Now that McCain is the presumptive GOP Presidential nominee, I’ll be spending a bit more time analyzing his health care plan. I’ve examined his plan before, but the Senator has made some progress, refining concepts and defining specifics.
First, lets find out how much this trip on the ‘straight talk express’ will cost.
According to McCain’s website, the plan will “eliminate the bias toward employer-sponsored health insurance, and provide all individuals with a $2,500 tax credit ($5,000 for families) to increase incentives for insurance coverage.”
“All” evidently means just that – no income indexing, cap based on total taxpayer income, or any other means test. Folks making a gazillion bucks get the same credit as those earning income below the poverty level.
McCain would likely take the revenue created by repealing the employer tax breaks for health insurance (noted in his proposals) to fund his plan’s new health tax credits. The result? The cost of the tax credits would be $206 billion in FY 2009 and $3.6 trillion over 10 years.
Notably, nowhere on McCain’s website or in his policy papers does he say what the plan will cost. But his statements leave little doubt as to what he wants to do, and the Joint Committee on Taxation’s report on the McCain health plan clearly demonstrates the financial impact of his plan.
Equally notable, Douglas Holtz-Eakin, one of McCain’s key advisers agreed that his plan would increase the budget deficit, saying “It will make deficits expand up front, no question…” (Holtz goes on to say that helping corporations helps workers…)
McCain’s plan will cost more than either the Clinton or Obama plans. To figure out whether it will be worth it, we’ll have to consider whether the $2500/5000 credit will be enough to help folks actually buy insurance and reduce the number of uninsured.

I watched Sen. John Mccain’s victory speech Tuesday night, listening as he trudged thru assaults on his opposition’s likely positions on issues ranging from Iraq to taxes. He then made one of the least intelligent ad I’ll-founded claims I’ve heard in presidential politics; Mccain claimed the US has the best health system in the world.
You could chalk this amazingly wrong characterization as just another pander, more raw meat for the adoring audience in the hall.
Or you could see it as a verbal faux pas of dramatic prorportion. Most Americans’ view of our benighted health care ‘system’ is it OSS anything but the best in the world – when you spend twice as much as the average developed nation which ranks well below average in most indicators of quality, its hard to justify any level of approval.
Which is how the real audience- the one outside the hall- likely saw the Senator’s comment. If you are lying in bed trying to figure out how your company will be able to afford healthcare, or you are locked in a job due to a pre-existing condition or have to choose between heat or drugs or have a kid without insurance and a bad ear infection you’d just be incredulous.
How can anyone think McCain can fix a problem if he doesn’t even acknowledge its existence?

Florida’s Governor Charlie Crist (R) has proposed a stripped-down health plan with coverage for the basics – physician visits, emergency care, hospitalizations, and drugs, for $150 a month. He’s not setting the benefits, but rather proposing that commercial insurers develop their own plans.
There’s a lot to like about hizzoner’s proposal.
First, Crist wants guaranteed issue – insurers won’t be able to turn someone down for pre-existing conditions.
Second, families will be able to include their kids on their plans up till age 30. This does a couple things – many ‘free riders’ are the young newly-employed who would rather use their cash for stuff besides health insurance (and who wouldn’t?). This eliminates many of the free riders, makes sure they are covered, and thereby reduces the need for hospitals and other providers to deliver care for free when these kids run their motorcycles into walls.
Third, the state would increase its efforts to locate and cover children eligible for insurance under Florida’s KidCare program.
Nothing’s perfect, and the Governor’s plan does have one rather big problem. He wants to eliminate the Certificate of Need program which requires providers to jump thru regulatory hoops before they can open certain kinds of facilities. Unfortunately, in health care supply creates demand, and the end of the CoN process in Florida will increase costs.
Thanks to Florida HealthNews for the tip.

This is a two-part answer. Both have essentially identical cost containment mechanisms. But will these mechanisms have a material impact on costs?
Here’s my take.
Pools – both look to reduce administrative expenses by providing insurance thru and ‘managing’ insurers by centralized insurance buying pools. Both would set up national mechanisms – Clinton thru the existing FEHBP and Obama via a new Health Insurance Exchance. My take – this will help cut admin costs by a few points.
Disease prevention – relatively minor policy differences – both will require coverage of preventive care and increase funding for some public health initiatives. My take – this should help reduce costs – but over the long term – by spotting disease early, thereby reducing cost of treatment. It will also improve GDP as the early detection will prolong lives of workers. Costs may well increase somewhat over the near term as the previously uninsured get lots of care for all their newly-discovered conditions.
High cost cases – Obama will reimburse employers for a portion of an individual’s over a per-person threshold if the payer uses the funds to reduce premiums. Clinton’s plan is silent on these. My take – no impact on costs. I don’t like risk transfers, as there is no incentive for the primary risk taker to manage cases which they think will become high-cost, and no incentive once these cases have pierced the threshold.

Continue reading Which health plan controls costs, Obama’s or Clinton’s?

I’m not a big fan of risk adjustment. The case for risk adjustment is pretty simple; insurance carriers should not be penalized if the folks who sign up for their plan are sicker, and therefore require more care, than average.
To make the market ‘fair’, risk adjustment advocates believe that the plans with lower costs (presumably due to their ‘healthier’ population) should send money to the plans with higher costs. There are several risk adjustment models in place, each with its own features. Germany’s system is an oft-cited example where adjustments for age, sex, disability, and level of sick pay benefits are calculated. The Dutch also look at age, sex, and disability status, and add employment status and region to their formula. The Israelis, Swiss, and Belgians also employ risk adjustment techniques; and each methodology has significant problems. To be sure, these countries are working on improving their techniques and formulae, but they all have been doing this for years and still find challenges.
But say these countries find the right algorithm, and figure out how to make the risk adjusment system ‘fair’. What then?
A massive deviation towards the mean – all insurers will become ‘average’. The logical problem is obvious – a risk adjustment eliminates any reason for an insurer to invest in keeping their insureds healthy, to effectively manage care, to seek out the best providers and help them deliver the best, most cost-effective care. Instead, it de-motivates insurers – there is no reason to work hard to improve health status and outcomes and minimize cost if there is no financial reward for success.
If insurers have no motivation to control medical costs, they won’t. Instead, health plans will slash costs, eliminate programs and jobs, and ignore results.
Risk adjustment assumes that regulators will not prevent insurers from exercising their well-honed risk selection skills; the transfer mechanism is a kind of backstop to ensure that even if those wiley insurance execs do fool the regulators, their trickery will not pay off.
I’ll grant that some insurers will try whatever they can wherever then can whenever they can to get ahead, and (pause, cross fingers) if some day we have universal coverage and ban medical underwriting and target marketing that will not change . There are always going to be cheaters – that’s why we have whistleblower laws, and Federal agents, and prosecutors, and jails. No, we’re not going to catch all of them.
But I don’t think they will cause nearly enough pain to offset the gains we will enjoy when insurance companies finally start turning their brains from risk selection to keeping us healthy.
And the only way to motivate that behavior is to reward those insurers that do it well.

Encourage people to eat and smoke more.
Because they die sooner, and, believe it or not, end up incurring lower health care costs than their healthier brethren.
That’s the rather uncomfortable conclusion of a Dutch study reported by our colleague Bob Laszewski on Health Care Policy and Marketplace Review. According to an article on the report, “from age 20 to 56, obese people racked up the most expensive health costs. But because both the smokers and the obese people died sooner than the healthy group, it cost less to treat them in the long run.”
The net cost differential in favor of the unhealthy folks was 12%, or $45,000.
The study was an academic extrapolation of data, and was not based on actual claims information. And there’s one significant problem with the conclusion -given how fat we Americans are getting, our costs should be heading down, and fast.

Despite the foaming at the mouth, gnashing of teeth and rending of hair by Rush Limbaugh, Ann Coulter, and the rest of the attack-dog right, the presumptive GOP Presidential nominee is John McCain. Unless he steps in front of a (literal) train the Arizona Senator is it.
For voters unconcerned about health care, and generally Republican in orientation, McCain wins.
But a good chunk of GOP voters are in favor of significant health care reform. As I noted in a post last month, fully 65% would support reform that helped reduce the number of uninsured.
Another poll, from last June, broke the GOP respondents into several groups. “Moralists” were the largest single group, accounting for 24% of all Republicans. Among the ‘moralists’, 48% were in favor of universal coverage. This segment is predominantly Born Again or Evangelical, poorer than the average, and disproportionately female.
13% of those polled were identified as “government knows best” Republicans. The GKB folks were typically female and McCain fans, and fully 93% were supportive of universal coverage.
The third group, ‘Heartland’ Republicans (also 13%), were also McCain backers. Predominantly midwesterners, 72% supported universal coverage.
McCain has his issues with the religious wing of the GOP, and they certainly have issues with him. The Senator’s ‘non-reform reform plan’ will do little to strengthen his case with this large bloc.
Looking at the electoral map, McCain has to win big in the midwest – the home of the Heartland folks. He also has to hold onto as many female voters as possible. Again, his reform plank does nothing to help his cause with midwestern Republicans, much less female midwesterners.
Polls can be misleading, old, or just plain wrong. But it is clear that a substantial portion of the GOP faithful want health care fixed. While Obama’s plan falls short of universal coverage, it represents a much more comprehensive answer than McCain’s. And Clinton’s universal coverage requirement is obvious enough even to the most casual voter.
The GOP is in rough shape heading into this election. Iraq, the economy, corruption, and arrogance are all going to dog McCain. If the economy continues to deteriorate and more lose their jobs and health coverage, McCain is going to find himself on the wrong side of an issue critical to many in his base.

But his opponent will have a decidedly stronger message.

Yet another comparison of the Obama and Clinton health care plans shows (again) that Obama’s claims that his plan is ‘universal coverage’ are fallacious. This analysis, performed by the good folk at FactCheck.org, provides an excellent synopsis of the plans as well as their likely impact on the uninsured.
The net is this – without an individual mandate, between 15 and 26 million Americans will likely remain uninsured. Obama’s plan does not have an individual mandate. Period.
With a mandate, a few million will slip thru the cracks – like the Medicaid-eligibles who fail to enroll.