insurance

Solutions to the health care problem

Is health care a right or a responsibility? During the third presidential debate, Barack Obama declared it to be a right, while John McCain called it a responsibility.

These assertions underscore the different philosophies underlying the candidates' proposals. One assumes that everyone is entitled to health care; the other puts the responsibility for obtaining health care squarely on the shoulders of the consumer.

Consumers already have plenty of responsibilities, such as the responsibility to find a way to retire even if the stock market trashes their retirement plans, for which they have complete responsibility.

In all fairness, the Republican candidate does propose changes to the health care system that are designed to expand its availability and enhance consumer choice. In fact, both candidates propose strategies designed to control costs while improving quality, such as promoting prevention and chronic care management, and investing in health information technology systems that produce electronic health records. In these ways, their plans are similar.

But in other ways, their plans offer starkly different solutions to the problem of more than 45 million uninsured Americans.

1. The Obama plan

Obama's campaign site discusses his health care plan in much more detail, but below are the central points.
  • All Americans could choose to keep health coverage with their current employer (if they have one) or opt for a new affordable plan through the National Health Insurance Exchange. That new entity would consist of a public health care plan like the one offered to members of Congress, as well as approved private plans with comparable coverage. Tax credits to help individuals pay for premium costs would be available on a sliding scale to needy families.
  • All Americans, regardless of their past or current health status, would be eligible for affordable health care coverage because insurance companies would be compelled to accept all citizens regardless of pre-existing conditions. Premiums would be stable and not depend on health status.
  • Benefits would be comprehensive, affordable and portable.
  • Small businesses would receive a refundable tax credit of up to 50 percent for premiums they pay on behalf of all their employees, as long as they offer a quality plan and pay for a meaningful part of the cost.
  • Large employers that do not offer quality health coverage or that do not pay a significant amount toward its cost would have to contribute a percentage of payroll toward the cost of the national plan. This does not apply to small businesses.
  • Children would have mandatory coverage, and young adults up to age 25 would have coverage through their parents' plans. Eligibility for Medicaid and SCHIP (State Children's Health Insurance Program) also would be expanded.
  • States could continue to offer health care coverage, as long as they meet the minimum standards of the national plan.

2. John McCain's plan

McCain's Web site offers some information about his plan. Below are highlights gleaned from it and other sources.
  • Health insurance plans would be offered across state lines, so that consumers residing in one state could purchase a plan based in another. This would increase competition among providers and result in greater variety to the consumer.
  • Individuals and families would receive a tax credit of $2,500 and $5,000, respectively, to offset the cost of insurance, whether offered through an employer or purchased in the private market. The money would be sent directly to the insurance provider selected by the individual or family, according to McCain's literature.
  • Currently, health care benefits received by workers from their employers are not taxed. Under McCain's proposed plan, workers would pay income taxes on the value of the provided benefit going forward.
  • Individuals with chronic ailments or pre-existing conditions would have access to "guaranteed access plan," or GAP, coverage in the states that would insure them if they are denied private insurance coverage or only offered it at very high premium costs," McCain wrote in an article for Contingencies magazine, a publication for actuaries and others in the insurance business.

In that September/October 2008 article for Contingencies magazine, McCain also writes: "Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulations."

It's an unfortunate analogy, preserved in print, I assume, before the financial crisis unfolded in recent weeks. But there it is, with the ink dry. We already know that a deregulated industry coupled with unfettered capitalism can get itself into big trouble if left to its own devices.

In the health insurance industry, though, consumers stand to lose the most, particularly those with pre-existing conditions. Medical costs contribute to a large percentage (by some accounts, half) of personal bankruptcies.

Of Obama's plan, an analysis by Urban Institute says: "The Obama plan would greatly increase health insurance coverage, but would still leave about 6 percent of the nonelderly population uninsured, compared to 17 percent today."

Of McCain's plan, it says: "By deregulating the health insurance market, the McCain plan would clearly decrease the sharing of health care risk. This would result in lower insurance costs for the young and healthy, but would increase costs and decrease access for older individuals and those with health care problems."

3. The future of employer-based care

Meanwhile, the availability of employment-based health insurance has gradually declined over the last several years, according to the Economic Policy Institute. While it's still the way most Americans obtain coverage -- some 63 percent get health insurance through work -- that's down from 68.3 percent in 2000. Private insurance has not picked up the slack -- just 6.5 percent of folks 65 and younger get insurance in the private market. Others have moved to public health insurance programs for coverage.

How would employers react to an Obama plan or a McCain plan? A survey of 187 executives responsible for health plans at U.S. companies didn't like either one, according to Plansponsor.com.

"Republican presidential hopeful John McCain has proposed to repeal the tax exclusion for employer-provided health coverage, prompting 74 percent of respondents to say the idea would be a substantial danger for employer-sponsored health coverage. His Democratic counterpart, Barack Obama, has called for compelling employers to 'pay or play' -- a notion 46 percent of respondents said would likewise hurt workplace health coverage."

It's not clear how Americans getting coverage the traditional way would fare under either system, but this we know for sure: Employers seem to be looking for reasons to stop offering health care benefits to their workers, and they can find them in either plan.

4. The cost of a new, improved health plan

It's difficult to cut through the sugar-coated (or shall we call it glucose-laced?) solutions proposed by both parties to find the bare, unsweetened facts. Arriving at a clear understanding of their costs is well-nigh impossible. Those who are trained to analyze such matters arrive at wildly disparate figures.

The Tax Policy Center estimates that over 10 years, the Obama plan will cost $1.6 trillion while McCain's will cost $1.3 trillion. The Lewin Group, a health care consulting firm, puts the tab at $1.2 trillion for the Obama plan and $2.1 trillion for McCain's plan, according to The Wall Street Journal.

Both plans promise to be expensive -- but to whom, besides the taxpayer in an abstract way? After all, taxpayers have an idea of the debt tab the government has racked up, but the day of reckoning has yet to arrive. Our national debt exceeds $10 trillion, an unimaginable sum. A news article from 1993, back when the national debt was merely a bit more than $3 trillion, states that if you count to a million at a rate of one dollar a second, it would take 11.57 days to arrive at the final figure. Counting to a billion at that rate would take 31.69 years. Guess how long it takes to count to a trillion? Try 31,688.09 years.

Just a few weeks ago, Congress dramatically increased the debt by $700 billion in one fell swoop in its effort to bail out financial companies. Why not spend something to help out individual Americans with health care costs, which increase at a much faster pace than regular inflation every year (more than 10 percent in 2008 alone, according to Buck Consultants)? Those who get health insurance from employers for their families have seen premiums increase 10 times faster than their income in recent years, according to an analysis released earlier this year by the Robert Wood Johnson foundation.

It may seem irresponsible to call for more spending on health care. But otherwise the responsibility may become ours as individuals. This responsibility is unfairly distributed because many insurance companies only extend coverage to those who have no history of health problems, leaving those who are sick and most in need of coverage in the lurch.

Longtime financial journalist Barbara Mlotek Whelehan earned a certificate of specialization in financial planning. If you have a comment or suggestion about this column, write to Boomer Bucks.

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