Obama Must Do Better on Health Care Reform

In his stump speech, during the presidential debates, highlighted in his 30 minute commercial, Senator Barack Obama has made clear that, were he elected president, health care reform will be near the top of his priorities. It’s viewed as a critical component in fixing the nation’s faltering economy, ranking alongside energy independence and a middle class tax cut at the top of his domestic agenda.

Senator Obama’s commitment to the issue is more than ideological, although he does see health care coverage as a right of all Americans. It is also highly personal. Senator Obama described the roots of his committment to health care reform in Sarasota, Florida yesterday this way: “And as somebody who watched his own mother lying on a hospital bed at the end of her life because they had cancer. The insurance companies were saying this was a pre-existing condition, maybe we don’t have to pay for your treatment, I know what it’s like to see a loved one suffer not just because they’re sick but because of a broken health care system.”

This combination of ideology, politics and the personal will assure that health care reform would be taken up early in an Obama Administration. Given his passion for the issue, the state of the economy and the real need to address serious problems in the current health care system, the odds are extremely high a comprehensive reform package will emerge sometime in his first term. Whether these reforms will be similar to what Senator Obama describes on the campaign trail, however, is, fortunately, both uncertain and unlikely.

One reason is because Senator Obama’s health care reform plan is seriously flawed. To cite just one example, a core attribute of his proposal is to require carriers to except all applicants for coverage without regard to their medical condition. As he put it in Sarasota, “… when I am president, we will end discrimination by insurance companies to the sick and those who need care the most.” This is a noble purpose, but if done wrong, it can lead to a health care reform surcharge that would increase the number of uninsured in the country while increasing costs in the system. The “wrong” way is require carriers to sell coverage without requiring consumers to purchase it. This, in essence, is how non-employer sponsored coverage works in New York and New Jersey. Average premiums in those states are more than twice what they are in California

The need for matching mandates, was integral to Senator Hillary Clinton’s health care reform plan. She perceived it more as a means to universal coverage, but also acknowledged that “adverse selection” is a real, proven phenomena. Imagine the premiums auto insurance companies would need to charge if drivers could wait until after an accident to buy automobile insurance. That is adverse selection and it is exactly what Senator Obama is proposing.

Another reason Senator Obama’s health care reform proposalis unlikely to survive the legislative process intact is it will need to compete with a host of other plans. Senator Ron Wyden (a Democrat) and Senator Bob Bennett (a Republican) have brought together a bipartisan coalition of Senators behind the “Healthy Americans Act.” Then there’s the proposal by Dr. Ezekiel Emanuel, Director of the Clinical Bioethics Department at the National Institute of Health, who proposes a voucher system financed by a Value Added Tax and shares some elements of the Wyden-Bennett proposal. Senator Ed Kennedy is talking to Senators and policy mavens from across the political spectrum to develop a reform package he hopes to introduce in January. Republicans, too, have a host of ideas for reforming the nation’s health care system. Some might even look similar to the health care reform package advocated by Senator John McCain during this presidential campaign.

In short, there will be no dirth of ideas when Washington begins to address health care reform in 2009. Hopefully a coherent, workable plan will arise from this stew of policies and concepts. Senator Obama speaks of being open to other approaches. As he put it when speaking at a Families USA forum in January 2007, “… affordable, universal health care for every single American must not be a question of whether, it must be a question of how. We have the ideas, we have the resources, and we will have universal health care in this country by the end of the next president’s first term.”

As president, Senator Obama would do well to remember these words. There will be pressure to pass something and pass something quickly. The “First 100 Days” nonsense will be pushed forward as his only window for pushing through comprehensive reform. This is silly. It’s far more important to get health care reform done right than according to an arbitrary timetable.

Instead of rushing reform, President Obama should demand that all the “hows” be on the table. He should require participants to leave their egos and pride of authorship at the door. He should demand an honest appraisal and accounting of both what’s working and what’s not working in the current system. He should set forth the principles he expects to achieve in the process. Then and only then should the hard work of building a new, better system, one that will provide “affordable, universal health care for every single American” begin.

Yes It’s the Economy, But It’s Health Care Reform, Too

In 1992, James Carville wrote down the key messages then Governor Bill Clinton’s campaign had to focus on in order to win.

  1. Change versus more of the same
  2. The economy, stupid
  3. Don’t forget health care

Throw in a cup of national security and you’ve got the same recipe for presidential success in 2008. Anyone listening to a speech by Senator John McCain or Senator Barack Obama will appreciate that their campaigns understand this reality. And given the recent credit crisis and financial maelstrom, the economy has become an even more central part of this election. In interpreting the public’s demand for change, however, the dominant position of economic issues should not hide the fact that voters want health care reform, too.

According to the October Kaiser Health Tracking Poll, no surprise here, the economy is overwhelmingly, the most dominant issue in this year’s campaign. 62 percent of the survey’s respondent’s listed the economy as “the single most important issue in [their] vote for president.” 13 percent of the respondents cited Iraq while 12 percent named health care.

Economic concerns emerged as the key issue long before the current financial crisis, however. In the December 2007 poll, Iraq was the top issue, with 30 percent of the respondents listing it as the most important issue. It was followed by the economy at 23 percent and health care at 21 percent.

In February 2008, the economy had moved into first place, having been named by 43 percent of respondents. The percentage name Iraq and health care as the most important issues remained constant at 29% and 21 percent, respectively.

By August 2008 49 percent of respondents were citing the economy as their top issue while Irag had dropped to 25 percent and health care to 16 percent. The Kaiser survey interviewed “likely voters” by phone between October 8th and October 13th, well after the economic crisis had set in, making the big change in the results understandable.

One might conclude from this that health care reform is moving off the public’s radar as a salient issue. That would be a mistake. The Kaiser survey shows that 75 percent of Democrats and 61 percent of independents believe “it is more important than ever to take on healthcare reform.” Even 42 percent of Republicans agreed with this statement. What it shows is that health care reform and economic security are intertwined and inseparabe. A key aspect of “fixing” the economy will involve “fixing” health care.

According to the Kaiser study, 35 percent of respondents themselves or a family member had put off getting health care they needed because of the economy. 31 percent said they skipped recommended medical tests or treatment and 27 percent said they didn’t fill a prescription. 28 percent of the respondents reported they had problems paying for health care and health insurance as a result of recent changes in the economy.

Restoring consumer confidence is a substantial part of recovering from economic set backs. So it is significant that half of the respondents (51 percent) said that “lower prices for health care and insurance would make a big difference in their family’s financial situation.” That’s more than the 45 percent who said a rebound in the stock market would make a big difference in their situation.

Senator Obama has cited health care reform as one of the top three issues he’ll address as president. There are numerous plans already circulating in Congress to jump start the reform process, including a bipartisan health care reform package backed by 12 Senators, six from each party. Senator Ted Kennedy, who is at home battling brain cancer, is talking with lobbyists, policy mavens and lawmakers from both parties to develop a framework for health care reform for the new president. Senator Kennedy intends to introduce his legislation as soon as the new Congress convenes.

So yes, the economy will be the dominant issue between now and election day. And it will dominate the president-elect’s wait to move into the White House and it will dominate his first months — perhaps his first term — in the oval office. The economy will dominate, but it won’t eliminate other issues. The American people expect health care reform to be among those other issues — and it will be.

What may surprise some is how quickly the health care reform effort will get underway. My guess is the new president will give a major address on the issue before inauguration day. Health care reform is simply too tied to the reality and perception of Americans’ economic security. It’s too important to Senator Kennedy. It’s too important to helping businesses recover and grow. The American people want the new president to address health care reform. And the new president will need to.

McCain’s and Obama’s Inconsistent Health Care Reform Principles

Picking inconsistencies in the positions politicians take is too easy to qualify as a sport. They have to take stands on such a wide variety of issues it’s asking too much for all of them to fit into a consistent and persistent political philosophy. Pointing out the contradictions can thus be seen as a cheap shot. Then again, Lou Dobbs has made a career out of cheap shots, so what who am I not to play the game? Fittingly for this blog, there were two examples of this consistency that become apparent when you examine their their positions on health care reform.

1. McCain’s Anti-Federalist Health Care Reform Plan

Senator John McCain described himself as a “Federalist” last night. This was in the context of his explaining that the Supreme Court should reverse Roe v. Wade and leave it to each state to determine how abortion will be treated within their own boundaries. Federalism emphasizes the portion of the United States Constitution that reserves to the states powers not specifically assigned to the central government. It reflects the belief that, because voters are closer to their own state governments than to the federal government in Washington, the state is best positioned to reflect their will and protect their interests.

How surprising then that a core plank in Senator McCain’s health care reform plan is to allow health insurance companies to sell in every state benefit packages approved in one state. The result will be a rush by carriers to file their plans in the least regulated, most insurer-favored state. And it won’t take them long to identify this lowest common denominator jurisdiction. I give it three days max.

Here’s how Senator McCain’s free-for-all approach to regulation would work. Consumers in, say, California could purchase health plans approved by the Arizona Department of Insurance. I’m sure the regulators in Arizona are fine, upstanding defenders of consumers interests. But California voters had no say in who they were or what laws they enforce. A true Federalist would defend the right of Californians to create their own health care system. A false Federalist would call for Californians to accept whatever system any of the other states happens to come up with.

In many ways, this is worse than a nationalized health care system. At least Californians have representation in Washington. They have some influence on what happens there. California voters have no representation in Phoenix.

2. Obama Attacks a Progressive Health Care Subsidy

Senator Barack Obama took a lot of heat for saying he wanted a tax system that “spreads the wealth” during the debate. Yet, that’s the nature of America’s tax system: it taxes wealthier people more than poorer people. This system is called progressive. A regressive tax system puts a greater burden on lower income families than on the well off ones. In many ways, President George W. Bush’s cuts over the past eight years eased the tax burden more for those earning more than $250,000 than it did for those making less. A core plank in Senator Obama’s platform is to reverse that situation and make the tax system more progressive.

One of the least progressive portions of the tax code concern the treatment of employer sponsored health insurance. That’s because the value of these medical plans (the portion of the premium paid by the employer) is not considered taxable income. This makes employer-sponsored coverage a great deal for employees at all income levels, but it’s a regressive benefit from a tax stand point.

Take the case of Acme Widgets. It currently pays $10,000 a year on each employee’s health insurance plan. The CEO of Acme makes a ton of money and is in the 35 percent tax bracket. This means America’s taxpayers are subsiding her health care to the tune of $3,500. Her assistant makes a lot less and is taxed at a 15 percent rate, resulting in a tax subsidy of $1,500. The receptionist makes the least of all, pays no taxes and receives no tax subsidy. When the rich get more than their lower income colleagues, the tax structure is regressive.

Under Senator McCain’s proposal, the value of health insurance would be considered taxable income. He offsets this lost take home pay with a $2,500 per person ($5,000 per family) refundable tax credit. (Refundable means you get the credit even if you don’t pay taxes.) Senator Obama hammers his opponent for this “gimmickry.” But let’s see how it plays out with our friends at Acme Widgets).

The CEO’s family pays $3,500 more in taxes and gets $5,000 in a health care tax credit for a net of $1,500. The assistant’s family pays $1,500 more in taxes, receives a $5,000 credit and nets $3,500. The receptionist’s family still pays no taxes, but after the credit comes out $5,000 ahead. The well off pay more in taxes than the less well off. That’s a progressive tax system. That’s spreading the wealth.

Having It Both Ways

Senator McCain can’t have it both ways. He can’t be a Federalist when it comes to abortion and a Lowest Common Denominator-ist on health care. Well, actually he can, but he shouldn’t be able to have it both ways.

Senator Obama can’t have it both ways. He can’t be for a progressive income tax system and then attack a proposal to make the treatment of employer sponsored health insurance more progressive. Well, actually he can, but he shouldn’t be able to have it both ways.

Inconsistencies is as common in politics as false smiles and bad coffee. It’s a human undertaking and, by definition, humans tend to be inconsistent. But it is fun to point them out.

Questions McCain and Obama Should Answer on Health Care Reform

Senators John McCain and Barack Obama final debate tonight at Hofstra University will cover a host of issues. Health care reform is should be a major topic of discussion. The financial insecurity Americans feel in the face of the current economic crisis is exacerbated by concerns over health insurance. Can they afford the coverage they have? Will they be uninsured — and uninsurable — if they lose their job?

How the candidates approach health care reform says a great deal about their approach to governing. Senator McCain’s plan is primarily market-driven and uses the regulatory powers of government lightly. Senator Obama’s approach relies more heavily on government intervention and more dramatically regulates carriers, pharmacies and health care providers.

Neither of their health care reform plans are very detailed. And I’ve written before, they demonstrate the candidate’s attitudes and principles towards reform mor than dogmatic policy; they are a starting point for debate rather than specific legislative demands. I’ve also pointed out that both reform packages contain serious flaws. So the two Senators have a lot of explaining to do. Here’s a few questions that would be a good start:

Senator McCain would allow benefit plans approved for sale in any state to be sold in every state. This would lead to a rush to the bottom as carriers file their plans in the most lenient state they can find. It would mean that voters in a state would have no say in how health plans sold to them are regulated. How would Senator McCain mitigate these inevitable outcomes? Does he think states have no right to regulate health insurance sold to its citizens?

Senator Obama would require carriers to sell policies to anyone applying for coverage and prevent them from excluding pre-existing conditions. Yet he does not require adults to buy coverage. They could simply wait until the need for medical care arises and then buy insurance. It’s the equivalent of waiting until after your car hits a tree to buy auto insurance. New York and New Jersey have similar rules. It’s no surprise that the average cost of individual coverage in those states is twice that in California. Senator Obama claims his top priority is to make health care coverage more affordable. How does he reconcile this contradiction?

Senator McCain wants to treat the value of health insurance as taxable income to workers and replace this with a tax credit of $2,500 for an individual and $5,000 for a family. In many ways this would be a more fair and progressive use of the tax code than the status quo. After all, higher paid executives are in higher tax brackets, and consequently receive a bigger tax deduction, than their lower paid colleagues. This would change under Senator McCain’s plan. Executives would be hit with a bigger tax bill, but receive tax credit as everyone else. Given a more progressive system, why does Senator Obama reject this approach?

The tax credit in Senator McCain’s plan is supposed to make buying coverage affordable for America’s families. However, medical inflation increases at a far greater rate than general inflation. Senator McCain’s tax credits don’t increase with inflation at all. Since the cost of medical care is the primary driver of health insurance premiums, the tax credits will cover a smaller percentage of premiums over time. Eventually, the tax credits won’t offset enough of the cost (let alone offset the impact of losing the tax deduction). How would Senator McCain deal with this problem?

Speaking of health care costs, how do Senators McCain and Obama intend to tame that beast? Yes, they both support a greater emphasis on prevention and leveraging technology. Everyone does — and these steps will have an impact. However, an aging population demanding the latest technology for an increasing number of ailments will soon overwhelm this benefit. So, beyond the obvious and widely shared solutions, does either candidate offer any unique approach to controlling rising medical costs?

Senator McCain’s tax credits would allow individuals to purchase coverage in the marketplace; Senator Obma would drive consumers into a government-run “exchange.” What do they like about the other’s approach? What don’t they like about it?

And wouldn’t it be fun to hear them talk about consolidation among hospitals, which in some communities have created health care monopolies? Or discuss whether for-profit health insurance companies have any place in America’s health care system?

The odds of any of these questions being addressed is small. Really, really small. Intead, all we’re likely to get from the debate tonight are snippets of their stump speeches. These will express their mutual desire to  make health care coverage accessible and affordable. Then they’ll attack the other’s approach as “the same deregulation that got us into the banking mess” or “a big step down the road to socialized medicine.”

We deserve to hear more about their health care reform plans. Even a little in-depth dialogue on the subject would be nice. Unlikely, but nice.

The Flawed Health Care Reform Plans of McCain and Obama

Both Republican Senator John McCain and Democratic Senator Barack Obama have put forward substantial healthcare reform plans. They both seek substantial changes in the current system. That they take starkly different approaches reveals a great deal about how their view of the current system and what they perceive the role of government to be in overcoming them. That both health care reform plans are dramatically flawed would seem to be of great concern, but probably isn’t. After all, these are just starting points and whatever new health care system emerges from Washington in the next few years is likely to be significantly different than either of these plans regardless of which candidate is elected.

As I’ve noted previously, the two plans are campaign promises, meaning they are more an expression of the candidates’ attitudes towards reforms than a blue print for legislation. That both starting points are flawed should be of concern, but is neither fatal nor devastating. They are, after all, just starting points.

Interestingly, the biggest flaw in each plan is the mirror image of the other. Senator McCain would encourage consumers to buy coverage in the individual market, assuming their employer isn’t providing health insurance, by offering tax credits — $2,500 for an individual and $5,000 for a family. While this would help many Americans buy coverage, there’s no requirement imposed on health plans to accept them for coverage (although there might be high risk pools under his plan for those turned down by carriers). Senator Obama, on the other hand, requires health plans to accept all applicants, but he fails to require everyone to purchase medical insurance. As has been demonstrated time and again, this is a sure path to higher premiums. Just look at New York and New Jersey where carriers must sell, but consumers need not buy, coverage. The premiums there are twice that in California.

Each health plan has other problems. Senator McCain would allow carriers to shop for the most lenient jurisdiction in which to file their plans, then impose this lack of regulation on other states. It’s competition without representation that is sure to result in consumer distress, political shenanigans that would embarrass an earmark addict, and undermine the credibility of the system.

Senator Obama, on the other hand, wants to create a government-run health care program to compete with private plans. The idea is to increase fair competition, but the result will be anything but fair. When the umpire picks up a bat, he’s rarely called out on strikes. Similarly, when the government competes in a market it regulates, the playing field is invariably tilted in favor of the government. The danger inherent in Senator Obama’s approach is that the government program, given unfair advantages, will squeeze out the private sector. The result will be a government-run system imposed on the nation without the accompanying debate such a policy shift warrants.

At Tuesday’s presidential debate in Tennessee expect to hear a great deal about their health plans. They’ll both be eager to dive into specifics about their own program — and to describe the failings of the other side’s plans. There will be heated exchanges concerning taxes and government takeovers. There will be fierce arguments over regulation versus goverment getting out of the way. As you watch, keep one thing in mind: none of it matters all that much.

Come November 4th one of these candidates will win. Come January 20, 2009 the winner will be sworn in as President of the United States. Unless there’s a miracle, the economic situation will push back meaningful efforts on healthcare reform for at least a few months. Yes, there will be a team put in place with orders to produce a meaningful plan within, let’s say, 100 days. But the real work of shaping the reforms could be delayed several months or a couple of years depending on the nation’s economic health.

Most importantly, once the plan is put forward, it will be changed profoundly by Congress and the new Administration as they respond to the public policy advice and political pressure of the nation. Some form of health care reform is likely to emerge before the next presidential election. Hopefully the major flaws in what’s currently on the table will be addressed — ideally without introducing new and bigger problems.