Monday, January 14, 2008

Dissecting the Democratic Front-Runners' Health Care Plans

By: Abhas Gupta
    My classmates recently held a "presidential debate" on health care where each of the candidates was represented by a student. The Republican "candidates" were hysterical, both because the student performances were extraordinary and the Republican plans themselves are laughable. I represented Senator Obama in the debate and while hope-mongering, I found that many students had broad misconceptions about the differences between Senator Clinton's and Senator Obama's health plans. I tried to address the issue of mandates in my previous post, but in my fit of anger at Krugman, I didn't communicate my views very effectively. Here's my second shot. This post examines mandates as well as other less-publicized aspects of the candidates' plans.

    Cost-Containment

    Although cost is an important component of any policy, I do not believe it is as important here as the candidates' measures to control cost growth*. The candidates' plans are very similar†. They both support prevention and chronic care initiatives. They support the government's right to negotiate drug prices and they want to level the payment gap between Medicare Advantage and traditional Medicare. They both support legislation to limit insurance companies' latitude in denying coverage to individuals. They both wish to create a national health insurance pool that is overseen by the public, similar to the Federal Employee Health Benefits Plan. Despite these commonalities, the candidates' plan do differ on several important points:
    • Insurance Industry Regulation - Obama supports the formation of a 'National Health Insurance Exchange', which is hands-down the biggest difference between the candidates' cost-cutting plans. Obama wants this central group to establish coverage criteria, even going so far as to set a minimum on the portion of premiums that must be paid out in benefits. The elements of disclosing cost and value to consumers is hinted at by Clinton's "Best Practices Institute" (discussed below), but the extent of insurance regulation is far more aggressive in the Obama plan. His plan could quickly cut tens of billions out of cost while simultaneously drawing attention to the gaps and inconsistencies in private insurance plans

    • Health Care Quality and Value - Clinton supports a "Best Practices Institute" with the goal of helping consumers make the "right care choices." Obama explicitly requires that hospitals and providers need to publicly report measures of cost and quality. I expect both proposals have the same end goal, but Clinton wants this to be a government-run effort whereas Obama enables outside groups to take on the task

    • Malpractice Reform - I previously commented on Clinton and Obama's joint letter to NEJM on making patient rights the centerpiece of malpractice reform. Clinton's plan only mentions additional physician protections, whereas Obama endorses "new models", presumably the ones they jointly outlined in the NEJM article and MEDiC bill. I previously expressed my strong support for systems-based approaches to malpractice reform. I am at a loss for why Clinton left this out of her plan‡

    • Drug Prices - Both plans want to promote generic drug use. Clinton explicitly wishes to alter patent protections to favor generic drugs. Additionally, Clinton wishes to limit (but not eliminate?) direct-to-consumer advertising, an impressive undertaking, but I'm skeptical about its legality and prospects on the floor. Obama supports the reimportation of drugs, another laudable undertaking, but I am again skeptical of its prospects

    • Electronic Medical Records - Both support a "paperless system", but Obama calls for an immediate $50 billion investment ($10 billion over 5 years) towards EMR adoption
    Both plans have impressive approaches to limiting costs. I believe the insurance exchange proposed by Obama fairly and practically addresses the need for public oversight of a privately operated insurance system. Such an exchange would have dramatic, immediate savings in health care costs and create greater competition among insurance plans.

    Coverage

    "47 million Americans do not have..." - I'm sure you've heard the stump speech. The candidates have squabbled about whose plan covers more Americans, acknowledging, though, that they both are aspiring to a truly universal health care system. Mandates often come up in the discussion of coverage--Clinton supports a mandate that all Americans purchase coverage and Obama supports a mandate only for children--but there are broad, false perceptions that the lack of a mandate implies an aversion to universal coverage. Before we get into the specifics, let's take a look at the make-up of the 47 million uninsured:
    • Duration: 45% of the uninsured remain so for less than four months
    • Age-distribution: 25% are under 18 and 14% are under 25
    • Income: 75% are under twice the poverty line
    • Employment: 46% are part-time employees, 10% are unemployed
    • Employer: 59% are employed at small businesses of less than 100 employees
    • Health: 86% consider themselves in good to excellent health
    Now let's break down how the candidates cover each of the uninsured segments...
    • Children and Young Adults (Under 25, 39% of the uninsured) - Both plans expand SCHIP to cover all children under 18, but differ in their approach to the 18 to 25-year-olds. Obama's plan is relatively simple in this regard: He enables this group to be covered under their families' plans and he expands SCHIP to cover those still uninsured. Clinton applies her health care mandate to 18-25 year olds, so these adults would have to purchase individual health insurance. Although these individuals utilize only a few billion dollars of health care annually, they will be asked to pay out tens of billions under the Clinton plan. I find this position difficult to justify, but I suppose one can argue that the development of chronic illnesses is shaped by factors early in life and thus all ages should bear an equal share of the health care pie

    • Small Business Employees (59% of the uninsured) - Both Clinton and Obama allow small businesses to pool their risk by buying into a national, public-moderated plan. Clinton mandates all small businesses to purchase health insurance, except if it has less than 25 employees. She offers tax credits to help offset these purchasing costs. Employees of small businesses with less than 25 employees would have to purchase individual insurance and would also be given tax credits to help shoulder the cost. Obama offers similar tax incentives to small businesses, but does not institute a mandate. I believe this decision is rooted in Obama's philosophy that businesses and individuals would buy health insurance if it was affordable. Assuming this is true, I suspect Obama wants to show businesses that his cost-cutting policies can slow the growth of health care costs or even reduce them. Businesses could then budget and purchase health insurance without fear of exploding benefits costs. Small businesses would then buy health care to attract competitive employees and the issue of a mandate would be subsequently moot

    • Poor Americans (75% of the uninsured) - both candidates will raise Medicaid's eligibility requirements, but neither offers any details on how many individuals will be covered. A Clinton mandate would require those who are ineligible for Medicaid (because they make slightly above the minimum income) to purchase health insurance
    I find a mandate to be simply unconscionable right now given rising health care premiums, gloomy economic projections, and rising inflation. Some harbor fears that without a mandate, the nations' healthy would elect out of insurance plans, thereby raising the premiums for everyone else. I find this claim to be unsubstantiated--there is no mandate in place now and yet the number of uninsured have largely remained steady. Also, I do not understand the rationale behind instituting a health care mandate on one hand an economic stimulus plan on the other, but I will differ to the real economists to better explain this§. I feel mandating health care would be a tremendous shock to the presently uninsured small businesses, young adults, and part-time workers. Such a plan would need to be phased in over a few years, the end result of which would not be any different than Obama's plan (assuming of course that his plan is able to control rising health care costs). Obama's advisers have stated that a mandate may be a possibility later when health care costs can be controlled.

    Like I said before, both candidates' plans are very similar, yet I am inclined to more strongly support Senator Obama's plan. I firmly believe that greater private competition in a public-defined playing field is what's needed to improve our health care system--the Obama plan's National Health Insurance Exchange most closely captures this sentiment. I also strongly oppose a mandate as a matter of principle, but more importantly, because we are likely facing a recession and a mandate would only serve to exacerbate our economic troubles.

    * I expect that both plans will probably cost within $50 billion of each other. This is rather insignificant when we are spending $2 trillion on health care and our costs are growing at 7%+ annually
    † Obama released his plan in May 2007 and Clinton released her plan in August 2007
    ‡ I suspect that Obama led the effort behind the NEJM article. The thesis of the article--making patients the centerpiece of any reforms and framing physician and litigators positions around patients--has Obama's signature all over it
    § Real economists unlike Krugman, who's at it again: in the same article, he mentions both Obama's and Hillary's economic stimulus packages and hints at their health care plans, yet he conveniently does not mention impact of a mandate on economic growth

    References:
    1. Health08.org, 2008 Presidential Candidates Health Care Proposals: Side-by-Side Summary. The Kaiser Family Foundation. September 5, 2007
    2. Health Care Spending and the Uninsured. Douglas Holtz-Eakin. Congressional Budget Office, January 28, 2004
    3. Plan for a Healthy America. Obama for America. http://www.barackobama.com/issues/healthcare/
    4. American Health Choices Plan. Hillary Clinton for President. http://www.hillaryclinton.com/feature/healthcareplan/

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