McCain On Health Insurance

by hilzoy

The NYT on John McCain's health care speech:

"Mr. McCain’s health care plan would shift the emphasis from insurance provided by employers to insurance bought by individuals, to foster competition and drive down prices. To do so he is calling for eliminating the tax breaks that currently encourage employers to provide health insurance for their workers, and replacing them with $5,000 tax credits for families to buy their own insurance. (...)

Some health care experts question whether those tax credits would offer enough money to pay for new health insurance plans. The average cost of an employer-funded insurance plan is $12,106 for a family, according to the Kaiser Family Foundation, a health policy group. Paul B. Ginsburg, the president of the Center for Studying Health System Change, a nonpartisan research organization financed by foundations and government agencies, said, “For a lot of people, the tax credits he’s talking about would not be enough to afford coverage.”"

Not everyone has an extra $7,106 just lying around, waiting to be spent on health insurance premiums. What, I wonder, would happen to them? And wouldn't you think that eliminating tax breaks for employers who offer health insurance might make some of those employers decide to stop offering it altogether? I would, and I'm not even a member of the party whose entire economic platform is designed around the thought that people are so exquisitely sensitive to tax rates that even a relatively small cut in the capital gains tax will unleash great raging torrents of entrepreneurial energy. McCain is; and yet, curiously enough, he doesn't consider this possibility. Here's what he says about employer-based health insurance: "Many workers are perfectly content with this arrangement, and under my reform plan they would be able to keep that coverage. Their employer-provided health plans would be largely untouched and unchanged." Except for the ones whose employers stopped offering health insurance, ha ha ha.

Besides, you might be thinking ...

Don't people with pre-existing conditions have trouble buying health insurance on the individual market? Well, yes, they do. Fortunately, McCain has thought about them. Unfortunately, his thoughts are pretty stupid. "I will work tirelessly to address the problem", he says. "But I won't create another entitlement program that Washington will let get out of control." (Heaven forfend!) Instead, he proposes to build on something states have already tried: insurance pools for high-risk people. Guess what? They're very expensive, even with subsidies.

Jonathan Cohn is one of the best writers on health policy around, so I'm glad he's decided to take a look at this part of McCain's plan:

"In a speech at a Florida cancer hospital, McCain acknowledged that people with pre-existing conditions can't always buy insurance on their own. But, he says, that doesn't mean these people will be left to twist in the wind.

Instead, McCain is offering people like Edwards what he calls a "Guaranteed Access Plan." But unlike all those awful big-government entitlements the Democrats are promising--you know, the ones that (supposedly) make you wait in long lines and cut off access to high-technology treatments--McCain says his plan will let the states handle the problem by working hand-in-hand with private insurers to offer insurance for people with pre-existing conditions.

It will be the best of both worlds, McCain promises: Affordable, available insurance, but through private carriers and without the heavy hand of Washington.

It all sounds very lovely--unless you know something about health care policy, in which case it sounds absolutely preposterous. "

To illustrate, Jonathan Cohn asked an health policy expert to figure out what coverage Elizabeth Edwards might get:

"It turns out that North Carolina, where Edwards lives, doesn't actually have a high-risk pool in operation right now. (It hopes to launch one next year.) But neighboring South Carolina does. Pollitz was able to track down published figures with the rates the South Carolina pool would charge a 50-year-old man. (Edwards, a 57-year-old woman, would actually pay more.) And according to those figures, Edwards' most cost-effective option would be to choose a plan that had monthly premiums of $867 for six months, followed by $693 every month thereafter.

That plan comes with a $1,500 deductible; in other words, every year Edwards would have to pay $1,500 in medical bills before the insurance kicked in. After that, she'd have to deal with the cost-sharing until she had spent another $3,500 out of her pocket.

If you do the math, you'll see that means Edwards would end up paying more than $14,000 a year in insurance and out-of-pocket medical expenses. (At least for now. The rates go up in July.)

But wait--there's the small matter of her cancer treatment during those first six months, which South Carolina's pool, like the rest, wouldn't cover at all. (And, no, those expenses wouldn't count towards the deductible or out-of-pocket limits, either.) Given the high cost of cancer care--some drugs cost $10,000 a month--Pollitz says that her expenses could easily reach $100,000, although it'd be less if Edwards is no longer getting intensive, cutting-edge treatment.

Edwards, who is wealthy, can afford to pay those bills. But most cancer patients can't, and as Pollitz notes, "If you have cancer, if you have a tumor growing in you, you can't just let it grow for six to twelve months while you wait for the pre-existing waiting period to run out."

The result is that a lot of people with medical problems will end up deciding to forgo insurance altogether, figuring that the insurance will make it harder--not easier--to pay their bills. And those people will almost certainly do what most people without insurance do: Pay out of pocket until they're broke or cut back on their own medical care to save money, even though it could mean worse medical problems (and even higher bills) down the road."

So, in a nutshell: McCain plans to eliminate tax breaks for employers who offer health insurance. In exchange, he will offer employees less than half the cost of the plans they now have. If their employers eliminate care, they will have to swallow the difference. But those employees are the lucky ones. They will only have to cough up $7,000 or so. People with preexisting conditions or serious health risks will have to pay $100,000 as a down payment, and $14,000 a year thereafter.

But hey: at least he's going to cut the gas tax!

Plus, you'll be thrilled to know that you can avoid diseases like diabetes and heart disease all by yourselves:

"Diabetes and heart disease rates are also increasing today with rise of obesity in the United States, even among children and teenagers. We need to create a "next generation" of chronic disease prevention, early intervention, new treatment models and public health infrastructure. We need to use technology to share information on "best practices" in health care so every physician is up-to-date. We need to adopt new treatment programs and financial incentives to adopt "health habits" for those with the most common conditions such as diabetes and obesity that will improve their quality of life and reduce the costs of their treatment.

Watch your diet, walk thirty or so minutes a day, and take a few other simple precautions, and you won't have to worry about these afflictions."

Really? We don't need to worry about diabetes and heart disease at all so long as we eat right and exercise? Who knew?

It's easy to make health policy when you don't allow little things like facts to constrain you: when you can wish away chronic diseases, pretend that corporations are completely unresponsive to changes in the tax structure, and describe programs that leave people with hundreds of thousands of dollars in health care costs as "making sure that they get the high-quality coverage they need." It's just not particularly helpful. Plus, it would be even better with ponies.

Comments

[Cardinal Fang]

"Watch your diet, walk thirty or so minutes a day, and take a few other simple precautions, and you won't have to worry about these afflictions."

He doesn't list the other simple precautions, but I will: Pick your parents carefully so you don't have asthma. Don't have Type I diabetes. Don't get old.

See? Simple precautions.

[Kevin Hayden]

I was waiting for the part where he proposes the demolition of all hospitals, which would end the high costs of hospitalization.And if people would be more courteous, they'd quit complaining about how bad they feel and - stoically - just die.

His free market healthcare plan should be ripped into extinction by our press. If we had a healthy one.

[Hartmut]

http://de.wikipedia.org/wiki/Sozialvertr%C3%A4gliches_Fr%C3%BChableben>Sozialveträgliches Früh-Ableben (socially responsible early demise) is of course the first civic duty of responsible but not affluent citizens. As Plato put it: in an ideal state a citizen unable to work for more than three days should commit suicide to avoid becoming a burden on society. What was the term he proposed for that? Hm...oh yes...euthanasia!
I propose some die-ins at the Capitol to make that more popular.
[/sarcasm]

[joejoejoe]

Doesn't the US have a net negative savings rate with about 20 million people headed for negative equity in their homes? Under McCain's plan should you put money in your HSA or pay the mortgage on the house the bank owns?

[Slartibartfast]

Really? We don't need to worry about diabetes and heart disease at all so long as we eat right and exercise? Who knew?

I wouldn't have interpreted what he said that way, but I don't think I'd have said it like that. I think the basic message is: the incidence of Type II diabetes and heart disease are on the upswing, due to that we as a population are becoming increasingly overweight. Get out and walk around, and watch your diet.

Really, really obvious stuff. I'm sure people's doctors tell them this all the time, and that of course makes people change their behavior immediately.

Just kidding about that last. I'd tend to poke fun at any politician who thinks making commonsense suggestions to people is going to change their behavior in any significant way.

[Hartmut]

Politicians are probably the last persons one would take common sense advice from ;-)

[felix culpa]

Pie in the sky by and by. Pink ponies lifting into the Summer sunrise on golden wings.

The Senator’s incipient senility, vigorous as it may be (or as it may be painted to be) is inadequate to explain his ‘thinking’; after all the advisors feeding him this crap have no such excuse.

But he and his advisors and their true constituency (the wealthiest 5%) have their nanny-fortunes to keep the nanny-state threatening us all at bay.

Thank [the Reverend Haggee’s] Heaven.

And, assuredly, thank [the Reverend Haggee’s] Heaven that this famously ‘Christian Nation’
is not bound by its Gospel to bind up wounds, care for the fatherless and the widow, heal the sick, not to mention beating swords into ploughshares.

Who needs ploughshares, or widows and orphans?

Certainly not the 5% who draw their sustenance from the sword (and, well, widows and orphans).

Our Proud Nation.

Oh wait.

Their Proud Nation.

Immiseration for the rest of us.

{Runs screaming in circles until dropping in the dust, sobbing.)

[Slartibartfast]

"Politicians are probably the last persons one would take common sense advice from"

Agreed. At one time I thought to myself: it'd be nice to have some gauge of how much thought anyone at all has put into politician X's latest harebrained notion, just as some indication of whether it was ripe for my consideration. Because this business of sifting through the landfill of political speech for an occasional useful part is way too much work.

[John Thullen]

felix culpa:

Sometimes I wish I was you so people would think I wrote your commentary.

In fact, what sort of health insurance do you have? Maybe I should be you, pending the answer.

"(Runs screaming in circles until dropping in the dust, sobbing.)"

Part of McCain's plan and just what the doctor ordered. I bet you feel better now. You have the heart of a 30 year-old man, if the man hadn't been hit by a bus when he was 29.

Alright, everyone, get up and form a circle.

Undress right undress! Not you, Slart, for chrissakes! Put those little paper gowns on and feel the breeze of high deductibles zephyring up your whatevers.

Pause here and each of you pay me $1000. This you may do, Slart.

Each of you drink twenty 12-ounce glasses of water. Cross your legs. Look sharp.

Now, right face, so you're ready to run counterclockwise, as the crow flies. Keep those knees up. Say AHHHH and commence screaming. Now run in circles. That's it!

Hup! When I say "Hup!", you hup! (a free kidney stone passing to the person who can tell me what movie I'm quoting there. The horse's name was 'Whiskey')

Speaking of which, bring me a double, Nurse
Hamanahamana!

I feel better, already.

Begone, heart disease, diabetes, and distemper.

Nurse Begonia, please come over here and sit in my lap and adjust my stethoscope. Not you, Slart.

Hey, who's that dropping in the dust and sobbing? There'll be none of that, and besides, mental breakdowns and their catharses are not covered, ya universal univerts!

Keep running. I'll be right back. I have a veterinary conference in Barbados and later I'm flying to Bangalore, India to have my cuffs shot.

[Slartibartfast]

I'm flying to Bangalore, India to have my cuffs shot.

The bullets are cheaper in China, but less reliable.

[Jen Smith]

ZOMG - TEH EVIL FATZZZZ GONNA KILL YOU!!! If I hear one more politician trying to strike fear into the hearts of all Americans, I am quite literally going to barf. Cummon people as if our country doesnt have enough eating disorders! Obesity is rising but so are life expectancies.

Correlation does not equal causation and even the republicans cannot make it so.

[bperk]

I have often thought that there needs to be a way (like the tax credit McCain is suggesting) to create a robust individual market. The market is so full of restrictions and so costly that it is hardly an option. I'm not sure why a health insurance market can't be robust like the car insurance market. Right now, individuals have no control over the health insurance products because they are designed to entice groups and employers, not individuals. Health insurance that would entice individuals I imagine would look a lot more like a classic insurance that kicks in for a catastrophic amount. Right now, those with good health insurance (my federal govt plan) waste so many resources - people getting their toenails clipped by a podiatrist, people going to specialists for the mundane, dermatologist because of a skin tag. There is no disincentive to do that because it only costs $5. This kind of health insurance for all is not the answer.

[Erasmussimo]

There seems to be a weakness in the reasoning of the main article. There is a kind of negative version of "no free lunch" here. Whatever subsidies that the government gives to businesses to provide health care are ultimately transmitted to the employees. If the government removes those subsidies and instead diverts the same amount of money towards direct subsidies to the citizens, then the net government subsidy towards health care remains the same. There are only two differences:

1. The money that was previously going to a subset of Americans (employees and their families) now goes to all Americans, reducing the amount that previously went to the employees and their families.

2. Any magnification effect, positive or negative, is lost. Does a government subsidy of $1 lead to an increase in insurance to the employee of more than $1 (due to economies of scale) or less than $1 (due to employer inefficiencies)? Hard to say.

Next, I'd like to point out that, so long as we approach health care as a zero-sum game ("let's find a Paul to rob to pay for Peter's health care"), we all lose. The real task is to reduce the overall costs of health care, not shuffle the money around in creative ways. And one of the benefits of self-insurance plans is that they place more responsibility onto the individual. Let's face it, folks: the average American is a health disaster! He's overweight, doesn't exercise, eats lousy food -- he's just asking for high medical costs, and the costs he imposes are spread out over all others in employee health care programs. Anything we can do to make him aware that poor health habits cost him money will help everybody.

[Phil]

Jen: Actually, life expectancy is falling for some demographics, and is falling overall relative to many other countries. See here.

USA: Best health care in the world!

[publius]

this is outrageous - i really hope the dem candidates hammer him again and again on this.

[jugheadjack]

its what is being put into our food that is causing obesity

[SamChevre]

A factual comment.

To my knowledge, there are no subsidies to employers for providing health insurance. The subsidy is that paying an employees health insurance premium does not count as compensation to the employee, and so is untaxed; if you pay the employee more, and he buys his own insurance, the additional income IS taxed.

It would be possible, but difficult, to design a worse subsidy. It only helps the employed, whose insurers offer health insurance, and the benefits are higher as your tax bracket increases.

[Hartmut]

I see no problem in principle for health care plans with incentives towards healthier lifestyles (as opposed to punishments for "violators"). E.g. over here visiting the dentist at regular intervals will reduce your co-payment in case of a necessary treatment (and it's progressive with time). Some health insurance companies give other incentives, e.g. for giving up smoking for good (they check that you a) were indeed a smoker and b) do not relapse).

[bperk]

SamChevre

Corporations are only taxed on their profits, so the employee salary or the health plan would be the same to the employer. They are both business deductions.

[Erasmussimo]

Sam, the subsidy is not direct, but indirect. The government doesn't give more money to employers, it takes less from employees, which allows the employer to provide greater compensation to the employee. The net result is a transfer of wealth from the government to the employee.

[Yukoner]

Sen. McCain's proposal illustrates that, no matter how bad a system is, it can always be made worse.

[SamChevre]

Erasmussimo: Correct. The subsidy is to employees, not employers. (That was my point.)

[Slartibartfast]

"Correlation does not equal causation and even the republicans cannot make it so."

Clearly, Republicans are everywhere:

Among adults, clear evidence exists that surprisingly modest weight reductions can markedly reduce the development of type 2 diabetes, if not prevent it completely, in susceptible individuals, and that weight loss can reverse the type 2 diabetic state. The remarkable effect of weight loss through diet and increased activity has been demonstrated in the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) Diabetes Prevention Programme in the USA to benefit particularly the over-60s, in whom nearly three-quarters of new cases of diabetes were prevented.

Kind of like Elvis, but without the dance skills.

Seriously, don't tell me that this is the first you've heard of this, Jen.

[Jeremy]

Hilzoy,
That was pretty shrill... I hope you aren't getting yourself into the situation where you already know McCain is evil, therefore whatever he says must be wrong. Cause thats what it sounds like.

[Anthony Damiani]

I applaud McCain's plan! I think it's a fantastic way to absolutely guarantee that Universal Healthcare is implemented under whatever Democrat wins the 2012 election.

[Gary Farber]

"Cause thats what it sounds like."

Actually it sounds a lot more what it looks like, which is that Hilzoy listed a bunch of substantive policy objections, none of which you noted.

Instead, your comment is substance-free assertion; this is an unconvincing means of argument.

[hilzoy]

Jeremy: is there some part of what I said that you disagree with?

I was snarky because I think it's a dog of a proposal. If you think it's actually a good one, just let me know why.

[Hartmut]

I think noone here doubts that a healthier lifestyle will reduce the risk of certain illnesses (and weight reduction for the obese is clearly included). But to claim that the health plan of the Son of Cain will work as a real-life incentive towards that is doubtful to say the least (this does not mean that anyone here made that claim explicitly but some comments seem to me to have implied it in one way or other).
The ultimate health plan(to extremly exaggerate):
1) If you are too poor to see a doctor, you will likely put extra effort into not becoming ill => poverty is an incentive for health and shold therfore be encouraged
2) If you can't afford food, obesity will not be your main problem. Obesity is bad for your health => starvation is healthy and should be incentivized
3) Lack of excercise is not good for your health => reintroduce galley slavery for those that can't afford to visit a fitness studio daily under supervision of a medical professional
---
Unfortunately I have heard actual arguments from conservatives that the threat of starvation would be a great incentive for those lazy welfare recipients (often including the biblical "he who does not work, he should not eat either".
---
As I stated above: Yes to positive incentives for a healthier lifestyle. No to "punishments" for "violators".

[Slartibartfast]

Obesity is bad for your health => starvation is healthy and should be incentivized

Uh, no. Not in any system of logical consistency I'm aware of, anyway. Ditto for the rest of your plan. We may as well introduce point 4), which is that dead people incur no healthcare costs, so we might as well all die.

[Hartmut]

I agree that noone worth of being called human would actually propose that (I should have put the sarcasm tag on the whole thing) but unfortunately some do and others effectively do while not being that direct (and I am not talking about dystopical fiction where the theme is quite common*).
The 4) Kill the ill (or pressure them to commit suicide) was introduced in that form by Plato and comes up in almost any discussion on assisted suicide (i.e. as fears that there is a slippery slope from "help the terminably suffering" to "you should be ashamed of still being alive and burden the taxpayers/relatives/insurance comapnies/etc.").

*and not about the Nazis that actually tried to install such a system.

[Hartmut]

I might add: What people eat, if they have a real choice, is their problem. Government should be in the business of giving them that choice* and enough info (and maybe some positive incentives) to rationally make it. Not more, definitely not less.

*e.g. by taking care of food safety and preventing predatory practices of the Enron type (i.e. artificial scarcity in order to milk the victims)

[Gary Farber]

John McCain: confused, or dishonest?

[CMatt]

When you know you've always been the voice of reason on a topic, it's hard to remember all the times you said stupid things. Particularly when you'd rather not.

My bet: confused, due to intellectual dishonesty.

Self-reflection isn't Presidential, anyhow. No time for that - we have realities to make. Or at least a media narrative to prop up - which is basically the same thing (if you ignore the hollow core).

[Jeremy]

Hilzoy,

I was referring to this:

"Really? We don't need to worry about diabetes and heart disease at all so long as we eat right and exercise? Who knew?"

Thats clearly not what the quote above it was saying. The quote above was saying all things that are true. We do need to have better chronic disease prevention, early intervention, new treatment models and public health infrastructure. You obviously know that McCain isnt saying we no longer would need to worry about diabetes and heart disease at all if these things were implemented, but what you did was invented a straw man to beat up on. I agree with the substance of your post in trashing McCain's proposal on its merits - its got a lot of obvious holes in it which you rightly call out, but that went over the line for me. Thats all.