The Wonk Room

Why Elizabeth Edwards Is Right

In recent days, Elizabeth Edwards has argued that John McCain’s health care plan would make it impossible for many Americans to get health insurance because of their preexisting illnesses – illnesses like the ones that Edwards and McCain suffer from themselves. She’s right.

Paul Krugman today called McCain’s approach “voodoo health economics.” McCain asserts that the insurance industry, once free of regulation, will provide sufficient “supply” of insurance to cover everyone. That’s wrong. The reality is that McCain himself – if he did not have access to government health insurance – would struggle to find health care under his own plan.

McCain – driven by his extreme free-market ideology – has written a health care plan that leaves individuals at the mercy of insurance companies’ profit motive. Insurance companies have strong incentives to avoid covering people who need health insurance the most – sick people. And McCain has been unwilling to build in consumer protections, saying “That would be mandating what the free enterprise system does.”

Like many conservatives, McCain believes in leaving people on their own to figure out the health insurance market. Instead of supporting group health insurance (i.e., employer and public coverage), he believes in tax credits that could be used in the individual market. In fact, the whole goal of his free market approach seems to be to grow the individual market.

Yet, the individual market is the Wild West for consumers with relatively few protections, as Georgetown research highlights. The individual market is so dysfunctional that 89 percent of those that tried to get individual coverage ultimately never bought a plan, according to a 2005 Commonwealth Fund study.

The reason is that insurance companies do everything possible to eliminate their financial risk. Although McCain has yet to release his health records, he has made public his fight with skin cancer. Ordinary people with cancer, let alone those in their 60s when McCain was treated, are considered “bad risks” and can in most states be denied or charged more for coverage in the individual market, which McCain says is a key part of his reform plan.

In fact, insurers will disqualify you from coverage even for just taking certain medicines because of the possibility of future costs, including the most common drugs as Lipitor, Zocor, Nexium, and Advair. People who have had cancer are denied coverage and those who get cancer run the risk of simply being dropped by their insurer for any excuse that can be found. And insurers make it practice to deny coverage to individuals in high risk occupations, such as firefighting, lumber work, telecom installation, and pretty much anything more risky than working in an office.

For taking on even minimal risk in the individual market, insurers charge a high premium. Of those in the Commonwealth Fund study, 71 percent of those with health problems found it difficult or impossible to find affordable coverage, as compared to about half of those with no health problems. Even the healthy only have a 50/50 chance of finding affordable individual coverage. As Nancy Metcalf of Consumers Union recently said, the two solutions to the individual market are to “be healthy or be rich.”

Individual Market Coverage: Barriers Abound
Adapted From Commonwealth Fund study, 2005

Adults 19 to 64 who bought or tried to buy individual coverage:	Total	Health Problem	No Health Problem	Less Than 200% Federal Poverty Level	Great Than 200% Federal Poverty Level
Found it “very difficult to impossible” to obtain  needed coverage	34%	48%	24%	43%	29%
Found it “very difficult to impossible” to obtain  affordable coverage	58	71	48	72	50
Never Purchased a Plan	89	92	86	93	86

If McCain was even offered insurance in the individual market, it would likely come with an exclusion for preexisting conditions. McCain’s plan calls for health insurance plans sold in one to be able to be sold in all states. Link back to freedom for insurers blog piece Just as companies go to the Cayman Islands to get around tax rules, Arizona would become the “Cayman Islands” of the health insurance world since that state is one of only four states that grants free reign to insurance companies on preexisting conditions issues. Under their rules, if McCain makes a claim for any service for as long as he has the policy, the insurance company could choose to go back and review his life-time medical history to see if the condition existed previously. Worse yet, Arizona lacks a set legal definition of preexisting condition, giving insurers even more power.

In an understated warning, an official state of Arizona publication offers that, “Many claims are denied because of these [preexisting condition] provisions” and explains that a condition can be preexisting even if it was unknown when coverage is purchased.

What would McCain do under his health plan? Without a government promise of coverage, he’d be out of luck. The fact is, Senator McCain’s plan doesn’t work for the average guy—not even himself.