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|October 23-29, 2008
Rx for change
What do the presidential candidates’ health-care reform proposals mean for Coloradans?
by Dana Logan
Karen was diagnosed with breast cancer when she was 33 years old. When she received the devastating news, she was lucky enough to have the support of her friends and family. Unfortunately, she had recently changed jobs and left behind her health-insurance benefits. Though her new company offered a competitive insurance plan, a waiting period for new employees meant that she wouldn’t be eligible to apply for the benefits until she’d been with the company for at least 90 days. For Karen, that was 52 days too late.
After finding the lump, she dished out high rates to have the local clinic check it out, only to learn that her world was about to be turned upside down. The good news — if you can find anything good about a cancer diagnosis — was that the cancer was in an early stage and with proper and immediate treatment — including radiation and chemotherapy — she had an extremely good chance of survival.
The bad news, aside from the fact that she had cancer, was that, without insurance, her impending medical bills would be utterly unmanageable. After several unsuccessful attempts to gain insurance, she sought aid from the state, but found that her household income was too high to meet the assistance qualifications. Out of options, Karen was forced to choose between the care she needed to save her life and her life savings, her credit and her financial future.
She chose to be treated for her cancer and was eventually forced to file for bankruptcy.
State health-care experts say Karen’s story — a hypothetical scenario based on real-life struggles they’ve witnessed — is all too familiar to the estimated 45 million Americans who live without health insurance today.
And the uninsured aren’t the only ones at risk.
According to Dede de Percin, executive director of the consumer health-care advocacy organization Colorado Consumer Health Initiative, “the statistics around bankruptcy are that 50 percent of bankruptcy is driven by medical debt, and of those 50 percent, 70 percent have insurance and end up in bankruptcy.”
With Americans’ health and financial well-being at risk, health-care reform is on the short list of issues that Sen. Barack Obama and Sen. John McCain are focusing on in their respective campaigns for president.
Each candidate has put forth a proposal for how, if elected, he would handle the health-care crisis in America. While both candidates propose reforms that would continue to structure health insurance around private insurance markets, the plans are rooted in fundamentally different philosophies — namely, whether or not the government has a role in providing health care to its citizens.
Though not all of the details of each plan have been announced, the basic approach each candidate would take is clear. Sen. Obama would build on the current system of mixed public and private group insurance and push for shared responsibility among employers, the government and individuals, while Sen. McCain intends to place much of the responsibility of health insurance coverage on families and encourage individual market coverage through tax incentives and deregulation.
“When candidates are running for president, what you get is sort of the overall gestalt or the direction that they would like to move in a certain policy area,” says Pam Hanes, the president and CEO of Colorado Health Institute, a non-partisan, independent institute that provides policy makers with evidence and information needed to facilitate good decision-making.
“The specifics are, at this point, not as important as trying to understand where each candidate stands with regard to health-care coverage and how broad they want to go with covering the uninsured because we have, in Colorado alone, around 800,000 adults and children without health-insurance coverage,” she says.
To put it another way, 20 percent of adults in Colorado and 14 percent of kids in the state are uninsured. It’s also important to note that the statistics for uninsured adults in Colorado and throughout the nation include only adults under the age of 65, since adults over the age of 65 are covered under Medicare.
A complex “system”
“Nobody ever set out to create a health-care system in this country,” says de Percin.
But today, employer-sponsored health insurance is so familiar that its history is often taken for granted or overlooked. So why is America’s health-insurance system unique to the rest of the developed world?
“It really started during World War II when there was a wage freeze,” says de Percin.
Companies trying to compete for employees were prohibited by the federal government from raising wages, so they decided to look at benefits as a way of wooing people to work for them, she explains.
“It never was a thought-out strategy that said, ‘This is the best way to provide health insurance to people.’ It was really a strategy that said, ‘How the heck are we going to get people to work in our factory?’ It’s one reason the U.S. has this system and nobody else does,” de Percin says.
“It’s a much more complicated system because it’s actually not really a system. It’s sort of a hodgepodge of different pieces that have been put together. We have the uninsured out there. We have people with employer-sponsored insurance — and there’s a big difference between big companies that are self-insured and small companies and where they buy theirs. And then we have public programs, but those vary a lot from state to state,” she says.
And as a result, she explains, reform is extremely difficult. There are just so many pieces to the puzzle.
“I think that’s why, when it comes to health care, people really are flummoxed. How do you start to make systems change when there’s not necessarily a coherent system?”
But despite the immense challenges that this type of reform presents, a promise has been made to the American people: health-care reform is on its way. What’s yet to be seen is whose health-care reform the voters will choose for themselves and their families.
If Sen. McCain is elected, he would replace the current tax exemption for employer-provided health benefits with tax credits — $2,500 for individuals and $5,000 for families — to be used to offset the cost of purchasing employer-sponsored insurance or coverage on the individual market.
“The plan that Sen. McCain is proposing would, first and foremost, do away with the link between employer-sponsored health-insurance coverage and employees. Individuals would be given a tax credit, but if an employer chose to continue to provide health insurance, it would be after tax dollars. So a major incentive has now been lost,” says Hanes.
“From the very beginning of the institution of private health insurance in this country, it’s always been framed as an employer-sponsored benefit and that employers were incentivized to provide health insurance to their employees because it was pre-tax dollars. It’s always been that way,” says Hanes.
The biggest question that de Percin sees among consumers is what the impact of the tax credit and removing the tax exemption will mean for Coloradans, most of whom still get their insurance through their employer.
“This is kind of a radical proposal in a lot of ways because it would be the first time in the history of private insurance in this country that that pre-tax benefit would be lost,” says Hanes.
The loss of the tax benefit would mean a de facto tax increase specifically related to health care. Employers might opt to drop health-insurance benefits for their employees, meaning that the number of uninsured Coloradans might increase dramatically.
In addition to concerns about the breakdown of employer-based health-care coverage, there are also questions about the value of the tax credits McCain would offer each American individual and family.
“So you could say, ‘Now all those uninsured people will have $2,500 credit that they can go out and buy health insurance,’” says Hanes.
But that’s a tax credit, not cash in the bank, so lower-income families would still have no way to come up with the money to pay for health-insurance premiums, particularly the poorest among us, those who don’t pay taxes to begin with.
To make matters worse, the tax credit McCain has proposed covers only about half the cost of a premium.
“I also understand that the $2,500 for an individual and the $5,000 for a family does not have an inflationary factor built into it. We know medical inflation is much higher than the CPI, so one would naturally question the purchasing power,” Hanes says.
But even if the credit were to cover the cost of health-insurance premiums, those seeking coverage would likely still face struggles.
“In this state, certainly, the challenge would be both about the affordability of it and being able to get adequate coverage for that amount, but also being able to get it at all because we do not have guaranteed issue on the individual market. Insurers can refuse to insure you completely. They’re not required to offer insurance. Or, they can insure you but they can exclude whatever they want to exclude from that insurance and they can pretty much charge you anything they want. Really, it is very wild, wild west when it comes to the individual market,” says de Percin.
And Hanes isn’t sure if McCain’s plan would even accomplish its own goals.
“Fundamentally, the McCain plan is about stimulating the market — about market competition hopefully driving down the cost of health insurance when, in fact, in many ways, the factors that drive the medical inflation are not something that can be simply addressed by market competition. You have the whole supply chain behind you. It’s the cost of technology. It’s the cost of consumer demand. It’s the cost of hospitals. All of that, one could argue, is not going to necessarily be affected by stimulating the insurance market,” she says.
But with all of the concerns regarding McCain’s proposal, de Percin thinks the transition from the current system would present the biggest challenge.
“How do you ensure that people don’t lose in that process?” she wonders.
If elected on Nov. 4, Sen. Obama’s health-care reform plan — a plan that strives for universal coverage — would maintain and expand the current system in the U.S. in which employers provide coverage to their employees. Under his plan, employers (with the exception of small businesses) would be required to offer insurance coverage or to contribute to the cost of their employees’ health insurance. Small businesses would, under his plan, be eligible for tax credits to offset their premium costs.
All insurance carriers would be required to offer plans to all applicants and could not turn an applicant down due to a pre-existing condition. The guaranteed eligibility that Obama promises would apply to all private and public insurance plans.
And while, at least initially, adults would still be able to decide whether or not to be covered (and by whom), every child in America would be required to have health insurance.
“The vision, the long-range goal, is that everyone is covered in the country. But let’s start with kids. Kids are the cheapest to cover. The impact of having children without health-insurance coverage — not getting their immunizations, not getting their well-child checks, not seeing a physician once a year — the long-term costs of not investing in kids, you can’t justify it,” says Hanes.
And Obama won’t try to. Instead, he plans to offer access to affordable health care for kids and adults by working within the existing system and expanding public programs like State Children’s Health Insurance Program (SCHIP) and Medicaid.
Small businesses, self-employed individuals and those who don’t have coverage through employers, Medicaid or SCHIP would, under Obama’s plan, be able to purchase a plan through a new insurance market called the National Health Insurance Exchange. Through the exchange, individuals could choose a plan similar to what is offered to federal employees and members of Congress.
“So what Obama’s plan does is sort of take a holistic look: here’s personal responsibility, here’s employer responsibility, here’s governmental responsibility, and together, at least we’ll start with kids and hopefully we’ll move on up the food chain and make sure that everyone gets covered eventually,” says Hanes.
“The approach is that there’s kind of a shared responsibility model here. It’s not, ‘Here’s your $2,500. Go out and buy health insurance.’ It’s that there has been, historically, a role for government in ensuring health-insurance coverage for people who don’t have the wherewithal to purchase it themselves,” she says.
And de Percin explains that one of the reasons that Obama’s plan is appealing is that it builds on what we understand and what we already have.
“Tweak some pieces on the employers’ side, require all kids to have health insurance, but really, it works within a familiar system,” de Percin says.
That familiar system would be significantly altered under McCain’s plan of limited government involvement.
Even without all the details of the plans in place, it’s clear that Sen. Obama and Sen. McCain have drastically different views on the role that government ought to play in ensuring health care for the people.
“The role of government is where you get down to the basic philosophies. In the Obama plan, there is a role for government, but it’s not a government-run health-care system, which is one of the unfortunate spins that certain people have put on his proposed plan,” says de Percin.
Cost and gain
You know the saying, “There’s no such thing as a free lunch?” Well, it’s true. And there’s no such thing as free health care, either. Everything comes at a cost, whether it is in the form of tax dollars or a lack of services. And reform, especially, comes with a price tag. According to Urban/Brookings Tax Policy Center estimates released earlier this month, over 10 years, Sen. McCain’s plan would cost $1.3 trillion and Sen. Obama’s would cost $1.6 trillion.
But only shortsighted consumers look at the price tag without looking at the value. Certainly, there are a variety of ways to measure the value of each of these plans. However, when 45 million Americans are uninsured, each plan’s projected reduction of that number is clearly one good measure of the value of the proposed plans. And while the missing details in the plans make it difficult to predict exactly how each plan will play out, the Urban/Brookings Tax Policy Center used the available information to give estimates on the number of uninsured that will be covered after 10 years. Under McCain’s plan, that number is 2 million. Obama’s plan, on the other hand, would provide insurance to 34 million people who don’t currently have it.
“The cost difference is not that great between the two plans, but the coverage is substantially different if these projections are at all a reflection of the reality of what might happen in each of the plans,” says Hanes.
When Nov. 4 arrives, however, projections mean little; values mean much.
“Like public education, like public utilities, I think that health care is something that we really do have an obligation to try to provide to people. It is part of the common good. I think that is what people really need to think through,” says de Percin.
As Election Day approaches and voters make their final decisions, de Percin urges people to ask themselves two questions: “The first thing is, what do these different pieces mean for me and my family? The second thing is, what’s my value about providing health care to everyone as a common good? What do I really believe we as a society, we as a country, should be able to do for people in this country and in this state?”
To learn more about the candidates’ plans for health care reform, check out their respective websites:
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