WSJ: McCain’s Health Plan embraces troubled model

Cartoon of July , 2004 by Tim Dolighan (site, email, bio)

Currently, the National Academy of Sciences is looking at the health repercussions of lacking health insurance coverage, but back in 2004, it noted,

Although America leads the world in spending on health care, it is the only wealthy, industrialized nation that does not ensure that all citizens have coverage.

So on June 2, I was interested to read the Wall Street Journal article “McCain’s Free-Market Health Plan Would Boost Role of High-Risk Pools,” by Laura Meckler and Anna Wilde Mathews. (The article is only available as a synopsis, if you’re a non-subscriber, unless you go grab a copy at the library. I happened to run across the article when I looked at the actual paper, courtesy of our local bakery and coffee shop, Bollos. )

The lede:

McCain derides government-run health care, but the high-risk pools in existence now require a heavy dose of government intervention.

Although the Journal would be expected to be sympathetic to Mr. McCain, it actually pointed out that the plan has more problems than those of his Democratic rivals. While all would continue to rely on insurance companies to shore up the system, McCain proposes a federally funded Guaranteed Access Plan to establish the high-risk health insurance pools for individuals who cannot obtain private coverage because of pre-existing medical conditions or no previous group coverage. (which doesn’t, by the way, take into account the higher premiums charged those with previous group coverage who join COBRA plans to replace their group plans.)

Take a look at the observation in the WSJ article by those who operate such plans. Douglas Stratton, chair of the National Association of State Comprehensive Health Insurance Plans, said,

There’s no way you can ever charge a premium that’s going to pay the cost of this population.

Sara Collins is an assistant vice-president at Commonwealth Fund,
a private foundation “working towards a high-performance health system.” She told the Journal, that the risk pool plans

tend not to work particularly well. States have really struggled to finance these adequately.

According to the Journal, fewer than 200,000 U.S. residents currently are enrolled in high-risk health insurance pools, which charge “high premiums and sometimes sharply restrict benefits.” In 2006, premiums provided 61% of the funds for high-risk health insurance pools, with most of the remainder of the funds — about $722 million, or an average of $3,800 per enrollee — provided by state governments.

McCain senior policy advisor, Douglas Holtz-Eakin said that McCain’s proposal would require $7 billion to $10 billion from the federal government to fund the high-risk health insurance pools. Others maintain that the estimate is “nowhere near enough, particularly given the large number of people with pre-existing conditions who would need this help if employers send their workers out to the open market.”

It makes a gal wonder what happened to the fiscally conservative maverick?

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McCain’s proposal would also replace a tax break for employees who receive health insurance from employers with a refundable tax credit of as much as $2,500 for individuals and $5,000 for families for the purchase of private coverage. As health care analyst Robert Laszewski noted back in February,

With the average cost of employer-provided family health insurance at $12,000 a year a $5,000 tax credit will often come up way short.

The candidate had unveiled his current iteration in a speech in Tampa on April 29. New York Times reporters Michael Cooper and Kevin Sack covered the topic April 3o, in “Federal Money in Health Care Plan From McCain:

His proposal to move away from employer-based coverage was similar to one that President Bush pushed for last year, to little effect. And his call for expanding coverage through market-based competition is in stark contrast to the Democrats’ proposals to move toward universal health care coverage, with government subsidies to help lower-income people afford their premiums.

McCain’s health care plan also allows insurers to operate across state lines. As noted by LA Times reporter Rong-Gong Lin II in “McCain’s health plan fails her test,” on March 30, 2008, Elizabeth Edwards voiced criticism of McCain’s proposal when she spoke at the annual meeting of the Association of Health Care Journalists on March 29.

Although mosts attention was devoted to her statement that “Neither one of us would be covered by his health policy,” (referring to her breast cancer and his melanoma), she especially criticized McCain’s provision to allow companies to sell health insurance across state lines, which his campaign website justifies as offering consumers more options and thus promoting competition.

Edwards countered that the plan would allow insurers to move their headquarters to states in which consumer protection laws are weak. Giving as an example how many credit card companies are based in Delaware, where the state’s laws are more accommodating to corporate interests, she said,

Hard-fought state-by-state protections would be lost. They mask this proposal as a cost-saving technique. This is giving insurance companies a pass.

According to the LA Times, McCain’s cheif policy advisor, Holtz-Eakin, said that

Edwards’ comments were disappointing and that they revealed she did not understand the comprehensive nature of the senator’s proposal.

Edwawrds makes her rebuttal in a guest post April 1 at ThinkProgress:

I freely admit that I am confused about the role of overnight funding in repurchase markets in the collapse of Bear Stearns. What I am not confused about is John McCain’s health care proposal. Apparently Douglas Holtz-Eakin, a senior policy advisor to McCain, thinks I do “not understand the comprehensive nature of the senator’s proposal.” The problem, Douglas, is that, despite fuzzy language and feel-good lines in the Senator’s proposal, I do understand exactly how devastating it will be…

Holtz-Eakin had also spoken to the LA Times about the

the power of competition to produce greater coverage for Americans.

Supposedly, this would reduce healthcare costs for consumers “with or without preexisting conditions.” Given the way I’ve see my health insurance company, Anthem, cherry pick, I’d like some hard data on that.

Let me give you an example from Virginia. A secondary policy with with a $1,500 deductible costs four times as much as ten years ago. How can this be?

Anthem would tell you that the plan is grandfathered and no longer exists, except for its original enrollees. There is one just like it, which you can buy for a lot less. In order to participate in the new plan, you would have to re-enroll. If you have suffered cancer and its treatment, or other health problems and enrolled in an individual policy as a “healthy Virginian” before diagnosis, you are grandfathered under the policy with the escalating premiums. If you apply for the “new plan” you will be told you now have a pre-existing condition and thus are ineligible.

Thus, Anthem can attract the young and healthy into this year’s version of the plan, and they can move on to next year’s version, until they, too, are trapped. If Anthem had not cherry-picked, while the new pool would be paying slightly more, the rest would be paying slightly less. And so it goes. The power of competition? The power of competition only works when you are not locked into your current insurer, which will only be the case when pre-existing conditions cannot be factored in. And if you say, well, the insurer is allowed to make a profit, I would ask, what is insurance for, if not a pooled risk and pooled premiums. Matthew Holt, in his May 15 critique of the McCain plan, “Half A Plan is not half a loaf,” has some figures on the “medical loss ratio” of various insurers–the college market, for instance takes in $10 in premiums for every dollar it pays out.

Of course, there is another solution, truly universal coverage. Until now, that has been banished by the specter of “socialized medicine.” But that is a topic for another day.

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