Health as an issue in the US election – Health Policy Today, 8th October 2008

In 27 days time, voters in the US will decide between Barack Obama and John McCain in an election that will have ramifications for the rest of the world.  Drawing on recent analysis in the BMJ and this week’s Economist, this issue looks at the two candidates’ positions on healthcare, an issue that 44% of US voters place among their top three concerns.

In the 1960s, when Medicare was founded, it seemed this would be the first step towards universal coverage, but subsequent steps were never taken.  

WHY IS REFORM SO DIFFICULT?
In the BMJ,  Vidha Alakeson , argued that ‘two facts begin to explain the puzzle: 94% if Americans who vote have health insurance and nearly three quarters of people who have insurance think that what they have is either good or excellent.’  The implication is that voters do not want radical reform, and therefore there is no pressure on politicians to deliver it.

Yet a need to reform the US system has been a political issue for years.  The Economist this week argues that two issues have made this impossible.  ‘The first is expense.  Costs in this sector have been soaring for decades’.  Unchecked, ‘the Congressional Budget Office estimates that Medicare and Medicaid will soar to 20% of GDP by 2050’.  ‘The second big headache is coverage’, which drives up costs too, because expensive emergency care for the uninsured is subsidised by premiums and creates no incentives for preventative measures.

Therefore ‘reforming the system will require addressing both cost and coverage together’.


COST VERSUS COVERAGE

The emphasis, since Hilary Clinton’s failed attempt to promote universal coverage, has been cost.  The Clinton administration ‘attempted to slash costs through the “managed care” movement, which was hated for restricting patients’ choices.’  George Bush has promoted health savings account, but his attempts to cut costs are overshadowed, says The Economist, by his ‘bowing to a demand in 2006 from the elderly for subsidised prescription drugs at a cost of perhaps $500bn’.  This ‘almost certainly fuelled another round of nasty health-cost inflation’.

Although both McCain and Obama say that their proposals will address both cost and coverage, The Economist says, ‘this is not so’.  The candidates differ in their emphasis.  ‘Look closely and it becomes clear that the two men have, in fact, made a clear choice to go after one of the two goals with more gusto.  Mr Obama’s plan focuses on coverage, while Mr McCain aims at cost’.


OBAMA’S HEALTH PLAN

Obama’s most popular promise is to extend healthcare coverage, working towards a universal scheme.  

Obama aims to achieve wider coverage ‘through a mix of new regulations, policy reforms and subsidies.  ‘Under his plan insurers would no longer have the right to reject anyone as too ill or too costly’.  He would create a ‘National Health Insurance Marketplace’ where private plans and public alternatives, modelled on Medicare, would be available.  Only those with less than 12 employees would be able to avoid a requirement to fund health plans.  Those who ought to and don’t will be fined.

With one crucial difference: it is based on the Massachusetts 2006 plan.  It is ‘designed to fill the gap between Medicaid at the bottom and employer-based insurance at the top.  The crucial difference from the Massachusetts plan is that it does not mandate individuals to buy a plan.

The Economist cites Hilary Clinton’s objections to Obama’s plan, made while they were competing for the Democratic nomination.  She didn’t think the plan would work without a legal requirement on individuals to buy an insurance plan.  Reform will be stymied without a mandate because of the problems of adverse selection, with healthy people avoiding adding their money into the pool, leaving a more difficult casemix amongst the insured.

As Alekeson writes in the BMJ, ‘for insurance pools to be cost-effective, the healthy have to buy in to offset the costs of treating the sick’.

One plus point from Obama’s plan is that is does require children to be insured (even if not their parents).


McCAIN’S ALTERNATIVE

John McCain says he will remove the tax advantage enjoyed by employer-provided health insurance, making it cheaper than deals gained by individuals purchasing directly from an insurance firm.
 
Says The Economist, ‘Mr McCain’s reforms would replace that corporate subsidy with a refundable tax credit, worth up to $5,000 per family, for people to buy their own insurance from anyone they like. He would allow them to purchase insurance across state lines and through such organisations as churches. Unlike Mr Obama, he will not force insurers to accept everyone, but he will offer federal funding for state-run “high-risk pools” which (he claims) will defray the cost of covering the sickest.’

Barbara Markham Smith, writing in the BMJ, explains the most radical part of Mr McCain’s plan.  He proposes ‘to substitute the tax emption with a universal flat tax credit of $2500 for individuals and $5000 for families’.  His aim is to shift people away from group plans and into insurance plans and to ‘free the insurance industry from state based regulation that currently requires minimum benefit levels.

‘Mr McCain expects that this unfettered market opportunity will entice insurance companies to start offering low benefit, low cost options.’  Markham Smith believes ‘this will create strong financial incentives to buy policies with fewer benefits’.

The fundamental flaw in McCain’s plan is that his tax benefit does not make health insurance affordable.  The most fragmented part of the insurance industry, catering to individuals, charges $12,000 for a comprehensive policy.  A $2,500 rebate leaves a large short-fall.

Markham-Smith argues that ‘adding dollars to the individual market subsidises the least efficient, administratively top heavy, most exclusionary part of the system.  Put another way, this approach could eliminate existing employer coverage for many families while providing no robust alternative source of insurance’.  


THE CHOICE

In response to the question, ‘who would do a better job on healthcare?’, Barack Obama polls over 40% support with McCain receiving less than 30.  But in reality, the US election will not be decided by health policy but by the candidates’ economic stance.  

It could be argued, however, that attitudes to health and economic reform are closely related.

Writing in the BMJ, Alakeson clearly believes that a move toward universal coverage is right.  She says the US should build on Medicare with its low administrative costs and existing infrastructure.  The problem, however, is that ‘the most promising solutions on paper are often the least popular with American voters because they involve giving up too much of what they already have’, particular patient choice. ‘Unlike citizens in other nations, Americans do not naturally turn towards government to tackle social problems.  On the contrary, the average American is more concerned about government failure than market failure’.

It may be that the recent economic crisis has changed this view.  While ‘fear of a big government solution was one of the reasons for the failure of the Clinton health plan 15 years ago’, the experience of the last few weeks may lead to a political change and a view that the government can play a productive role in spreading risk and protecting vulnerable members of society.

Obama’s plan promises to cover more people, but at a high cost.  McCain’s plan is likely to cover less people but it will help to remove the link between healthcare and employer contributions, which is a major obstacle to reforming the system.

Alekeson writes, ‘McCain’s proposals are unlikely to make any dents in the numbers who are uninsured.  Even with the new tax credit, premiums for people with pre-existing conditions will remain unaffordable.  Mr Obama’s plan will give more people access to insurance but with the real risk of exploding costs’.

The Economist says Obama’s plan is winning more people over amid ‘an increasingly common view that this is a scandal for a country as rich as America – never mind the 46 million people with no health insurance at all – voters may prefer the plan that promises to cover everyone quickly, and let future voters worry about the cost’.

Markham-Smith concludes, ‘the key differences between the plans are views of what drives health system costs.  The McCain plan reflects the belief that aggregate individual choices drive health spending.  Thus, Mr McCain focuses on shifting costs to individuals to drive down demand for health services and limit benefits.  Mr Obama’s plan reflects a view that individuals have little control over total health system costs and the large market forces must be harnessed to bring down costs and improve access’.

As in England, a real political challenge in Britain as well as America is to engage the public in a discussion of the financial implications of their choices.