But the Journal pulls quotes out-of-context and completely ignores the fundamental differences in the thoughtful, comprehensive Democratic prescriptions for change as compared to the radical approach from Sen. McCain.

While the employer-based system isn’t perfect, it plays a crucial role in connecting Americans to coverage by encouraging risk pooling through employer policies and guarding against adverse selection. Ending that employee tax deduction without additional reforms—reforms opposed by Sen. McCain—will weaken our health care system. Sen. McCain’s health care plan is based on ultra-conservative ideology: give every American a flat, “one-size-fits-all” tax credit; end government oversight of insurance companies; force people to buy insurance on their own; and, let the market run, no matter the consequences on real people. Even former Federal Reserve Chairman Alan Greenspan has now conceded that lazzie-fare economics is a failed belief.

In the Health Affairs article cited by the Journal in making their flawed argument, Furman himself makes the case against a McCain-type plan. A plan like that proposed by Sen. McCain could “cause a large number of employers to drop coverage . . . the number of uninsured people would rise.” What are Furman’s suggestions for reforms to be paired with a change in the tax code?

- Expanding Medicaid and SCHIP

- Creating an insurance exchange

- Reinsurance

- Allowing people to buy into public plans

Sound familiar? Yes, those would all be the core elements of the Obama health care plan.

The Journal’s mistakes continue. In trying to make their case for Cutler’s supposed support for Sen. McCain, they reference a 2004 book by Cutler that has the stated purpose of making the “economic, as well as moral, case for universal insurance coverage.” For his part, John McCain has said repeatedly that the problem with the US health care system is not the uninsured. Anyone who has actually read the book (which clearly no one on the Journal editorial board has done) would understand that David Cutler and John McCain have a fundamentally different philosophy on health care.

So, yes, the Wall Street Journal is right that “obviously neither Mr. Furman nor Mr. Cutler would endorse the McCain plan outright.” The Journal got just about everything else wrong. The McCain plan doesn’t come close to the type of health care reform goals that Jason Furman and David Cutler have consistently discussed and supported during their careers. A recent poll showed voters give Sen. Obama and his team a 39 percent point advantage over Sen. McCain when it comes to who they think will do a better job of managing health care. The Journal, to say it politely, is confused about the Obama health team. The American people have it figured out.

Digg It!

The Center for American Progress Action Fund’s analysis of Senator McCain’s reliance on reduced spending in Medicare and Medicaid to pay for his health care plan was cited by Senator Obama on October 17 and thus has garnered unprecedented attention in the last 48 hours. In a spirit of transparency and openness, we are sharing our original spreadsheet:

Origin of the $1.3 Trillion, Ten-Year Medicare and Medicaid Cut Estimate: In early October, McCain campaign advisor Douglas Holtz-Eakin told the Wall Street Journal that McCain would reduce Medicare and Medicaid to help fund his health care plan. The Tax Policy Center had previously estimated that McCainʼs health care plan had a $1.3 trillion budget hole to fill.

Allocation of the $1.3 Trillion Cut Between Medicare and Medicaid: The campaign has been silent about both its specific policies and how much of the reductions would be taken from Medicare versus Medicaid. In the absence of additional information, we allocated McCain’s $1.3 trillion in proportion to the projected, FY 2009 to 2018 Federal spending for these two programs — $882 billion (68%) for Medicare, and $419 billion for Medicaid (32%).

Could Benefits Be Sustained with a Cut of this Magnitude? With the news that McCain would use Medicare and Medicaid to fill this hole, we decided to see whether cuts of this magnitude would enable the programs to keep up with medical inflation and enrollment growth. In other words, could you cover the same proportion of people for the same benefits, assuming growth in Medicare could not be kept below the increase in medical inflation? Medical inflation itself does not take into account the changes in service mix and utilization that typically are needed to sustain health care services. We reasoned that if McCain’s restrictions on Medicare and Medicaid spending fell below medical inflation and population growth, meaningful program cuts – specifically eligibility cuts or benefit reductions – would be required to hit McCain’s target.

So we looked at the Congressional Budget Office’s current estimates of Medicare and Medicaid spending from fiscal years 2009 to 2018, which project that Medicare will grow, on average, 6.9 percent per year, while Medicaid will grow by an 8.0 percent average annual growth rate. We used these figures to calculate what total Medicare and Medicaid spending would have to be under the McCain proposal through 2018 to hit these targets by changing the programs’ average annual growth rates. Our results: a 4.5 percent average annual growth rate for Medicare, and 5.5 percent average annual growth in Medicaid.

These growth rates fall far below the combination of medical inflation (4.4 percent for the most recent year) and CBO’s enrollment growth projections for each program over the 2009 to 2018 period (2.7 percent for Medicare and 1.5 percent for Medicaid). The most aggressive cost containment policies possible could not make up the difference between 7.1 percent and 4.5 percent growth for Medicare, and 6.0 percent and 5.5 percent growth for Medicaid. As such, we concluded, would require eligibility cuts, benefit cuts, or both.

Mismatch in McCain’s Target and Policies: Prior to the recent announcement McCain was already relying on savings in Medicare and Medicaid to fund his tax cut proposals. These funds included Medicaid savings that could result from some lower-income people using the new tax credits to purchase private coverage – but Holtz-Eakin also mentioned these particular Medicaid funds as an offset to the $1.3 trillion, which meant these funds were being double-counted. We also know that McCain’s proposed health system savings – from new incentives for coordinated care, greater use of health information technology (IT) and reduced levels of waste, fraud and abuse, some of which would accrue outside of Medicare — would not approach this $1.3 trillion cost. For example, Sen. McCain has not proposed making any up-front investment in health IT, nor has he offered any specifics for how to reorganize doctor payments to improve care for people with chronic diseases. Regardless, no amount of savings from such policies could yield savings of this magnitude within these programs.

But let’s consider Sen. McCain’s cost-containment policy. Over the summer, CAP-AF released a 50-page analysis of presidential cost-containment plans. After that review, there was only possible conclusion: Sen. McCain’s cost-containment plan is ineffective. Others have found that the McCain plan could raise costs, including Emory Professor Ken Thorpe in a new report.

So, why won’t John McCain’s cost-containment policies work? The primary reason is that the best form of cost-containment is having coverage for all Americans. Sen. McCain has said that he isn’t worried about covering all Americans—that the lack of health insurance in the US isn’t a major concern for him. But study after study shows that consistent access to health care is the best way to manage chronic disease. A noted Brookings economist has said that broadly expanding coverage is “a precondition for effective measures to limit overall health care spending.” On-again-off-again health insurance means that diabetics and asthmatics aren’t getting the treatment they need, and people end up back in the ER.

In fact, a recent study shows that the most expensive Medicare beneficiaries are the ones who were uninsured before entering the program. That’s a critical point because McCain’s focus on the individual market means that the near elderly will have a much harder time getting insurance (something else this blog has discussed extensively). One of the nation’s most respected health policy journals, Health Affairs, has noted that 20 million people will lose their employer-sponsored health insurance under Sen. McCain’s plan. When those newly uninsured try to obtain health insurance on the individual market, they will find it enormously expensive or simply not available to them at any price.

More than that, McCain’s cost-containment policy lacks any real details.

Heath IT: McCain has said that the marketplace will promote the expansion of information technology. Well, the existing health care marketplace got us to where we are at today: virtually the only modern industry that still relies on paper. McCain’s faith that something will change by itself without government leadership or support seems misplaced, at best.

Addressing Disparities in Chronic Disease: Some of the most significant health care costs are born by minorities because the disparities that exist in health care. Sen. McCain has not offered any policies whatsoever to address health care disparities directly.

Promoting Effective Care: McCain claims that he is going to improve quality care by using “technol­ogy to share information on ‘best practices’ in health care so every physician is up-to-date.” Again, McCain offers no details on how to do this—nor offers any support to doctors to help make this happen.

The last thing worth mentioning is how Sen. McCain will increase administrative costs. McCain is focused on growing the individual market. That is notoriously inefficient because you are selling policies to every family individually, as well as rating each policy based on health status so the insurance company knows what to charge (called underwriting). CAP-AF conservatively estimated earlier this year that growing the individual market will cost an additional $20 billion in paper work alone.

The Wonk Room has long argued that to finance his health plan, Sen. McCain would have a tax increase of $1,100 on the average family—and that absent the tax increase there would be a $1.3 trillion budget shortfall. Now, McCain has dramatically changed his proposal. As explained by McCain adviser Douglas Holtz-Eakin, the McCain plan will keep the payroll exemption for health insurance and, instead, cut $1.3 trillion from the Medicare and Medicaid programs to finance his health care plan.

Bearing a strong resemblance to the cuts that were sought by former-Speaker of the House Newt Gingrich, McCain’s call for radical cuts to Medicare and Medicaid will undermine their vital role in our health care system, putting affordable health care out of reach for millions of seniors, people with disabilities, and low-income families, and driving up the cost of health insurance for everyone else.

Assuming that the $1.3 trillion cut is taken proportionately from both Medicare and Medicaid:

- Medicare: The McCain plan will cut $882 billion from the Medicare program, roughly 13 percent of Medicare’s projected spending over a 10-year period. At this level, Medicare spending will not keep pace with inflation growth and enrollment increases – 4.5 percent compared to over 7 percent — thereby requiring cuts in benefits, eligibility or both.

- Medicaid: The McCain plan will cut $419 billion over 10 years from the Medicaid program, roughly 13 percent of Medicaid’s projected spending over this period. At this level, McCain’s Medicaid spending growth – 5.5 percent – does not keep pace with inflation growth and enrollment increases (at 6 percent), thereby requiring cuts in benefits, eligibility or both. Because federal Medicaid funds match state spending, this cut in federal funds would likely yield a parallel cut in state funding, for a total reduction in Medicaid spending of $738 billion over 10 years—more than the cost of providing benefits for all Medicaid beneficiaries for two years. These cuts could also cascade into the State Children’s Health Insurance Program, or SCHIP, the federal progam that covers millions of children who otherwise would not have access to health insurance.

- Private Insurance: As the government’s support of public programs fall, those with private insurance will end up paying more as health care providers shift costs to private payers.

McCain Proposes Large Medicare Cuts:

McCain would cut Medicare by 13 percent over 10 years. To achieve his Medicare spending target, McCain will have to limit growth to 4.5 percent annually. However, just to maintain the current operations of the existing Medicare Program, a growth rate of 7.1 percent is needed over the next ten years to cover the 2.7 average annual growth in enrollment and a projected rate of medical price inflation of 4.4 percent.

The difference in growth rates can be seen in the chart below. Absent yet another change in the McCain plan, it is clear that McCain will reduce Medicare eligibility, reduce benefits, increase cost-sharing, or some version of all three:

McCain Proposes Large Medicaid Cuts:

Assuming proportional cuts divided between the two programs, McCain would also cut Medicaid spending by 13 percent over 10 years. As Governors struggle to fund existing Medicaid programs in the face of the nation’s economic crisis, cuts of this magnitude would place extraordinary pressure on states. Under these circumstances, states could have no choice but to reduce eligibility and benefits, or increase cost sharing.

To achieve his Medicaid spending target over the next years, McCain will have to limit growth to 5.5 percent annually. However, just to keep up with medical inflation and enrollment growth – to say nothing of changing patterns of health care use –a growth rate of 6 percent is needed over the next ten years. The difference in growth rates can be seen in the chart below. Absent yet another change in the McCain plan, it is clear that Sen. McCain will reduce Medicaid eligibility and benefits, increase cost-sharing, or some version of all three.

Those with Private Insurance Will Pay More Under McCain:

The various pieces of our health system are linked. As public funding falls, private health care costs will go up in at least two ways:

- Cost-shifting to the private market: Low payment rates in the public market mean that health care providers will pursue higher payments from the private market. This represents what some have called a hidden tax on those with private insurance. Given the radical cuts in the McCain plan, those with private insurance will surely pay more for coverage.

- Increase uncompensated care costs: As states are forced to cut back on their Medicaid programs, more people will turn to the emergency room – the highest-cost setting for health care services. As those costs increase, there is a hidden tax on those with health insurance.

McCain’s original health care plan was designed to unravel the current employer-based health care system and push individuals and families into the individual insurance market. Now he proposes deep and unsustainable cuts to Medicare and Medicaid, which provide critical health benefits and economic security to elderly, disabled and low-income Americans, while pushing up costs for everyone else. What will he think of next?

Read the full memo here.

Digg It!

But, McCain has also said that he would ask the nation’s governors how to create these pools (with about 30 states having one today). Since Alaska is one of the states with a high risk pool, it might be interesting to get a sense of how Governor Palin might advise McCain on the creation of these pools.

Based on the high risk pool in her state, Palin’s advice would clearly be to create a high risk pool that: offers very expensive coverage, puts as much burden on individuals as possible, excludes preexisting conditions, and limits benefits as much as possible.

Alaska’s pool is one of the smallest in the country, with 510 enrollees (end of 2006). And, Alaska is one of the most expensive programs in the country—the total cost per enrollee of the program is $18,569 (when you include the enrollee premium spending and subsidies). In the US, the average family premium for an employer sponsored health plan is roughly $13,000—yes, that is for a whole family, not for an individual in Alaska.

Alaska’s high risk pool imposes very high cost sharing on enrollees, which limits enrollment and access to care:

- Premiums: Overall, the monthly premiums are very high. For example, if you are 55 years old and elect the PPO with the $1,000 deductible, your monthly premium cost is $1,404 a month ($16,848 a year). Assuming a two-person, middle class household making $43,750 a year (250 percent of the federal poverty level in Alaska), the premium cost for that one person would consume 39 percent of household income.

- Deductibles: Alaska has a minimum deductible of $1,000 (which is high, but not uncommon for high risk pools). Options exist to allow enrollees to choose from a range of deductibles up to $15,000 (which is very high, even for high risk pools).

- Out-Of Pocket Costs: The premium and deductible are not the only costs to the individual. When seeing an in-network provider, the individual is still responsible for 20 percent of the cost of most services. There is an overall cap on out-of-pocket costs, but that is as high as $25,000 a year for one of the policies.

Alaska’s preexisting condition exclusion and limited benefits hut enrollees:

- Pre-Existing Condition Exclusion: For many individuals in the Alaska high risk pool, pre-existing conditions are excluded for six months. This means that if you are in the pool because you have ovarian cancer, then you will not get any coverage for cancer-related services for six months.

- Limits on Benefits: The PPO plan does not cover many services, including for the following from Part I of the PPO contract: maternity coverage and fertility tests, routine physicals, immunizations, eyeglasses, and mental health benefits services are capped at $4,000 a year.

Alaska’s high risk pool discourages individuals from seeking preventative care and chronic disease services by making such care subject to a deductible. A plain reading of the benefits package shows that preventative care and chronic care services are part of this deductible. Many states will exclude those services from the deductible to encourage patients to get the chronic care they need. Instead, Alaska makes you pay out-of-pocket for such services until the deductible is met.

Gov. Palin is currently the subject of two lawsuits alleging that Alaska does not do enough for special needs children. One of the lawsuits was filed by the parent of an autistic child who has to live thousands of miles out of state to get needed care. The lawsuit has been pending over a year. An advocate for children with autism could have found a way to resolve it by now.

On another issue, the Alaska legislature did adopt a new funding formula for school districts this year to better support special needs kids, as reported by Alaska NPR. And in fact, Palin signed the bill. But Rep. Mike Hawkins, the bill’s author, was not about to thank Palin in a recent interview, saying: “She had no role whatsoever. Her role was signing.”

That might be playing politics if Hawkins was a Democrat—but he is a fellow Republican. It seems like an advocate for special needs kids would have found time to be a supporter.

So, if Palin intends to be an advocate as vice-president, it will be a significant change in what she has been doing as Governor.

As VP, it will be up to Palin to support her President’s policy approach. And John McCain’s policy will make it hard—if not impossible—for special needs children to get the coverage that they need.

The Wonk Room has written extensively on how John McCain will make it difficult for those with pre-existing conditions and special needs to get the care that they need. Jocelyn Guyer, a leading national advocate on children’s health, recently echoed our statements by telling the story of a 3-year-old child with Downs Syndrome in Ohio whose family has not been able to obtain health insurance coverage for her.

In fact, the National Down Syndrome Congress has specified its criteria for national health reform. And there is virtually no overlap with the McCain plan. The NDSC has called for reform with key provisions including:

- “Universal access to health care insurance,” but John McCain has not.
- “Comprehensive coverage which cannot be denied because of health of disability status,” but John McCain has not.
- “No preexisting condition exclusions or waiting periods,” but John McCain has not.

If Palin wants to prove she’ll be an advocate for special needs kids, she should start by cleaning up her poor record in Alaska first—and then publicly calling for Sen. McCain to change his health care plan.

- In 2006, America spent approximately $2.1 trillion on health care—even as more than 47 million individuals went without insurance and thus without access to affordable routine care.

- Health care spending, which doubled between 1996 and 2006 and is expected to double again in the next decade, outpaces wage growth and inflation.

- Between 2000 and 2006, private health insurance premiums increased more than 90 percent.

Today, the Center for American Progress Action Fund released a new analysis on the cost containment approaches articulated by Senators Obama and McCain. The political rhetoric emanating from the leaders of the conservative and progressive movements sounds remarkably similar. Agreement on the problem of rising health care costs, however, does not translate to agreement on how to achieve those solutions. And as the new analysis shows, there is little evidence for McCain’s claim that conservatives’ health care reforms will address health care costs, which he has called, “the biggest problem with the health care system.”

McCain’s Extreme Plan Will Likely Not Contain Health Care Costs:
Sen. McCain’s plan asks the impossible of consumers – it asks them to drive down prices and improve quality through one-on-one interactions with insurance companies. Extensive research, however, consistently shows that the pooling of individuals into large groups is the most effective way to manage risk and promote efficiency. The individual market approach is both more costly and less efficient than the group market approach.

McCain’s Lofty Rhetoric Unmatched by Details:
An analysis of Sen. McCain’s plan shows that his cost-containment steps lack specificity—regardless of his efforts to camouflage his proposals with rhetoric about “freedom” and “responsibility” lowering costs. There are few concrete steps for implementation in his plan, and almost no detail about the resources he would dedicate to the effort.

Coverage for All Americans Is the Fundamental Way to Contain Costs:
Current research suggests that the closer a health care system is to providing affordable coverage for all, the more successful it will be in achieving significant cost containment. By extending coverage to all, we can achieve efficiencies, end cost-shifting and rationalize financing mechanisms. Given Sen. McCain’s refusal to provide health care coverage for all, any success he may have in cost-savings will be limited.

The Progressive Alternative:
In contrast, progressive leaders have consistently offered concrete steps to making sure all Americans have access to affordable health care, and to help bring down health care costs. And progressive governors have led by taking proactive action when possible, as this report shows. Indeed, for his part, Sen. Obama has articulated clear steps to implement his cost containment measures.

In a Washington Times op-ed by the disinformation crew at the Center for Medicine in the Public Interest, conservatives tipped their hand: try to convince people that the big bad government is going to take over health care. Never mind the truth.

As they prepare to launch an anti-health reform campaign, CMPI’s op-ed (oh so cleverly titled “Obamacare,”) implies that Obama would enroll everyone in Medicaid and SCHIP:

Rather, Mr. Obama plans to make Medicaid and State Children’s Health Insurance Program (SCHIP) expansion the foundation of his proposal to expand coverage.

In reality, Obama’s plan would expand both private and public insurance options and make coverage more affordable. As more and more employers drop coverage, Obama would extend public insurance options to lower and middle class Americans, strengthening the existing safety-net of coverage for those who would otherwise become uninsured. His plan would also provide sliding-scale assistance to help families purchase comprehensive private coverage.

But the op-ed suggests that these public health programs offer limited access to care and argues that Obama’s plan would expand an ineffective system. Again, the opposite is true. Any insurance program can come up short – and both Medicaid and SCHIP have been systematically underfunded—but Medicaid and SCHIP are still very valuable. The Center for Budget and Policy Priorities provides ample facts to backup their statement:

Publicly insured children are more likely to have asthma, learning disabilities, and/or health conditions that require regular treatment with prescription medications. Medicaid and SCHIP provide access to the medical care that can treat these problems and help children grow, function, and learn more effectively.

Most disturbingly, the op-ed implies that, the private insurance market is a panacea where health care flows freely and everyone gets what they need. The real world is very different. As the Wonk Room has previously reported, insurers wrongly stop payment to doctors (meaning their patients don’t get care), overcharge for use of out-of-network doctors, and pay bonuses to insurance bureaucrats who can find excuses to disenroll high-cost patients. Those with employer-sponsored insurance face growing obstacles to care in the form of deductibles, co-pays, and drug formularies. And, the private market needs much more by way of consumer protections.

Two other myths in the op-ed that are worth quickly debunking.

First, the op-ed claims that Obama “would make private health insurance affordable by having the government force doctors to accept below-cost rates for their services and impose a 4 percent tax on physician earnings.”

It’s tough to know how the Washington Times and CMPI can justify making this stuff up. Obama is going to pay for his health care plan by raising taxes on those who make more than $250,000 a year. Obama hasn’t discussed lowering payment rates, and certainly hasn’t proposed new physician taxes.

Second, they argue that “Mr. Obama would also create a new health board to create lists of ‘cost effective’ new drugs and medical devices, and set prices for their payment.”

To help doctors get the information that they need, Obama has discussed creating an independent research institute so that doctors can use unbiased information to deliver the best possible care. Today, there is little to no head-to-head testing of drugs and devices to see which are more effective and under what circumstances. As a result, these companies are able to mislead doctors and consumers with flimsy claims. Our health care system will deliver better quality care when this kind of information is available.

Sadly, this is just the beginning of the fear-mongering for 2009.

If that tax exclusion is no longer allowed and all I get is a tax credit for $5,000, well, maybe I’ll decide a (cheaper) policy is all I need or all I can afford. I’ll get less health insurance, which means I’m going to be paying more of the cost of care, and that is a cost-containment.

Ginsberg touches on the fundamental conservative approach to containing costs: reducing access to health insurance. But as the Center for American Progress Action Fund has argued, conservative ideas on cost-containment “could deepen our health system crisis.”

The McCain plan is predicated on the idea that everyone is getting too much health care, and therefore, families should have to pay more money out of pocket in order to reduce the amount of care delivered. He also argues that higher cost sharing will lead to greater competition among providers and insurers. But research shows that higher cost-sharing can reduce utilization of needed care. And with little information available on quality of care, and even less information on costs of procedures, there is no way for individuals to become effective purchasers. All of this leaves families disadvantaged. Indeed, there is every chance that the ultimate result will be an increase in costs as opportunities for care management and preventative care are missed.

In addition, McCain would make care even more difficult to obtain because he focuses on using the individual market, which has few coverage standards. Jon Gruber, a Massachusetts Institute of Technology economist, has said:

Indeed, there is evidence that encouraging people to join such health plans might act as salt on a wound, exacerbating some of the very maladies that undermine our health care system’s ability to perform at the highest level.

Certainly, there are bipartisan ideas on cost containment. The Partnership to Fight Chronic Disease has been building support for programs on the Right and the Left to manage and prevent conditions like asthma and diabetes. But McCain’s approach of leaving persons uncovered will weaken any effort at cost containment. As Henry Aaron, a Brookings Institute economist put it, “Covering nearly all Americans is a precondition for effective measures to limit overall health care spending.”

While not addressing the McCain plan directly, Quinn talks about health policy perspectives from ERIC, The ERISA Industry Committee. (ERISA is a federal law that helps governs how employers offer employee benefits, like health care.) With a membership of 110 companies that reads like a who’s who of American business, including Boeing, 3M, Lockheed Martin, and Exxon, ERIC proclaims itself as the, “organization dedicated exclusively to representing the employee benefits and compensation interests of America’s major employers.”

Quinn discusses ERIC’s concept to build regional purchasing pools so that employers can band together in negotiating with insurance companies. The reason?

“On their own, ‘even large companies don’t have much negotiating power when facing large health plans,’ said ERIC President Mark Ugoretz.”

The largest companies in the world are trying to find ways to band together as purchasers, while McCain wants the country to move in the opposite direction and leave families on their own to buy coverage. If Boeing, 3M, Lockheed Martin and Exxon all feel like they can’t successfully take on the insurance industry by themselves, what is an individual family supposed to do?

Progressives are trying to find ways to bring purchasers together to buy health insurance so that there is a fair and equitable marketplace. In fact, the purchasing pool idea isn’t new at all, as asserted by Quinn. A year and a half ago, John Edwards’ health plan would have let businesses purchase coverage through his regional purchasing pool model. Sen. Obama wants to create a “connector” to allow individuals to come together to purchase coverage, like the Massachusetts plan. In contrast, McCain would leave families to fend for themselves to hope for the best against health insurers.

“According to the numbers CAP cites in its own study, individual market plans are far less expensive than those purchased through the group/employer market,” he adds. Suderman concludes:

So the real message here is that John McCain wants to promote health insurance plans that cost less money.

Suderman is missing the point. The plans McCain wants to promote cost less because they’re worth less. As insurance guru and Georgetown University professor Karen Pollitz has said:

It’s true that the advertised prices for many individual policies in many states are eye-poppingly low. The policies often cover very little: $5,000 deductibles, four doctor visits a year, no drugs.

Studies show that plans on the individual market have lower premium costs because they offer much weaker protections than those in the group market:

— Individual market policies offer weaker financial protections, despite their costs having risen by more than one third from 2001 to 2004. [Health Affairs, 2008]

— Basic benefits are frequently excluded from individual plans, such as maternity, prescription drugs, and mental health — with any pre-existing conditions more often than not being permanently excluded from coverage. [Commonwealth Fund, 02/05]

— In 2007, median out-of-pocket medical expenses for those with individual health insurance policies were $2,264 as compared to $973 for people with employer-based plans. [Consumer Reports, 01/08]

There are other reasons that individual market plans are cheaper. For example, the plans cherry pick the healthiest people to enroll, something that they will continue to try to do under the McCain approach.

The bottom line is that John McCain thinks that health care costs are too high because people get too much health care. That’s why, under his plan, individuals are left to fend for themselves to get the coverage they need. McCain is so driven to achieve this change that he is willing to waste roughly $20 billion more annually in paperwork to expand the individual market.

The study flips McCain’s small government rhetoric on its head. Since McCain’s plan seeks to shift enrollment from the employer-based insurance market to the individual market, insurers would have to spend much more money marketing and processing individual plans and waste premium dollars on the medical review and legal costs of underwriting and rescission. These costs are significant and are the fastest growing part of health care, as shown in the below chart:

Administrative costs are what insurance companies use to deny coverage for individuals with preexisting conditions. We need to spend less on administration, not more. Senator McCain takes health care in the wrong direction.

Read the full report.

McCain’s advisors have confirmed that the spending under his tax credit plan is $3.6 trillion over 10 years, roughly the same amount that the Joint Committee on Taxation estimated would be spent by President Bush when he announced a similar policy. In the first year, the JCT estimated that the Bush policy would spend $220 billion in the first year.

This means the McCain’s spending on health reform is twice the price tag as Senators’ Clinton plan and Senator Obama’s. (Note: Senator Obama only describes his plan’s costs net of savings, but the Washington Post has published a cost estimate.)

Not only is the spending level very different between the Democrats and McCain, but the sources of funds vary as well. McCain would roll back the longstanding tax break for all 160 million Americans who obtain insurance through their employer. In contrast, the lower spending Democratic plans pay for health reform by rolling back President Bush’s tax cuts on the highest income Americans.

McCain will argue that their health plan is not new spending but different spending. It is indeed different. Every one of the 160 million Americans who gets a tax break via employer coverage would get a different tax break – sometimes more, sometimes less. If, like President Bush, McCain increases the tax credit by general inflation, the plan would increases the deficit in the early years, but raises taxes by $334 billion over 10 years.

In today’s New York Times article, a McCain adviser said that, “It would be a very, very small percentage of people,” would pay more in taxes. There are only two possibilities:

• One: Very few Americans are going to end up paying an astronomically higher amount on their taxes.
• Two: And what seems more likely, a whole bunch of Americans are going to be hit with the McCain health care tax.

Either way, the McCain statement to Sean Hannity of Fox News that, “none,” would pay higher taxes under his administration is just wrong.

And there is more to worry about in the McCain plan. This proposal would also take away rather than add health insurance options. It promotes and deregulates the individual market coverage, even though this market allows insurers to charge more or deny coverage to high-risk people. This market would draw off healthy workers, raising costs for employers. Fewer people would have the choice of keeping employer-based coverage.

Similarly, if you are sick, you will have no choice of health plans: instead, you will be forced into a high-risk pool, the so-called Guarantee Access Plan. Today, most high-risk pools have high cost-sharing, limited coverage, and waiting lists.

So, the Harry and Louise – the stars of the insurer-sponsored ads – should stop worrying about the Democrats’ plans. They should instead look at the details of the McCain plan. It could turn our current health care system upside down, resulting in higher taxes and more limited coverage for millions of Americans. This is a true cause for alarm.

Today, the Center for American Progress Action Fund released two new analyses of the McCain plan (you can read the whole reports here and here). The only two key things you need to know are the numbers 158 million and 56 million:

• 158 million is the number of people who could lose their existing health care coverage under the McCain plan. McCain believes that individuals should find health insurance by themselves, and he will give them a small tax credit to help cover the cost. To pay for this, McCain ends the tax break given to those who purchase insurance from their employer today. This means that all 158 million people with employer-sponsored coverage today could eventually be forced to find a new health plan.

• 56 million is the number of people who are at risk of not getting health insurance at all under the McCain plan because of their chronic condition. The individual market is notorious for denying coverage to those with preexisting conditions. By creating a system that tries to push people towards individual coverage, McCain’s plan could leave out in the cold the 56 million Americans with employer insurance who have one or more chronic diseases like hypertension, arthritis, and asthma.

Overall, the McCain plan today was just more of the same old conservative rhetoric. His promises to help cover those with pre-existing conditions have turned out to be empty. The McCain plan still doesn’t help cancer patients like Elizabeth Edwards. Far from improving health care, John McCain will only make it much worse.

Small businesses face significant barriers in getting and keeping health insurance. Recent survey data from the National Federal of Independent Business bear this out, with 81 percent of small business owners indicating that “finding affordable healthcare” is a challenge, with 16 percent calling it was their biggest challenge.

The reason is that small businesses do not have enough people to create a “stable risk pool.” That’s insurance gibberish for simply saying that, if just one employee develops a catastrophic disease or has a major accident, then the insurance company loses money on that small business. In the insurance marketplace, small businesses don’t have it much easier than individuals.

To help small businesses, the majority of states take steps to cap premium rates within a certain range (technically called a “rate band”), and many states will also cap the annual increase in premiums. As research from Georgetown University shows, some states have strong protections, like California. Other states do not, like Kentucky and Louisiana where insurers are allowed to increase rates by more than 20% in a single year for a small business (most states only permit increases smaller than that). Very few states offer no rate protections: District of Columbia, Hawaii, Pennsylvania, and Virginia.

The McCain plan could very well create a rush to the bottom among insurers in these rules. McCain’s idea to allow insurance companies to sell policies over state lines will weaken small business protections by enabling businesses to simply market insurance policies around the country from states with weak protections. There would be no reason for an insurance company to sell a policy anywhere other than from states with weak insurance rules. And as I’ve blogged previously, McCain seems ok with being willing to ignore consumer protections by saying, “That would be mandating what the free enterprise system does.”

Does this mean small business costs will go up? Not necessarily. Small businesses could choose to slash benefits to contain costs, reducing coverage for owners and employees alike. But one reason these state rules exist is to prevent wild swings in price. McCain will offer much less predictability for small businesses on insurance costs, which will weaken small businesses.

The NFIB has also found that 69 percent of small business owners believe that “healthcare should be a top priority for the next president.” Under a McCain presidency, those small business owners would be better off if McCain just forgot about working on health care.

GOODMAN: “Elizabeth Edwards apparently thinks insurance companies should have to insure cancer victims even if they were willfully uninsured and paid no premiums during all the years when they were healthy.”

Wrong. Edwards has said time and again that everyone should be expected to take responsibility for themselves and enroll in affordable health insurance. Goodman wants to ask Edwards a series of questions about the kind of health system she wants, but it’s easy. It’s called universal coverage.

GOODMAN: “In the Elizabeth Edwards’ world, by contrast, health plans would try to avoid the sick and if they failed at that, their incentives would be to under provide care.”

Wrong. That’s the world we live in today; the world that Edwards wants to change. The reality is that pre-existing conditions make it hard, if not impossible, for people to get health insurance in the individual market that McCain is promoting. The Democratic reform proposals call for guaranteed issue, so everyone can get insurance, regardless of their health status. And even though McCain has turned his back on patients by supporting a marketplace free of insurance company oversight, Democrats still support a Patient’s Bill of Rights to make sure managed care plans put people before profits.

GOODMAN: “Any Senator or Senator’s spouse who has been participating in the federal employee’s health program cannot be denied coverage by any subsequent employer plan or in the individual market. This guarantee also applies to every other American who is currently in an employer plan under federal law.”

That’s overstated. The Federal government has a 52-page guide explaining insurance coverage protections, and it is clear how individuals’ legal protections are limited. For many Americans, their ability to retain coverage as they change jobs or move from group to individual coverage are determined by the type of coverage they have and the benefits it covers. And for those who can’t afford coverage as they leave a qualified employer plan, those protections disappear completely after 63 days.

Edwards makes an excellent point. John McCain is promoting an individual market with few protections. By pushing more people into that market, McCain puts everyone at risk. Sure, US Senators and their spouses, as Goodman points out, have strong protection. But we need a system that works for everyone.

In 2001, McCain was in the middle of Washington’s biggest health debate in years. In drafting the Patients’ Bill of Rights (S. 1052), McCain’s fight though was with Republicans, not Democrats. The goal was to find ways to keep insurers under control and to stop some of the worse abuses of managed care.

McCain’s co-sponsors were none other than Sen. Edward Kennedy (D-MA) and John Edwards (D-NC). McCain even co-authored a Washington Post opinion piece with Edwards. Titled “Let’s See Some Bi-Partisanship,” the piece read in part:

For too long, some of us in Congress have struggled to come up with a way to create rights for patients who have disputes with health maintenance organizations…We all agree that patients deserve basic rights.

McCain was bucking his party. President Bush verbally threatened a veto early in 2001 and then issued a written veto during the summer. Senator Don Nickles of Oklahoma, then part of the Senate Republican leadership, once warned, “Employers beware. There is language in this bill that can bankrupt you.” Patients’ rights became so difficult for Bush that the newly elected president quipped, “A dictatorship would be a heck of a lot easier, there’s no question about it.”

That was then. Today, McCain has learned to get along with his party and insurers. When asked recently plans that offer coverage guarantees at reasonable prices and consumer protections for individuals with preexisting conditions, McCain said, “That would be mandating what the free enterprise system does.”

Instead of regulating the insurers, McCain now wants to deregulate them. For example, his plan to allow insurance companies to sell products across state lines would weaken consumer protections. And while John Edwards called for a new and even stronger patients’ rights during his 2007 run for president, McCain’s position actually weakens patient protections. McCain’s plan to enroll everyone in high deductible health plans will create barriers to access for low-income persons.

In 2001, much was made of how Bush was trying to cut his former presidential rival out of the patients’ rights negotiation. Maybe McCain found solace for his 2000 presidential loss in knowing that patients’ rights debate was an embarrassment to his former rival? Whatever his motivation in the past, McCain has now embraced conservative orthodoxy.

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

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.

It’s just the latest chapter in Elizabeth Edwards’ effort to explain the facts on the McCain health plan, which started Saturday at her speech to the Association of Health Care Journalists. While there, Elizabeth Edwards pointed out that she and John McCain had something in common, that neither of them would get coverage under his health plan.

This lead to the McCain campaign calling her “confused” in a piece published by the Los Angeles Times, something Edwards responded to on this blog and then this morning on the Today Show.

When Bill Bennett followed Edwards this morning, the best response he could muster was a generic assertion that the free market could cure the country’s health care crisis, saying, “I think a market approach is going to be the better approach.”

He added that what McCain is trying to do is, “unprecedented,” and because of that, “ We don’t know what the market will provide.” Commenting on whether all persons would be covered under the McCain plan, the best Bennett could do is to say, “It is John McCain’s position, and Dr. Coburn’s position [Republican Senator from Oklahoma, whose health idea McCain's follows], that an influx of that amount of supply [under their plan], if you will, will create possibilities for people that haven’t existed before. So, I don’t think you can rule this out categorically.” Watch it:

We can’t rule out that the McCain plan will help people get coverage? We don’t know what the McCain plan will mean? Wow Bill, there is a ringing endorsement. It was a simple enough question, and Bennett couldn’t give a straight forward answer supporting McCain. Bennett got one thing right though, McCain’s idea of trying to move everyone into the individual market is “unprecedented,” mostly because the individual market is broken and conservative ideas to markets like McCain’s would further weaken individual market protections.

I’ll be waiting for the McCain campaign statement that Bennett must be just as “confused” as Edwards on the merits of the McCain plan.

When McCain says he wants to improve quality, he means that he wants families to pay more out-of-pocket for care by enrolling them in Health Savings Accounts (HSAs), preferred-tax savings accounts than can be used by individuals and families to pay for deductibles as high as $5,000.

The theory is that the money is coming directly out of the family’s pocket, so they will have an incentive find the highest quality, least expensive care, or as McCain said, “American families know quality when they see it, so their dollars should be in their hands.” Conservatives call this approach, “Consumer-Directed Health Care,” to make it sound like they are giving power to consumers. All they are giving consumers is a headache.

There are many reasons the HSA theory breaks down:

– Little information on quality. It is easier to find out the quality of a microwave than it is the quality of care at a local hospital. Little quality data is given to those in consumer-driven plans and it is rarely used. It is difficult to know which doctor or hospital is better than another.

– Little information on cost. If you call up the local ER and ask them how much it is to treat a broken leg, you won’t get answer. In fact, a Commonwealth Fund report released last week shows that the information available to those with high deductibles is still limited and has not really improved over the last three years.

– Costs could be higher. There is reason to think that the uninsured (and therefore those with high deductibles) pay more than others.

– Most people didn’t go to medical school. High cost-sharing doesn’t affect quality, and it discourages the use of highly effective and less effective care at equal rates, with the poor and sick being at a significant disadvantage.

George Halverson, CEO of Kaiser Foundation Health Plan, summed up high-deductible plans this way in a 2003 article:

That thousand-dollar deductible will buy, at best, four hours in the more-expensive hospital. It might buy five hours of care at the less-expensive hospital. Will people really shop between two hospitals if the same thousand dollars buys four hours of care at one and five hours of care at another? No — we don’t buy hospital care by the hour.

There is some evidence that those in HSAs spend less money, but it simply could be that younger (and healthier) people sign up for these plans. And some may spend less because they can’t afford needed care given the high deductible. In fact, a recent survey found that those in HSAs have are more dissatisfied as compared to those with traditional insurance. There are so many problems (read Jeanne Lambrew’s piece on what “Conservative Health Reform” means) with HSAs, one advocacy group has created a library of critical papers.

So who wins from such a radical plan? That’s easy. HSAs are very lucrative for insurance companies for the simple reason that the individual bears much more of the cost and risk for care. The McCain health plan isn’t about improving quality. It’s about supporting the insurance industry.