defined benefit health insurance plans that the employer continues to pay most of the cost of no matter how expensive they are?

McCain: Or, do we change the health insurance focus from relying on the employer to relying on individual responsibility and a structure that enables the individual to build their own health care security, often with an increase in wages to replace the health insurance benefit, and not having to rely upon the generosity of one employer or another to provide a fixed and comprehensive plan?

Just as we have learned from our pension experience, one approach is not necessarily good or bad. Both have some very important advantages and some very important disadvantages.

Liberals often believe that the best way to provide health care is via a large group. Lots of people coming together to spread the risk and cost of insurance has worked well for consumers. The great health benefits most of us get from our employers may be the best thing going in our problematic health care system. The worry is that if we push people out of these plans and into the individual health insurance market to fend for themselves consumers will be subject to the vagaries of the market that include underwriting limitations and health insurance premiums in the thousands of dollars.

But conservatives often worry that the employer-based system is at the heart of why our costs are out of control. A third-party, the employer, pays for care the doctor and the patient demand. There is little in the way of incentives for the buyers to care much about costs. American employers are also saddled with by far the most expensive health care system in the world as they try to shoulder those costs and still be competitive in a global market--the cost of health care that goes into the cost of making an American car is much more than the cost of steel in that car. Conservatives also argue is is unrealistic to think the employer-based system is anymore sustainable than the old pension system was.

Conservatives also worry that Obama's endorsement of the defined benefit approach also applies to government making even more unsustainable entitlement promises than it does now by guaranteeing more access to government plans and promising expensive subsidies so everyone can get into a health insurance plan. That is a legitimate concern particularly in the light of Massachusetts enacting an Obama-like plan last year that is proving to be giving us an incomplete result toward getting everyone covered for an unsustainable cost.

But liberals counter that McCain would "shred" the traditional employer-based system of health care and push consumers into a very expensive and even less regulated health insurance marketplace with a reputation for wanting to cover only healthy people.

Liberals believe we have a moral imperative to get everyone covered sooner rather than later--in Obama's case by spending many billions upfront. Conservatives believe we have a moral imperative to avoid making promises we can't keep if the system isn't made to be affordable first.

In my mind, both sides have legitimate points.

I also believe either system can work--how well is a matter of what the details look like. The most important of these details is how costs would be controlled. When the day is done, controlling costs is what it is about so we can get everyone insured, sustain that, and make America competitive in the global economy.

So it all comes down to the security afforded by employer-provided defined benefit group plans (Obama) versus the potential for cost savings and the advantages of portability that come with a defined contribution approach (McCain).

In many ways, Senator McCain makes the more radical proposal--not what you would expect from the Republican on health care. But with our system as unaffordable and globally uncompetitive as it is that is by no means a criticism on my part.

As a voter, you have a big decision to make in November when it comes to health care.

Obama has a defined benefit health care plan that asks us to give up less--but will it get the job done in making health care more affordable and will the program be sustainable for us? Under Obama's health care plan that continues to rely upon the employer, will America's products and services be more competitive in the world?

McCain asks us to make the biggest health care leap with him and give up the security we have had under employer-based health care--but a security that may not be sustainable anyway.

Boy! Do you have a big decision to make.

ROBERT LASZEWSKI

USA elections: Health Care Plans

About Those Health Care Plans by the Democrats ...

WASHINGTON — While Senators Hillary Rodham Clinton and Barack Obama fight over who has the better health plan for the uninsured, they say little about a more immediate challenge that will confront the next administration, whether Democratic or Republican: how to tame the soaring costs of Medicare and Medicaid.

Americans and low-income people, cost $627 billion last year and accounted for 23 percent of all federal spending. With no change in existing law, the Congressional Budget Office says, that cost will double in 10 years and the programs will account for more than 30 percent of the budget.

Economists and health policy experts say the federal health programs are unsustainable in their current form, because they are growing much faster than the economy or the revenues used to finance them. The Medicare program is especially endangered; its hospital insurance trust fund is expected to run out of money in 11 years.
But the need for cutbacks is not a popular theme for political candidates wooing voters who want more care at a lower cost.

The Democrats do not say, in any detail, how they would slow the growth of Medicare and Medicaid or what they think about the main policy options: rationing care, raising taxes, cutting payments to providers or requiring beneficiaries to pay more.
Nor do they say how they would overcome the health care industry lobby, which has blocked proposals for even modest reductions in Medicare payment rates.
Instead, scores of lawyers and lobbyists are continually urging Congress to expand Medicare coverage of specific drugs, medical devices, tests and procedures.
The leading edge of the baby boom generation becomes eligible for Medicare in three years. The number of beneficiaries, now 44 million, is expected to reach 49 million in the first term of the next president and then climb to 55 million by 2017.

Those numbers, while daunting, are less significant than other factors.
Peter R. Orszag, director of the Congressional Budget Office, said, “The bulk of the projected increase in spending on Medicare and Medicaid is due not to demographic changes, such as increases in the number of beneficiaries, but to increases in costs per beneficiary.”
And what is driving those costs?

“Most of the long-term rise in health care spending is associated with the use of new medical technologies,” the budget office said in a recent report. It suggested that more selective use could save substantial amounts — a prospect that alarms manufacturers of some medical devices.

“Medical technology has saved and improved countless lives by reducing disability and death rates from cancer, heart disease and other conditions,” said Stephen J. Ubl, president of the Advanced Medical Technology Association, a trade group.
Spending on Medicare and Medicaid tends to increase in tandem with health spending generally.

“Federal health spending trends should not be viewed in isolation from the health care system as a whole,” said David M. Walker, the comptroller general of the United States.
When Medicare and Medicaid squeeze payments to doctors and hospitals, health care providers often try to increase charges to other patients, Mr. Walker said. To rein in the costs of Medicare and Medicaid, he said, it will be necessary to slow the growth of health costs generally.

For several years, an independent federal panel, the Medicare Payment Advisory Commission, has recommended that Congress reduce payments to private health plans. Those payments are about 12 percent higher, on average, than the cost of caring for similar patients in the traditional fee-for-service Medicare program.

Insurance companies, working with satisfied customers and lawmakers who want to preserve access to such plans, have successfully resisted the proposal.
To help pay for their coverage plans, Mrs. Clinton and Mr. Obama both say they would roll back the “Bush tax cuts” for the wealthiest Americans. But major provisions of the tax cuts, adopted in 2001 and 2003, are already scheduled to expire at the end of 2010. Democratic lawmakers, moreover, have committed the savings from the elapsed tax cuts several times to other pet programs, like eliminating the alternative minimum tax.

Some experts say the only real way to tame health care costs is by limiting access to expensive treatments or by requiring affluent Americans to pay for more of their health care.
Medicare has generally not taken costs into account in deciding which services to cover. If officials even suggest that Medicare should deny payment for an expensive treatment that could produce a small improvement in a person’s condition, they are accused of rationing care.

Researchers at Dartmouth Medical School have found large variations in the amount of hospital care and other services that people with the same condition receive in different parts of the country. In some regions, where doctors favor more intensive treatments, Medicare spends much more without getting better results for patients.
This research “suggests that about 20 percent of Medicare spending could be eliminated with no adverse effects on health,” said Prof. David M. Cutler of Harvard, an adviser to the Obama campaign. Identifying that 20 percent would be “very difficult,” he acknowledged.
President Bush says high-income people should pay higher premiums for the Medicare drug benefit, and at least some liberals are willing to discuss the idea.

“We can go further in setting Medicare premiums at higher levels for affluent beneficiaries without unraveling the universal nature of the program,” said Robert Greenstein, executive director of the Center on Budget and Policy Priorities. But, he insists, “we should also eliminate billions of dollars in overpayments to private Medicare plans.”
The Democratic candidates do believe they can wring savings out of an inefficient health care system that spent an average of $7,400 a person last year, far more than any other country.
Mr. Obama says his plan can achieve “tremendous savings” by making the health care system more efficient. Mrs. Clinton says her plan will save more than $50 billion a year with “efficiency reforms.”

To this end, Democrats and some Republicans are coalescing behind proposals intended to improve care while lowering costs. These proposals call for greater use of health information technology, including electronic medical records, programs to manage the care of people with multiple chronic diseases and research to compare the effectiveness of different treatments.
Senator John McCain of Arizona, the presumptive Republican nominee, describes Medicare as a “fiscal train wreck.” He voted against adding a prescription drug benefit to Medicare in 2003 because, he said, it added huge costs to a program going broke.
Mr. McCain says he, too, wants to cover more people. But he has not explicitly embraced the goal of universal coverage, saying he worries more about costs.
Public opinion polls show broad support for federal action to cover the uninsured. But Robert D. Reischauer, a health policy expert and president of the Urban Institute, said, “It will be difficult for Senator Clinton and Senator Obama to retain popular support for their plans once the details are specified.”
NYTimes, Robert Pear (03.03.08)

USA elections: Health Care Debate, Part 2

Health Care Debate, Part 2
THE skirmishing between the Democratic presidential candidates over the mechanics of universal health coverage will soon give way to a quite different general-election debate — about whether universal coverage should even be a national priority.

In the primaries, Senators Hillary Rodham Clinton and Barack Obama have magnified their differences over making health insurance mandatory because it provides a rare chance to differentiate themselves on an issue that matters deeply to Democrats. But they are fighting over the narrowest of bands in a broad policy spectrum, and the focus on universal coverage — rather than on cutting costs — may have far less resonance come Nov. 4.

Senator John McCain, the presumptive Republican nominee, agrees with the Democrats that the health system needs major repair. But his solution would stress cost-containment over assuring coverage for all. Its most controversial elements would fundamentally alter the employer-based insurance system through which 71 percent of insured Americans now get their health coverage.

Like President Bush, Mr. McCain wants to use tax policy to create an insurance marketplace that he says would be more competitive. He would end the longstanding tax exemption on health benefits paid by employers, to eliminate what he says is a bias against those who buy insurance individually.

Instead, anyone who buys health insurance would receive refundable tax credits of $2,500 per individual and $5,000 per family. To promote competition, Mr. McCain would allow policies to be sold across state lines and by organizations like churches and trade groups.
The most difficult to insure — the elderly and those with health problems — would be eligible for larger credits, though Mr. McCain has not specified the amounts. By contrast, the Democratic plans would simply prohibit insurers from denying coverage because of health status.

The McCain campaign has no estimate of how many of America’s 47 million uninsured would likely gain coverage under its plan. But Mr. McCain’s emphasis is elsewhere. “The biggest problem with the American health care system,” he said in an October speech, “is that it costs too much.”

The Democratic candidates have not ignored the cost side of the health care equation. Like Mr. McCain, both have articulated plans to reduce the rampant growth of health spending through improvements in prevention, electronic record keeping and chronic-disease management. When Mrs. Clinton introduced her health plan last year in a series of three speeches, she pointedly devoted the first to lowering costs.

But anyone paying attention to the Democratic campaign over the last two months could be excused for thinking that universal coverage is the candidates’ fundamental concern. Last Saturday, Mrs. Clinton drew attention by scolding Mr. Obama (“Shame on you, Barack Obama!”) for what she said was a distortion of her position in a mailing. Three days later, the candidates spent the first 16 minutes of their debate in Cleveland disagreeing over whether everyone should be required to have insurance (Mrs. Clinton says yes; Mr. Obama says only children should be).

Jonathan B. Oberlander, an authority on health politics at the University of North Carolina at Chapel Hill, predicted that in the general election the Democrats might regret how much time they spent discussing government mandates, and the tax increases they have proposed to support broad expansions of coverage. “It’s just not how you want to sell health reform,” he said.

Polling suggests that at least 9 of every 10 voters in November will be insured. Many will not see universal coverage as a matter of self-interest. The complex economic argument that the uninsured impose hidden costs on everyone else may be difficult to convey in sound bites.
And the electorate may be less receptive than participants in the Democratic primaries and caucuses. A December poll by the Kaiser Family Foundation found that 42 percent of Democrats said their top health policy concern was expanding coverage for the uninsured, while 35 percent said it was reducing costs. The priorities flipped when Republicans and independents were added to the mix, with 41 percent of all polled saying they cared most about reducing costs and 31 percent citing coverage for the uninsured

Michael F. Cannon, the director of health policy studies at the Cato Institute, argues there is no way to know whether universal coverage — estimated by both Democratic campaigns to cost at least $110 billion — would be the most cost-effective means of improving the country’s health.

Mr. Cannon, a libertarian who used his blog to found the Anti-Universal Coverage Club, acknowledges that a substantial body of research has shown that health coverage can improve health outcomes. Studies by the American Cancer Society, for instance, have found that the uninsured are significantly more likely than those with private insurance to be diagnosed with cancer in late stages rather than early stages.

But he cites a highly-regarded 2001 survey by two University of Chicago researchers, Helen Levy and David Meltzer, who said, “there is no evidence at this time that would allow us to say whether money aimed at improving health would be better spent on health insurance or on inner-city clinics, community-based screening programs for hypertension or advertising campaigns to encourage good nutrition, to name just a few possibilities.”
Mr. Cannon, along with a number of conservative theorists, contend that spending on unneeded procedures, medical errors and hospital infections is a more dire problem than the cost of caring for the uninsured. They say that waste accounts for a much larger share of the country’s $2.1 trillion health care bill, and that at least twice as many Americans are estimated to die each year from medical errors as from lack of access to care.

The toxic politics of appearing to support any rationing of care has kept candidates in both parties from seriously confronting the overuse and misuse of health care, they say. Without change, health spending is projected to double by 2017, eating up 20 percent of gross domestic product.

“The pernicious aspect of this cry for universal coverage is that it is too easy for politicians,” said Joseph R. Antos, a health policy expert at the American Enterprise Institute. “The hard work is getting at the underlying inefficiencies in the health system, the perverse incentives that have everybody operating in the dark.”

Supporters of universal coverage counter that its benefits would go well beyond its impact on health spending. Mrs. Clinton, for instance, speaks passionately about making health care in America more equitable and removing the ability of insurance companies to “determine who lives and who dies, who gets health care and who does not.”
Len M. Nichols, director of health policy for the New America Foundation, and a supporter of a health insurance mandate, said the ledger also must account for the economic and social costs of the deaths, disabilities and bankruptcies attributable to lack of insurance. “The right question is: would coverage expansion add enough social and economic value to merit the investment?” he said. “The literature suggests a resounding yes.”

Other health experts say it would be regrettable if the general election devolves into a debate that pits coverage against cost. In fact, they say, the government must fight on all fronts simultaneously to have any chance at meaningful change. “If reforming U.S. health care results only in expanded access to care, costs will increase faster but with limited health benefits,” Thomas R. Frieden, New York City’s health commissioner, wrote last week in The Journal of the American Medical Association. “If only cost controls are instituted, even more individuals will be denied access to needed care. Health care must be restructured to make maximizing health the organizing principle.”
NYTimes

USA elections: 2 Plans

and Many Questions on the Uninsured
ATLANTA — Brandy Coons is what health economists call a free rider

She may not fully appreciate it, but her decision to go without health insurance, like millions of similarly situated Americans, has become central to the pre-eminent policy dispute of the Democratic presidential campaign.

Ms. Coons, a 23-year-old waitress who rents a room and rarely eats out, said she could probably afford a high-deductible policy if she gave up her gym membership and spent less on her amateur photography. But she chooses instead to gamble against the odds of confronting a bankrupting catastrophe.
“I’m young and in pretty good shape,” Ms. Coons said one recent afternoon, on her way to the treadmill at the Fitness Factory in Midtown Atlanta. “I looked at Blue Cross Blue Shield. But the only thing I could see myself really needing it for are prescriptions and dental because there are so many free clinics, or a hospital visit really isn’t all that expensive.”
She continued, “The insurance premium was more than what I would pay for my prescriptions, so I just decided not to deal with it.”

Senator Hillary Rodham Clinton contends that the only way to achieve universal health coverage, and to make the marketplace fair and efficient, is to require that everyone have insurance. That would include people like Ms. Coons, who may not currently rank health care above other needs and wants.

Senator Barack Obama, Mrs. Clinton’s rival for the Democratic presidential nomination, shares her goal of insuring all Americans. But he says that a mandate could mean financial devastation for middle-class families if the government did not first adequately reduce the cost of insurance.

Both candidates express confidence that by pumping at least $110 billion into subsidies and tax credits they can make policies affordable for all. The difference is that Mr. Obama insists he will be able to lure all of the uninsured simply by dangling the carrot of low premiums; Mrs. Clinton believes there will always be some free riders who respond only to a government stick.

Neither campaign has provided enough detail about its plan to enable more than guesswork about how it might influence consumers like Ms. Coons. They have not detailed what kind of subsidies would be needed or who would be entitled to them. Mrs. Clinton has not fully explained how she would make everyone comply with her plan or exactly how she would cap the amount a family would have to spend on premiums.
Each candidate would raise the money needed to subsidize premiums by rolling back President Bush’s tax cuts for high earners, taxing businesses that do not insure their workers and reducing costs through electronic record keeping, preventive medicine and chronic disease management.

But there is little certainty about how much those initiatives might save, or when. Nor can it be known if the savings would offset the potential cost of new technology and drugs and the cost of providing care to the newly insured. There are also questions about whether the new savings and tax increases would be enough to subsidize insurance for all who need help.
Both candidates are backed by teams of prominent economists from top universities and policy groups. But with little real-world precedent to guide them, their assessments are necessarily an amalgam of statistical modeling and back-of-the-envelope calculation.
“In a campaign, people put out proposals that aren’t highly specified, that don’t have enough detail to model them effectively,” said E. Richard Brown, director of the Center for Health Policy Research at the University of California, Los Angeles, and an Obama adviser. “These numbers are based on a lot of assumptions.”

In speeches, debates and dueling advertisements, Mrs. Clinton and Mr. Obama have brandished projections that even their originators acknowledge are tenuous.
Mrs. Clinton, for instance, has charged repeatedly that Mr. Obama’s plan would leave 15 million people uninsured. Doing so, she has said, amounts to Democratic apostasy. “I don’t want to leave anybody out,” she said in Thursday’s debate in Austin, Tex.

But the economist who devised that number, Jonathan Gruber of the Massachusetts Institute of Technology, said that while he felt strongly that a mandate was needed to achieve universal coverage, he was less firm about his projection. “There is a lot of margin for error around that estimate,” Mr. Gruber said.

Mr. Obama, meanwhile, maintains in a television advertisement that his plan will “cover everyone.” That claim is disputed by some of his own advisers, including Mr. Brown, who recently calculated that the Obama plan might leave behind two million free riders.

“That’s the number we would expect to continue to be uninsured unless they’re forced to buy coverage,” Mr. Brown said.
There is no consensus among health economists about how many free riders there are, or on their economic impact. But of the 47 million uninsured people in the United States, 7.3 million come from families with incomes of $75,000 or more, and an additional 6.9 million earn between $50,000 and $75,000, according to 2006 census estimates.

Some of those with moderate or high incomes may have been shut out of the insurance market because of age or pre-existing health conditions. Researchers believe a majority are self-employed or among the growing number of Americans whose employers do not offer affordable insurance. Their only insurance options may be high-priced individual policies.
Many free riders are assumed to be young and at little risk of major illness, but they do consume health care. A recent analysis by the New America Foundation, a Washington policy group, found that 16 percent of the patients who received uncompensated medical care in 2004 had family incomes of at least four times the federal poverty level (which would currently be $41,600 for an individual and $84,800 for a family of four).

They accounted for $5.8 billion of the estimated $41.4 billion in uncompensated care that year. Most of it was delivered in hospitals, which are required by federal law to treat patients with emergency conditions, regardless of ability to pay. A vast majority of that care is covered by the federal, state and local governments in a direct cost shift to taxpayers.
But there is also a shift to the privately insured. Hospitals and doctors raise their fees to compensate for the losses they incur by treating uninsured and underinsured patients, and insurers pass those increases along to consumers. A 2005 study found that the shift added 8.5 percent to the average premium.

Many free riders, including Ms. Coons in Atlanta, never consider that the care they receive in community clinics and emergency rooms is subsidized by taxpayers and private policyholders. “I still pay for everything,” Ms. Coons said, “and I certainly pay taxes.”
Mrs. Clinton says that requiring everyone to get insurance, in addition to addressing the taxpayers’ cost-shift, is a prerequisite to ending discrimination against those with pre-existing medical problems. Only then, she argues, would it be fair for the government to require insurers to cover even those likely to require expensive care.
“By allowing people to stay out, you risk that only the sick will come in,” said Len M. Nichols, director of health policy for the New America Foundation, and a reluctant supporter of a mandate. “Insurers have to protect themselves. Bringing everyone in also lowers costs across the board because the risk pool is wider.”

Mr. Obama, for his part, all but denies the existence of free riders. “I don’t see those folks,” he said when asked last month about people who may need to be forced to buy insurance.
He said he would mandate coverage for children and allow parents to cover children up to age 25 on their policies. But recognizing that affordability is often in the eye of the beholder, he would not immediately require coverage of adults. He says he would be open to a mandate later if there were holdouts, convincing some economists that the dispute is more about the timing of a mandate than the need for one.

“I believe the reason people don’t have health care isn’t because no one’s forced them to buy it,” Mr. Obama said this month in Wisconsin. “It’s because no one’s made it affordable.”
There is no settled view about what makes health insurance affordable. A survey last year by the Kaiser Family Foundation found that the average annual premium was $4,479 for an individual and $12,106 for a family.

Massachusetts, the only state that mandates insurance coverage, considers insurance to be affordable for anyone with a family income that is more than three times the federal poverty level, above $31,200 for an individual and $63,600 for a family of four. Coverage for those making less is subsidized in full or in part by the state.
Unlike Mrs. Clinton’s plan, however, Massachusetts offers exemptions from the mandate to those who can demonstrate they would otherwise suffer financial hardship. It expects to offer 60,000 such waivers this year.

Some share of the population will disregard virtually any government mandate, either by intent or inertia, and the early evidence about the Massachusetts law is mixed. Only half of the state’s estimated 600,000 uninsured enrolled by the end of 2007, the first deadline. That may be because the state set a gentle initial tax penalty of $219 to soften any perception of heavy-handedness. This year, the fine will rise to as much as $912 for some residents.
“The Massachusetts experience shows that unless you have very clear, very stringent penalties that are directly enforceable, mandates don’t work,” said Austan D. Goolsbee, a University of Chicago economist who advises Mr. Obama.

Mrs. Clinton acknowledged Thursday that a mandate would be politically unpopular, noting in the debate that she “took a big risk” to propose one.
“You chose to put forth a health care plan that will leave out at least 15 million people,” she told Mr. Obama. “That’s a big difference.”
Mr. Obama responded that his goal was the same as hers, to cover everyone. “We think,” he said, “that there’s going to be a different way of getting there.”
Kevin Sack, NYTimes (23.02.08).