The politics of health care
Both McCain and Obama propose expensive health care plans; the experts debate the costs and benefits of both.
A panel discussion on health reform and the Presidential election was held on campus in September featuring Mark Hall, professor of social sciences and health policy and professor of law; Alison Snow Jones, a health economist and associate professor of social sciences and health policy; Michael Lawlor, professor of economics and director of the Health Policy and Administration minor; and Jonathan B. Oberlander, University of North Carolina at Chapel Hill professor and health policy scholar. The discussion was sponsored by the School of Medicine's program in bioethics, health and society, and the department of communication.
What are the basic facts about the U.S. health care system?
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Oberlander: The U.S. has the most expensive health care system in the world, yet the quality is uneven. We have 46 million people who are uninsured, including 8 million children.
Lawlor: Our health care system is largely employer based. Almost all employers with more than 200 workers — 98 percent in 2007 — offer health care benefits.
Who are the uninsured?
Lawlor: About 80 percent of those uninsured are employed. Many are just unlucky enough to work for a small employer or to have pre-existing health conditions that insurers avoid. Some working Americans who are uninsured simply do not earn enough money to be able to afford a health care plan even through their employer. Some are young people who choose not to spend money on insurance because they consider themselves low risk.
Compare the health care policies of both presidential candidates. What does Barack Obama's plan offer?
Oberlander: Obama's plan offers a modified employer mandate where all businesses will either have to offer group health insurance or pay a tax to the government to be used for health care coverage for the uninsured. There will be an exemption for very small businesses. A Health Insurance Exchange will be set up that will give access to health insurance to small businesses and the uninsured. Medical underwriting — charging people more for insurance based on risk — will be illegal. A Medicare-like plan will be created for those under 65 who cannot afford insurance, and there will be a mandate that all children must be insured. His plan will expand coverage but cost $100 billion to $120 billion.
What about John McCain's plan?
Oberlander: His plan will eliminate the tax exclusion for employer-sponsored insurance and create refundable tax credits ($2,500 and $5,000 for individuals and families) available to use to purchase private medical insurance. The plan also calls for deregulating the insurance market so that insurers can sell their products across state lines. A guaranteed access plan for the medically uninsurable in the high-risk pool is included in the program as well. His plan will cost about the same as Obama's plan.
What would deregulating the insurance industry mean?
Jones: A deregulated market will probably increase the options available for the currently uninsured, but many of the private options for high-risk individuals will also include high deductibles and low annual caps on benefits. High deductibles have a tendency to mean that people will wait to seek treatment instead of taking care of illnesses early when they are less costly to treat. Newer, less comprehensive insurance products will tend to turn the uninsured into the under-insured who will show up in hospitals with inadequate coverage instead of no coverage. Because they cannot ethically or legally be discharged when their coverage is exhausted, their costs above the annual cap will be shifted to hospitals, taxpayers, and the insured through higher fees.
What is the likelihood that health care reform will occur anytime soon?
Oberlander: First, there is a status quo that exists where the people who are making money off of the current system oppose making changes so this will make reform a challenge. Second, the budget deficit and the complexity of the congressional agenda mean health care reform could be delayed. Also, issues such as the financial crisis, sub-prime mortgage defaults and the use of military resources in Iraq and Afghanistan are pressing, and there is no certainty that health care reform will be addressed in the near future.
Hall: There are also factors that are unique to the health care industry that make change difficult. Primarily, the need for reform varies across the population. The top one percent of the population accounts for one quarter of total health care expenditures. The top 20 percent account for 80 percent of expenditures. Those who have health care and are satisfied with it need to be convinced that reform is necessary.
What special challenges exist with a plan that emphasizes private insurance as opposed to employment-base programs?
Hall: Private insurance companies are unusual entities because they are inherently suspicious of the people who want to buy their product. Individual insurance is nearly impossible for people to purchase unless they pass rigorous health-risk assessment tests to determine how likely they are to need it. In effect, health insurers offer their best rates to people who won't be likely to use their product. Employment-based systems provide a convenient pooling for risk. Individuals must be in pools for health insurance so that the risk is shared as people move from not needing care to needing care and back again over the course of their lives.
Jones: Another possible challenge to private insurance is that under McCain's proposed plan, low-risk people may leave their employer-based plans for the private market when they are able to find lower-priced insurance. Some moderate-risk employees may do the same. If this happens, employer-based insurance will become dominated by high risk/high cost individuals, and premiums will rise for those who remain in employer-provided plans. As costs rise in employer-based plans, employers will pass the increased costs to employees as lower wages and to consumers as higher prices for their products. This will tend to make employers less competitive in both labor and product markets and many will stop offering employer-based health insurance, forcing high-risk/high-cost employees into private markets or into government-sponsored high-risk pools.
Under Obama's plan, some low-risk individuals may exit employer-sponsored plans for the private insurance market if it costs less. However, the continuation of the existing tax deduction for employer-provided health insurance premiums will tend to dampen this effect. The Obama plan does a better job of providing stop gap insurance for high-risk individuals than does the McCain plan and will probably result in a reduction in and better coverage for the currently involuntarily uninsured.
Neither plan satisfactorily addresses the problem of low-risk/low-cost free riders who opt out of health insurance markets, but must still be treated when they show up in hospital emergency departments and need treatment for which they are unable to pay out of pocket.
What changes do you see for health insurance?
Oberlander: Without health reform we will get more of the same: higher costs, more uninsured and increasingly strained federal and state budgets.
Lawlor: I think there will be a move by providers toward greater use of uniform and portable electronic health records. This would make recordkeeping, treatments and management based on objective data much more efficient. It would also cut costs and provide information for insurers who are interested in paying for cost-effective treatments. The total overhead and management costs for the U.S. health care system, which are quite high by international standards, would be reduced and rationalized by the change.
Hall: We are likely to see even well-insured patients having to bear more of the costs of their treatment through higher co-payments and deductibles. People might want to set up tax-sheltered "health savings accounts" to provide a cushion for having to pay more out of pocket.
Jones: If the financial crisis pushes us into recession, each one-percentage point rise in unemployment will translate into roughly 1.5 million U.S. jobs lost. Each lost job will mean lost health insurance coverage, often for an entire family. In any other developed country, a downturn in the economy does not place middle- and working-class families at risk of losing their health insurance or, in the event of a serious illness, their life savings, their home, and even their life when they lose their job.
Losses like this have not only ethical implications but economic efficiency implications since most U.S. families cannot afford the $12,000 premiums they would have to pay out of pocket to maintain health insurance while unemployed. It may be time to re-examine the ethical and efficiency aspects of publicly sponsored health insurance, subsidized premiums for those who are unemployed or unable to work, and social safety nets generally.
