Politicians promise many things. During the 1988 Republican convention, candidate George H. W. Bush stated “read my lips, no new taxes”. In the campaign for the 1992 election, candidate Clinton repeatedly promised middle class tax cuts.1 However, once elected, neither of these Presidents followed through on their promise. Similarly, the current candidates for President have already begun changing their minds. Senator McCain (R-AZ) initially voted against the tax cut proposal advanced by the current President Bush but now says he would keep it in place.2 McCain was also opposed to offshore oil drilling but now thinks it might be a good idea.3 Likewise, Senator Obama (D-IL), while competing for the Democrat nomination, repeatedly stated that he would withdraw our troops from Iraq beginning on day one of his presidency and would have all combat troops out of Iraq by the end of March 2009.5 Now, after securing the nomination, he states that he will need to consult with the commanders in the field first and a complete withdrawal of troops will not be completed until a minimum of mid 2010.6 Additionally, when previously asked by the Chicago Tribune what he thought of the Washington D. C. handgun ban, Obama stated that the ban was constitutional and then, after the Supreme Court ruled that the gun ban was unconstitutional, Obama stated he agreed with the Supreme Court ruling. In the process of seeking victory, politicians tend to “adjust” or “grow” or “tack to the middle” as national opinion polls shift. The term for this is “political expediency”. We should understand the inherent existence of political expediency within the campaign process and not become enamored with any candidate’s “laundry list” of policy proposals and assume all (or any) of these promises will become law. If any readers are interested in the list, both Obama and McCain have very long lists of proposals that are readily accessible at their respective Internet web sites. 7,8 However, I would rather focus on the system of health care and how it might (or might not) change under the next President.Let’s begin by stating that neither candidate is particularly positive or negative about nurses in particular or the profession of nursing in general. In fact, nursing as a profession is barely mentioned on either Internet site. That said; let’s begin to examine their proposals. Traditionally, we view health policy through the triple lens of cost, quality and access. It is not surprising to find that both candidates make the broad claim that should they be elected, access will increase, quality will be enhanced and costs will be reduced. However, the two candidates differ sharply on their focus. That is, McCain seems to target his policy prescriptions toward cost and Obama targets access. Therefore, prior to examining what each would do to improve access or constrain cost, let’s see where we presently stand in each of these broad areas.
Access: Although there are many facets of access, when we think of access in the broadest sense, we invariably think of the uninsured. We are told that there are approximately 47 million uninsured in the United States. In order to help make intelligent choices about something as important as national health care policy we should first find out who the uninsured are before we set about trying to address the problem. The Kaiser Family Foundation issued a health policy report in 2007 that provided some numbers based on census data.9 Although some of these numbers overlap, they do help provide additional insight into the definition of the problem. Of the 47 million uninsured, approximately 12.5 million have annual family incomes greater than $50,000 and 4 million have family incomes in excess of $75,000. Roughly 12.6 million are not American citizens. About 19 million are adults between the age of 18 and 34 and, as we all know, younger people are less likely to require health care. According to another report, roughly 9 million are persons already on or eligible for Medicaid and another 3.5 million are eligible for other government health care programs. Finally, the vast majority of the uninsured are in and out of health coverage mostly as a result of changing jobs and are, therefore, not intractably without coverage.10 Good people can look at these additional numbers and disagree as to whether there is a crisis in health insurance access but the additional information should help provide clarity as that argument takes place.
Cost: The gross domestic product of the United States is approximately $13.84 trillion11 of which we currently spend over $2 trillion12 on health care. This represents 16% of all goods and services produced in the country. Federal and state governments currently spend $413 billion on Medicare13, $303 billion on Medicaid14 and 8.7 billion on the State-Children’s Health Program15 (S-CHIP). Although that represents a significant portion of national spending it is not current spending alone that worries policymakers. The government, through its programs, makes promises to citizens going out into the future. For example, we are all promised health care through Medicare when we are older even if we are young now. These promises are counted actuarially as unfunded liabilities or promises to pay. The current promises (unfunded liabilities) of the United States to its citizens total $57 trillion. Much of this unfunded future liability involves health care and includes $30.4 trillion for Medicare, $1.13 trillion for disabled veterans, $ 1 trillion for state and local retirement health plans and $834 billion for military retirement health plans. These numbers will probably become worse as the “baby boomers” continue to age and reach retirement status. But, to be fair, the United States has always increased its productivity over time so it may be easier to pay for $57 trillion in promises in the future as our productivity increases. However, I think we can all agree that this is a lot of money and will have to be paid for someday with some combination of higher taxes, reduced benefits or inflation of the dollar.
There are many challenges in making our health care system more efficient for more people. Individual people and interested stakeholders may disagree on which problems should take priority but, in my opinion; the twin problems of ongoing unsustainable cost and the difficulty of the uninsured accessing efficient care dwarf all others. Both candidates are offering significant structural changes in the manner that the country allocates its precious health care resources. Both candidates, if they enacted their ideas, would significantly change the fundamental system of healthcare in America. Both candidates talk about many of the same ideas but both candidates have very bold ideas about the fundamental system of care delivery in America. With that in mind, let’s look at the candidates’ proposals (in alphabetical order) and focus on their differences.
McCain7: McCain seeks to decouple private health insurance from employment exclusively and give individual citizens and families more control over their health care dollars. Currently, almost all private insurance is bought through employment at a reduced rate because of the current government subsidy that results from the tax deductibility of every dollar spent on the purchase of insurance by the employer for the employee. Individual purchasers of health insurance can also deduct the cost from their gross income but the high spending thresholds required by the government to take advantage of these deductions results in less than a dollar for dollar deduction. In effect, the government currently favors employment based coverage over individual coverage by making employment based coverage cheaper. Additionally, those without employment based coverage must have the resources to spend on insurance in the first place in order to eventually receive the tax deduction from the government.
McCain’s plan would offer all citizens a refundable tax credit totaling $2500 per individual and $5000 per family to purchase health insurance. By definition, a tax credit, as opposed to a tax deduction, means that the tax savings are dollar for dollar and not just a percentage of income. The refundable nature of the credit means that even those citizens without $5000 in income would receive a $5000 check from the government in order to pay for health insurance. The option to use the employer as a means to acquire health insurance remains open but is not required and if money is left over after the purchase of health insurance the balance would be deposited into a health savings account and become the property of the citizen or family. In other words, McCain seeks to incentivize individuals to purchase health insurance with an eye towards price because what they do not spend on insurance or care becomes their property. I was initially skeptical of the $2500 tax credit for individuals but, after a little research, I discovered that a 25 year-old can currently purchase a high deductible ($5000) health insurance policy that includes prevention, vaccinations and check-ups for $83 a month which is less than $1000 per year.
To help open insurance markets to individual consumers, McCain would remove the current government restriction on insurance companies which prohibits the selling of many health insurance products across state lines. Additionally, he wants public transparency of all health care goods and services, including insurance products, with regards to quality and price. He believes that incentivized consumers armed price and quality information will make more efficient purchasing decisions and that, with government help in the form of refundable tax credits, more citizens will have the means to enter that marketplace.
Additionally, there are groups of individuals who are, in effect, uninsurable. The costs of providing them care are too great for an insurance product to work efficiently. Therefore, McCain proposes “Guaranteed Access Plans” whereby individual states, coupled with financial assistance from the federal government, would form high-risk pools of patients through a non-profit entity tasked with covering these patients. Individual states would be allowed to group their high risk pools with other states thereby enlarging the pool and lowering overhead costs. However, this would be a costly pool of patients and the costs would be primarily borne by taxpayers.
Obama8: Obama seeks to create a new nationalized health care plan whereby every single American can buy “affordable” health coverage. The comprehensive coverage available under the plan would be similar to the coverage provided to the U. S. Congress under the Federal Employees Health Benefit Program (FEHBP) and would include medical services, prevention and mental health benefits. If an individual or family cannot afford the plan they would be provided a federal subsidy. Obama would mandate that all children have health care coverage including young adults up to the age of 25. Additionally, he would expand coverage under the SCHIP program and Medicaid though he does not mention what that expansion would entail.
For those citizens who wish to maintain their private insurance coverage, Obama would create a “National Health Insurance Exchange” to ensure fairness. All private insurance plans would be required to have coverage that is at least as generous as the national plan. The Exchange would ensure that no one was turned away (guaranteed access) regardless of preexisting conditions and that the premiums charged were fair and stable. The Exchange would also make public the differences among all plans. To help pay for this expansion of benefits, Obama would institute a “play or pay” program whereby all employers would either have to provide quality health coverage to their employees or they would be required to pay a percentage of their payroll to the government that would then be used to help fund the national plan. In this way, those employees working for an employer that did not provide coverage would be able to purchase health insurance through the aforementioned national plan. There would be an exception for smaller employers based on revenue thresholds but these exceptions are not specified by Obama.
Like McCain, Obama would allow Americans to re-import drugs from other countries if they were less expensive and safe. Unlike McCain, Obama would, for the first time, allow the federal government to negotiate directly with pharmaceutical companies regarding the cost of drugs to federal beneficiaries, Under Obama, the number of federal beneficiaries would greatly increase and, therefore, the federal government would have a great deal of leverage during these price negotiations.
Obama’s plan would not get all the way to 100% universal health insurance coverage but it would get much closer than we are today. The only people who would not have health insurance would be those that chose not to purchase into the national plan and were either unemployed or worked for an employer that did not offer health insurance coverage. Additionally, for the first time, the government would be required to offer mental health benefits on a par with “physical health” benefits.
Analysis: Neither McCain nor Obama have a perfect solution. The American healthcare system as it is presently construed is, frankly, a mess. In economics, equilibrium occurs when supply meets demand. However, we have a system where demand for services exceeds supply and this reality is increasingly getting worse.
1. We are living longer and there are more of us. Simple demographics dictate that a population that is increasing and aging at the same time will demand more health care services. This is not surprising.
2. We demand that insurance cover everything. In other insurance markets, we only collect when terrible and expensive things happen like a fire (homeowners insurance), accidents (car insurance) or death (life insurance). However, we expect health insurance to pay for everything, even the most trivial of goods and services. Because health insurance covers trivial and inexpensive things, we use more of it and, thus demand more.
3. Unlike other goods and services, we expect the very, very best regardless of cost. In other markets we weigh the additional cost against the additional benefit and make rational decisions about whether the added value is worth the additional cost. In healthcare, because insurance shields us from the true cost, if any good or service is a “teeny-weeny” bit better, we demand it regardless of cost.
McCain and Obama both see the data and the history of healthcare provision and both have concluded (correctly) that the current system is unsustainable. McCain sees a potential market solution and Obama sees a government solution. Both candidates have problems.
In theory, McCain’s vision could work. If people get refundable tax credits and increase their use of Health Savings Accounts, we could see millions of incentivized consumers shopping for the best value when they consume healthcare goods and services. If people have accurate quality and price information and have an incentive to search for the best deal, they will put downward pressure on the cost of care. For younger Americans, a high deductible policy might be good enough. It would cover the motorcycle accident or other tragic and expensive events and the tax credit would be enough to cover it. To repeat, in theory it could work. However, McCain has some questions to answer.
1. We have a culture of consuming healthcare through an insurance product. How will you change this entrenched culture and motivate people to take control of their healthcare?
2. Young people would have the opportunity to purchase high deductible insurance. What makes you think that they will choose to do so? What if they do not? Would you compel them?
3. People need accurate price information in order to make informed purchasing decisions. How will you do this? What price will they see? Will you compel all providers of goods and services to disclose their prices? What if they don’t? Will it be the true cost? Will it be the cost that insurance companies negotiate for? Who determines which cost the consumer will see? Will companies be bound to provide goods and services at the price consumers see? How will consumers get this information? Will it be on the Internet? How will that work with older people who are not as computer savvy? How will the information be updated?
4. People need accurate quality information also. How will this occur? When confronted with inferior quality indicators, providers will always claim that their patients were sicker. Will a quality based information system compel providers into not accepting sicker patients because they fear worse outcomes? Will the data be aggregated? Will lawyers have access to it? What about privacy?
It is possible that McCain has reasonable answers to these questions but those answers have not yet been provided to us.
Obama definitely wants to utilize the power of government to ensure fairness and equality and the government certainly has the power to do so. There would definitely be a greater number of people with coverage. However, the historic arguments against such a system involve cost and quality. Simply stating that cost will go down or that quality will improve does not make it so. The history in other countries that have taken the government route is that waiting times are extended and some services are restricted. So, here are some questions for Obama which he has not yet answered.
1. You want the government to negotiate prices with pharmaceutical companies. However, under your system, the government would be (almost) a monopoly buyer of prescription drugs and, as such, would have immense power to not simply negotiate prices but to, in effect, set prices. What will this do to innovation in the drug industry? How many valuable drugs will not be invented and utilized because you have reduced the incentive to innovate?
2. You will be adding many millions of people as carriers of insurance coverage. Demand for services will definitely soar. Unless you have repealed the law of supply and demand, prices will also soar. Are you eventually going to have to reduce the number of services covered or make people wait longer to get those services? These are the choices that other government “run” healthcare systems have to face. Which do you choose?
3. You envision a National Health Council be formed to determine fair pricing. How do they know what is fair? Additionally, are you concerned with fairness to the patients or fairness to the providers or fairness to the taxpayers? It can’t be fair to all of them because they all have competing interests.
4. You want everyone covered up to the age of 25 and you want the National Health Council to determine what should and should not be included in the coverage. Aren’t you transferring wealth from the young and healthy to the old and sick? If all employers are required to pay for benefits, won’t the wages of young employees suffer in order to pay for health services they statistically will not use?
5. If you require all businesses (with some exceptions) to play or pay, how many businesses are you prepared to let go bankrupt in order to accomplish this policy. The small business sector has been the engine of new job creation in this country for decades and small businesses function at very narrow profit margins already. Some (many) will definitely not survive. How much additional unemployment is acceptable?
6. You want the government to make binding decisions on many, many aspects of health care. However, the health care system that this same government currently has the most control over is Medicare and that program has an unfunded liability of over 31 trillion dollars. Why should we have any confidence that the same government can manage the entire healthcare system for all of us when it has already failed at managing only a small portion of the healthcare system?
Conclusion: Neither candidate has a magic solution. However, both candidates want to significantly and fundamentally change our current system. The profession of nursing at large is neither helped nor hurt by either of these men. That said, each individual nurse must make their own judgment about what is best for the system: for the country. If you believe that there is a chance that markets could work through better information and incentivized consumers, maybe McCain is your guy. If you believe that markets have no chance at working and, at the same time, you are willing to trade fewer uninsured on the one hand for higher costs and/or longer waiting times on the other, Obama might be the choice. There is one thing I am absolutely sure of: this election will have a lasting impact on the structure and provision of healthcare and, as such, it demands your serious attention. Both candidates will promise reduced costs, better quality and more access and, at the same time neither candidate will be able to accomplish all three of those things. You must decide which tradeoff is most important to you.
Dr. Thomas J. Hendrix is an Assistant Professor at the University of Alaska Anchorage, School of Nursing. He has a Master’s degree in Health Services Administration, a Master’s degree in Adult Health Nursing and a PhD in Health Policy with an emphasis in Health Economics. The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions or recommendations of the American Nurses Association, the Editorial Advisory Board, or the staff of American Nurse Today.
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