The Wonk Room

Insurance Industry Pushes For Health Insurance Mandate»

The insurance industry recently reiterated its support for a health insurance mandate. Since healthy folks could no longer wait until they’re sick to buy health insurance, the insurance industry has agreed to end its practice of cherry-picking the healthiest applicants and denying coverage to individuals with pre-existing conditions.

Affordability, of course, is a different issue altogether. The New York Times writeup notes, “while insurers would be required to sell insurance to any applicant, nothing would guarantee that consumers could afford it. Rate regulation promises to be a highly contentious issue, since it pits the financial interests of insurers against those of consumers.”

Most progressive proposals guarantee affordability by forcing private insurers to compete with a new government plan, limiting premium discrimination of sex and age, and ensuring that nobody spends more than a certain percentage of income (for example, 5–7.5 percent) on health insurance premiums.

As Tom Daschle, the incoming Health and Human Services Secretary, writes in his book, “the government would provide financial help on a sliding scale so nobody has to pay more than a certain percentage of their income for health insurance. Administered as a refundable tax credit, this protection would apply to employer-based health insurance as well as private insurance obtained through the pool.”

Still, the industry’s concession is significant, since some insurers remain profitable by excluding sick people from coverage. One of the biggest opponents to the individual mandate in California, for instance, was the for-profit Blue Cross plan, which found the underwriting process particularly profitable and played a major role in defeating reform efforts.

But now, the industry that brought you the infamous Harry and Louise ads of the 1990s — warning Americans that they would be forced to purchase health insurance they could not afford — may force President-elect Barack Obama (who proposed requiring insurers to cover pre-existing conditions but not creating a mandate for adults to buy insurance) to adopt a health insurance mandate! It will be up to progressives to push hard for affordability guarantees and comprehensive benefits.

The Baucus Health Plan & The Tax Incentive Tweak»

During the presidential campaign, progressives criticized Sen. John McCain (R-AZ) for dismantling the employer-based health insurance system by exposing employee tax benefits to income taxes. This morning, Sen. Max Baucus (D-MT) proposed financing his comprehensive health reform plan by reforming the tax incentives for employer coverage.

So what’s the difference? Why aren’t progressives jumping down Baucus’ throat and accusing him of treason? While McCain proposed replacing the employee deduction with a one-size-fits-all tax credit without reforming the health insurance market, Baucus pairs employee-tax tweaks with market reforms that would increase access to group coverage.

Baucus proposes two changes to the tax exclusion: capping the amount of health care premiums that can be excluded from employee wages and restructuring the exclusion on a sliding scale based on income, giving people with lower wages a larger deduction. But, since the plan simultaneously expands Medicaid, Medicare and SCHIP, creates an insurance exchange, allows Americans to buy into a new public plan, and ends discrimination against individuals with pre-existing conditions, the restructuring of the tax exclusion would not leave Americans without coverage.

Most progressives recognize the regressive nature of the employee tax exemption. As the Baucus white paper points out, “current incentives are also regressive because they are, for the most part, more valuable to taxpayers who are subject to higher marginal rates. As such, they give larger subsidies to higher-income workers, instead of to the lower income Americans who need more help buying insurance.” In fact, even Obama adviser Jason Furman argued that our current tax exemption for health insurance could (or should) be revamped.

The Baucus plan also meets another progressive requirement: it builds on the current employer-system. 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. Baucus seeks to expand and strengthen the system by requiring employers to offer a Section 125 plan which would allow employees to pay their health insurance premiums through their employer’s payroll deduction and with pre-tax dollars.

As Ezra Klein points out, “by offering something that hews closely to Obama’s principles and traces the expressed preferences of most leading Democrats, [Baucus] he’s constructed a broadly acceptable base on which to build the process. There is plenty yet to be defined, traded, added, and decided — which is to say, there is plenty of reason for other senators to take a role in the process. If his colleagues agree, then this will be, as Baucus hopes, Max Baucus’s health reform process.”

Baucus Unveils Universal Health Care Initiative»

In a recent letter to President-elect Barack Obama, a coalition of business and labor groups — the Business Roundtable, the National Federation of Independent Businesses, AARP and the Service Employees International Union — argue that “addressing skyrocketing health care costs is a critical component of stabilizing household, national and global economies” and warn that “inaction undermines the economic security of our families; limits the productivity of our work force; stagnates job creation and wage growth; and threatens to crowd out investments in energy, education and infrastructure.”

Today, Senate Finance Committee Chairman Sen. Max Baucus (D-MT) answers the call for reform with a detailed health care proposal designed to expand health care access and improve affordability.

The plan includes a mandate, requiring that all Americans obtain health insurance through an employer or the new Heath Insurance Exchange:

Requiring all Americans to have health insurance will help end the shifting of costs from the uninsured to the insured…This step is necessary for insurance market reforms to function properly and to send the cost shifting that occurs within the system. It is expected that the vast majority of American employers would continue to provide coverage at a competitive benefit to attract employees. Except for small firms, employers that choose otherwise must contribute to a fund that would help cover those who remain uninsured.

Baucus’ proposal expands Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP) and opens “Medicare to people ages 55 to 64.” As the New York Times reports, “Medicaid would be available to everyone below the poverty level and could provide at least seven million more people with access to the program.” SCHIP “would be expanded to cover all uninsured youngsters in families with incomes at or below 250 percent of the poverty level ($44,000 for a family of three),” raising the income limit “in about half the states.”

Here are the guts of the proposal:

- A choice of public or private: Creates a “health insurance exchange,” where people could choose from among private insurance policies and a new public Medicare-like plan.

- End to discrimination: Prohibits insurers from denying coverage of preexisting conditions or age.

- More affordable coverage: Offers new tax breaks for individuals and small businesses to offset the costs of insurance.

- Easier to enroll: Ends the current ban against immigrants participating in Medicaid or SCHIP in their first five years in the United States.

- Focus on prevention: Uninsured would receive a “RightChoices” card that guarantees access to recommended preventive care.

- Payment reform: Refocuses payment incentives from quantity (fee-for-service) toward quality and value.

Baucus finances the plan by “eliminating, fraud, waste, and abuse in public programs,” ending overpayments in the Medicare Advantage program, increased transparency, and “careful reforms of medical malpractice laws that could lower administrative costs and health spending.” More controversially, Baucus also proposes revisiting “the current tax treatment of employer-sponsored health insurance…. a benefit valued at $245 billion annually.”

Palin Ignores Gender Discrimination: Women Would Benefit From Individual Health Care Plans»

Two days after new data from insurance companies and online brokers suggested that women buying health insurance in the individual market pay more for coverage, Sarah Palin argued that Sen. McCain’s plan to push more Americans into the individual heath insurance market would benefit women:

Of course we want and deserve equal pay for equal work. But we also want to be able to afford good health care for our families. John McCain’s plan for the $5,000 tax credit will allow us to make our own decisions, to be able to afford health care, to erase these state lines that prohibit a competitive environment to purchase a good health-care package. . . . That’s an issue that is important to women.”

Palin’s pro-market rhetoric obscures the consequences of exposing health care to a “competitive environment.” In fact, despite Palin’s pro-choice assertions, allowing insurance companies to sell policies across state lines would eliminate existing consumer protections and increase the costs of insurance.

Insurance companies are already charging women more than men for identical coverage. As the New York Times reported last week, “women pay much more than men of the same age for individual insurance policies providing identical coverage.” A 30-year-old woman pays “31 percent more than a man of the same age in Denver or Chicago” and in Iowa, “a 30-year-old woman pays $49 a month more than a man of the same age.”

Women pay more because they are more likely to have certain chronic diseases and are expected — as people who bare children — to need more care.

McCain’s plan would give insurance companies even more incentive to discriminate against women. Under his proposal, in order to attract the healthiest risk pool and maximize profits, insurance companies would market bare-bones policies from states that don’t require insurers to finance maternity care or cervical cancer screenings. But an exodus of non-insurance users into bare-bones policies would further fragment the health insurance pool, divide those who don’t use insurance from those who do and force women who require pregnancy check-ups or other health care services to pay more for identical coverage.

The only “choice” McCain’s health care plan would provide women, is the “choice” of paying more for health care. And that’s certainly “an issue that is important to women.”

For more on how McCain’s health care plan would effect women, click here and here.

McCain’s Medicaid Cuts: $738 Billion Over 10 Years»

The recent economic downturn is forcing states to “scale back safety-net health-coverage programs,” USA Today is reporting. Medicaid, which eats up 17 percent of state budgets is on the chopping block and millions of low-income adults and children are in danger of losing their health insurance.

Sen. John McCain’s solution is to push even more people off the rolls. As the Wonk Room reported, McCain recently proposed cutting $1.3 trillion from Medicare and Medicaid to plug the $1.3 trillion funding gap in his budget-neutral health care plan. And while the campaign has argued that McCain will make up the shortfall by finding trillions of dollars worth of “savings,” most observers disagree.

CAPAF’s very own Peter Harbage, for instance, who conducted the initial analysis of the effects of McCain’s cuts on both Medicare and Medicaid had released a new report documenting the consequences of McCain’s proposed “savings.”

According to Harbage, “the only way for Sen. McCain to achieve his goal is to slow Medicaid growth to 5.5 percent per year –well below what is would take to maintain enrollment growth and match the rising costs of medical care.” To accomplish this, McCain would have to lock in federal spending limits “through so called block grants, which deliver federal funds according to pre-set budget limits rather than on a needs basis, as is now the case.”

In other words, as unemployment creeps up and more Americans lose their health insurance (a 1 percent increase in unemployment resulted in 1 million more people enrolling in Medicaid and SCHIP and another 1.1 million more people uninsured), the federal government will sit on its hands, offering no extra Medicaid funding. Here are the consequences of McCain’s one-size-fits all block grant:

- Total program cut of $738 billion over 10 years

- 29 states could lose more than $5 billion in federal Medicaid spending over 10 years

- Every state could see a reduction of more than $1 billion in total Medicaid spending (federal and state) over 10 years

By limiting average annual growth to 5.5 percent — compared to the estimated 5.9 percent growth rate needed to keep up with medical inflation and Medicaid enrollment growth, states will have to make cutbacks in “program, eligibility and benefits or both.”

Inflating The Numbers: McCain’s Plan Boosts Coverage By Redefining ‘Insurance’»

After the Lewin Group released its analysis of Sen. John McCain’s health care plan, the McCain campaign and even some in the media, have used the report to argue that McCain’s plan would cover about 20 million uninsured Americans and save millions:

- Jay Khosla, McCain policy adviser: But our internal estimate all along had been that we would cover anywhere between 25 million to 30 million uninsured. Lewin said it’s about 21 million. [Kaiser Foundation Webchat, 10/16/2008]

- Maria Bartiromo, host of Wall Street Journal Reports: According to a recent study by the independent Lewin Group, both candidates plans would reduce the total number of uninsured by the year 2010. Obama’s plan mandates coverage for children under 19. In the 55 to 64 age range, Senator McCain would reduce the number of uninsured by 25 percent, compared with the 52 percent under Obama’s plan. [CNBC, 10/19/2008]

- McCain campaign: “A recent Lewin Group study estimated savings of more than $1,400 per American family – almost three times the savings as under the Obama plan.” [JohnMcCain.com]

- Robert Carroll, Tax Foundation: “The Lewin Group, a respected private health-care research outfit, recently estimated that the McCain credit would increase the number of insured by as much as 21 million.” [WSJ, 10/27/2008]

But as the Wonk Room argued earlier this month, Lewin’s conclusion that McCain’s health care plan would reduce the number of uninsured by 21.1 million and cost $2.05 trillion dollars is More ». In fact, their conclusion paints a more favorable picture of McCain’s proposal precisely because it ignores the consequences of opening the health insurance market to unfettered market competition, overstates the purchasing power of McCain’s health credit and the quality of individual health insurance plans.

Yesterday, Len Berman of the Tax Policy Center, which conducted its own analysis of McCain’s plan, similarly argued that Lewin produced its favorable numbers by “ignoring the campaign’s statements and supplying their own assumptions.

More »

Holtz-Eakin Implosion Watch: Admits Inferiority Of Individual Health Care Plans…Again»

Earlier this month — after previously maintaining that Sen. John McCain’s health care proposal would lower costs by allowing healthier Americans to find cheaper coverage in the individual market — McCain senior policy adviser Douglas Holtz-Eakin argued that “younger and healthier employees with the McCain health care tax credit will have a bigger incentive to stay with the employers“ because employers offer better coverage than individual health care plans.

At the time, the Wonk Room considered Holtz-Eakin’s remark an unfortunate, if somewhat desperate argument, which betrayed a disorganized campaign frantic to convince voters that they won’t lose their employer-sponsored coverage.

But as the days passed and the campaign moved into its home stretch, Holtz-Eakin’s comments ranged from the bizarre to the truthful:

- On CNBC, Holtz-Eakin asserted that “you can’t cut taxes for 95 percent of the American people, if just under 50 percent aren’t paying taxes” and then claimed that McCain would cut taxes for “everybody.”

- Last week, during a segment on Bloomberg television, Holtz-Eakin finally admitted that temporarily cutting the capital gains tax would overwhelmingly benefit millionaires

- On Bloomberg, Holtz-Eakin conceded that McCain’s health care tax credit wouldn’t cover the entire cost of a comprehensive health plan and would only allow some Americans to buy insurance in the individual market.

- On Face the Nation this Sunday, Holtz-Eakin seemed to argue that carbon dioxide is not a pollutant.

And so it is with great fanfare and anticipation that the Wonk Room unveils The Holtz-Eakin Implosion Watch, a semi-regular series chronicling Holtz-Eakin’s truthiest moments in the waning days of the campaign.

Today, Holtz-Eakin again strays off message, telling CNN, “younger, healthier workers likely wouldn’t abandon their company-sponsored plans“:

“Why would they leave?” said Holtz-Eakin. “What they are getting from their employer is way better than what they could get with the credit.”

Hotlz-Eakin argues that “under McCain’s plan, employer-funded care will generally be preferable to the tax credit alone — since it’s the tax credit plus the employer contribution — but that the tax credit alone will be a huge step up for people who have nothing at all.” In other words, in the individual market, without the employer contribution, Americans would have to pay more for less…and less as McCain’s tax credit does not keep up with medical inflation.

In fact, high deductible plans typically lead to higher out-of-pocket expenses, resulting in “a one-time shift in spending from premiums to patient out-of-pocket outlays.” As Holtz-Eakin himself points out:

McCain’s would leave them better off than they are now, but still with something less than complete coverage, unless they reach into their pockets to supplement the tax credit.

Oddly enough, Holtz-Eakin is now arguing that under McCain’s health care plan (which pushes about 20 million Americans out of the employer market and into the unregulated individual market), Americans would receive sub-prime health care coverage.

The True Consequences Of So-Called Consumer Driven Health Care»

In today’s Wall Street Journal, Robert Carroll lays out the conservative philosophy for health care reform. Like Sen. John McCain, Carroll believes that the employer-insurance subsidy contributes to higher health care costs by encouraging overutlilization of care. “The subsidy encourages people to buy bigger policies that cover more, and leads to greater health-care spending,” Caroll argues.

Eliminating the income-tax exclusion “should reduce private health-care spending; to the extent this reduced the cost of health care, it should also put downward pressure on the growth of Medicare and Medicaid costs.”

But in shrilling for McCain’s plan to dismantle the employer-based system and push Americans into high-deductible plans in the individual market, Carroll gets the consequences of leaving individuals responsible for financing their own health care entirely backwards.

According to a Commonwealth study, for instance, the major effect of a high deductible is likely to be “a one-time shift in spending from premiums to patient out-of-pocket outlays.” Premiums to employers and workers would be reduced by 10 to 15 percent, “but most of that reduction would be a reduction in covered medical outlays and a shift to out-of-pocket expenses for which patients would be responsible,” a Commonwealth study concluded.

Shifting the risk and cost of health insurance onto the individual will increase medical debt and discourage preventive care utilization. In fact, adults enrolled in high-deductible insurance plans (with deductibles of $1,000 or more) reported one of four cost-related access problems:

- because of cost did not fill a prescription

- did not see a specialist when needed

- skipped a recommended test treatment, or follow-up

- had a medical problem but did not see a doctor

Encouraging more people to skimp on preventive care, could fuel growth in health care spending, not reduce it. In fact, advocates of so-called consumer driven health care plans, miss the forest for the trees. The sickest 20 percent of Americans account for 80 percent of health care costs. Yet consumer plans would do little to lower the costs of their care and may actually add to their ranks.

Carroll proclaims that “Almost Everyone Would Do Better Under the McCain Health Plan.” In truth, it’s difficult to think of anyone — the not-yet sick or the already sick — who would benefit from punting needed care because of higher cost.

In Search Of An Honest Debate On Health Care»

Our guest blogger is James Kvaal, a Senior Fellow at the Center for American Progress Action Fund.

How much will Sen. John McCain cut from Medicare and Medicaid to pay for his new tax credits? McCain advisor Douglas Holtz-Eakin said that our estimate of $1.3 trillion – based on the work of the Tax Policy Center – is “false.” But he has refused to provide his own number or to endorse any of the independent estimates.

Holtz-Eakin also claimed that he could save “on the order of $2.6 trillion over 10 years” by cutting wasteful Medicare spending, without affecting benefits at all. If that’s true, than Obama’s plan – which costs $1.6 trillion – could provide universal health care coverage while saving $1 trillion.

There are only 10 days until the election. If the McCain campaign successfully avoids all the difficult questions on who, exactly, is paying for its trillions in tax breaks, than no future presidential candidate will have any reason to be honest in their budgeting. And if McCain actually becomes president, then he will have learned that he can put out whatever numbers he wants, or not, and leave all of us guessing about his true policies.

For more on this, read the new analysis released yesterday by the Center for American Progress Action Fund.

McCain’s Health Plan Isn’t Kid Friendly»

Sen. John McCain’s health care plan leaves too many Americans behind. Individuals with pre-existing conditions, women, baby boomers and children will have a harder time finding affordable health insurance under McCain’s proposal to move individuals from large employer-risk pools — where the risk and cost of health insurance are spread across a large group of people — into unregulated individual plans.

In fact, a new report from First Focus concludes that McCain’s $5,000 one-size-fits-all tax credit discriminates against families with children. “A family will get the same $5,000 tax credit regardless of the number of children they have. Based on this design, families are penalized for every child,” the report concludes.

And it only gets worse. Since McCain deregulates insurers and allows companies to cherry pick the healthiest individuals, 19 million children “currently with employer coverage could be barred from insurance” in the individual market place “due to pre-existing conditions.” Children who require autism care, well care visits, or lead poisoning treatments could “lose the protection of having guaranteed benefits” once companies can relocate to states without consumer protections:

McCain’s proposed cuts to Medicaid and his lack of support for maintaining SCHIP — combined, the two programs cover approximately 26.4 percent of all children under 19 — would also erode the safety net programs that families rely on to keep their kids healthy.

Sununu Misrepresents Bill: ‘I Wouldn’t Discriminate Against People With Pre-existing Conditions’»

During last night’s senatorial debate in New Hampshire, Sen. John Sununu (R-NH) falsely suggested that his Making Health Care More Affordable Act of 2008 (S.3072) “wouldn’t discriminate against people with preexisting conditions”:

And I wouldn’t discriminate against people with preexisting conditions, no one should be for that. In fact, we have a health care affordability act at the federal level that prevents exactly that kind of discrimination.

Watch it:

Given the toughness of his campaign, Sununu may not have had time to read his own bill, for it legitimizes the very same kind of discrimination he condemns.

The Making Health Care More Affordable Act of 2008 creates Association Health Care Plans that are exempt from state insurance regulations and consumer protections. Like the McCain plan, the Sununu proposal allows insurance companies “to be licensed in the state of their choice and sell policies to people in other states without adhering to the standards that would otherwise apply to them in each state.”

By relocating to the states with the least regulation, insurance companies could cherry-pick the most profitable risk pool (young and healthy workers), leaving older and sicker people behind. State-regulated health care plans would be left with a disproportionate number of older and sicker employees who are more expensive to cover. As a result, if enacted, this bill will result in higher premiums for four out of five small employers, the Congressional Budget Office estimates.

Small business groups, like the National Small Business Association, oppose Sununu’s bill:

AHP legislation would likely increase premiums for small employers and their workers, and make it much harder, if not impossible, for small business owners with older sicker workers to get access to affordable health coverage.

Sununu allows insurers to circumvent existing consumer protections, without establishing “any new national standards with which the plans must comply.” Thus, not only does his plan not prevent companies from discriminating against people with preexisting conditions, it practically encourages them to deny coverage to all but the healthiest Americans.

McCain’s Health Plan Puts Baby Boomers At Risk»

In the short term, if you’re healthy and wealthy, you can use Sen. John McCain’s $2,500/$5,000 health care tax credit and enroll in a low premium/high deductible health care plan in the unregulated individual health insurance market. Once you get sick, you may lose your coverage to another round of medical underwriting … see your costs increase astronomically … have certain conditions exempt from coverage … the list goes on and on.

But for the 56 million Americans with employer coverage today who have a chronic illness, who are women or who are ages 55 to 64 — three groups of people who pay more for health insurance in the individual market — McCain’s plan to shift Americans from the employer-based insurance market to the individual market is more than an inconvenience, it’s a net loss.

Because while insurance companies require older and sicker people (or those who simply use more care, like women) to pay higher premiums, McCain’s plan doesn’t offer them a higher tax credit.

In fact, according to a new report from CAPAF, “the flat $2,500 credit will cover less than 48 percent for older Americans and more than 48 percent for younger Americans”:

Specifically it would cover 84 percent of the premium for an 18-to-24-year-old, but only 23 percent of the premium for a 60-to 64-year old…The McCain plan gives people ages 60 to 64 a tax credit that is 53 percent lower than one that adjusts for premium variation by age.”

What’s more, boomers — who make up 17 percent of non-elderly adults but account for 26 percent of those with at least one chronic illness — will have a hard time finding coverage in a market which tries to maximize profit by insuring only the healthiest Americans. But if they go uninsured, Medicare costs will skyrocket. In fact, a recent study found that “chronically ill people turning age 65 who were previously uninsured had lower spending than insured people prior to Medicare. Yet once on Medicare, these uninsured Americans spent 50 percent more than previously insured Medicare beneficiaries who also had chronic disease”:

If, as one study suggests, being uninsured increases spending by 50 percent…having 2.4 million more chronically ill Americans join Medicare as uninsured rather than previously insured could raise its costs by $2.4 billion per year in 2005 dollars.”

Thus, under McCain’s plan older and sicker Americans — and in fact all Americans — pay more for less. Read the full CAPAF report here.

McCain’s Missing Cost-Containment Policy»

Sen. McCain has said that he would cut Medicare spending without reducing benefits or enrollment. Again today, Sen. McCain’s campaign talked about policies like reducing health care payments, promoting IT, and taking other cost containment steps. Despite his assertions, Sen. McCain has not put forward a serious health care cost-containment policy. Moreover, it would take restraining Medicare spending to below the rate of medical inflation and population growth achieve $882 billion in savings. Translation: funding would be inadequate to provide Medicare beneficiaries with the same services they receive today. Massive premium increases or benefit cuts would be required.

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. More »

How ‘Joe The Plumber’ Is Hurt By McCain’s Health Care Plan»

Responding to conservative claims that progressives would raise taxes on middle-class Americans like Samuel J. Wurzelbacher (a.k.a. ‘Joe the Plumber’) and undermine the success of small businesses, today’s Progress Report argues that a progressive tax policy is exactly how millions like ‘Joe the Plumber’ can realize the American Dream. The same is true for health care policy.

‘Joe the Plumber’ has himself experienced the consequences of rising health care costs. After St. Charles Mercy Hospital filed a lien against him in 2007 for $1,261, ‘Joe the Plumber’ joined a long-line of Americans who are squeezed by growing costs.

Nationally, costly illnesses trigger about half of all personal bankruptcies, and most of those who go bankrupt because of medical problems have health insurance. Total health care spending has doubled between 1996 and 2006, and without reform it is expected to double again in the coming decade.

But the change that Joe’s preferred candidate for President, Sen. John McCain (R-AZ), offers would do very little to reduce Americans’ health care debt; in fact, it may add to it. Sure McCain speaks a good game about controlling health care costs, but his health care plan merely shifts the costs of insurance from the employer and the government to the individual. McCain controls cost by providing less care.

In McCain world, Joe is responsible for negotiating with a health insurance company and finding affordable coverage for himself or his children. Should he be lucky enough to find insurance in the individual market place (and only about 10 percent of applicants do), high deductibles and out-of-pocket expenses would bankrupt the plumber, should his family become sick and actually need care. Since McCain’s plan undermines existing consumer protections, the insurance company could exclude certain conditions from coverage, deny medical claims, and increase premiums. In time, McCain’s $5,000 health credit would depreciate in value, raising Joe’s taxes, and forcing him to pay more for his health insurance plan.

Unfortunately, since ‘Joe the Plumber’ is no ‘Joe Millionaire,’ McCain’s health care plan would do little to help him afford health insurance.

McCain Confuses Non-Group Plans With Employer Coverage»

During last night’s final presidential debate, Sen. John McCain (R-AZ) falsely claimed that “the average cost of a health care insurance plan” for a majority of Americans “is $5,800″:

Now, 95 percent of the people in America will receive more money under my plan because they will receive not only their present benefits, which may be taxed, which will be taxed, but then you add $5,000 onto it…And the good thing about this is they’ll be able to go across America. The average cost of a health care insurance plan in America today is $5,800. I’m going to give them $5,000 to take with them wherever they want to go, and this will give them affordability.

Watch it:

McCain confuses non-group plans with employer coverage. In the individual health insurance market, annual premiums averaged “$5,799 for family plans” but most Americans bought into more comprehensive employer-based plans which cost an average of $12,680, significantly higher than McCain’s so-called “average cost.”

To continue receiving “their present benefits,” the 158 million Americans in the employer system would have to stretch McCain’s $5,000 tax credit into $12,680 or enroll — if they are eligible — in subprime (and thus cheaper) coverage “across America.”

McCain’s awkward answer comes on the heals of internal confusion about the effects of the senator’s health care plan on employer-sponsored coverage and taxes. More importantly, the error highlights McCain’s personal unfamiliarity with health insurance. As a life-long beneficiary of government health care, McCain has never had to grapple with the rising costs of health care.

How The Lewin Analysis Falls Short»

On Sunday, former Rep. Rob Portman (R-OH) cited The Lewin Group’s new analysis of Sen. John McCain’s (R-AZ) health care plan to argue that McCain’s proposal “will cover about the same number of uninsured” as Sen. Barack Obama’s (D-IL):

With all due respect, they are very different plans. But the independent evaluations that I’ve seen, including one last week, shows that the McCain plan will cover about the same number of uninsured–in fact, this particular analysis said a few million more people–but it will reduce costs. That’s the key.

Watch it:

According to last week’s Lewin analysis, McCain’s health care plan would reduce the number of uninsured by 21.1 million and cost $2.05 trillion dollars. But the Lewin assessment is the black-sheep of the candidates’ health care comparisons– in fact, the three other prominent analyses of the candidates’ health care plans estimate that McCain would reduce the number of uninsured by just 1-5 million:

The Lewin Group inflates McCain’s numbers in several ways. Put simply, the report ignores the consequences of opening the health insurance market to unfettered market competition, overstates the purchasing power of McCain’s health credit and the quality of individual health insurance plans.

More »

McCain On Tommy Thompson: ‘The Smartest Guy On Health Care’»

Today, during a campaign stop in La Crosse, Wisconsin, Sen. John McCain (R-AZ) reiterated his praise for former Wisconsin governor and Health and Human Services Secretary Tommy Thompson:

I would also like to mention one, who is here, who has been a great governor here in the state of Wisconsin, the smartest guy on health care, one of the great friends we all have in America, Governor Tommy Thompson.

Watch it:

Thompson’s intelligence not withstanding, his record on health care leaves much to be desired. During his four year tenure as President Bush’s point man at the HHS, the number of uninsured increased from 41.2 million to 46.6 million, Thompson pushed through a lobbyist-written prescription drug bill, helped misrepresent the legislation’s true cost, proposed a radical restructuring of the Medicaid program, and “improperly altered a report documenting large racial and ethnic disparities in health care”:

- Shoved Through Industry-Friendly Medicare Part D: Thompson was instrumental in ramming through the industry-friendly Medicare Prescription Drug bill, going so far as to strong-arm retiring Rep. Nick Smith (R-MI), allegedly offering the congressman a “$100,000 bribe to vote for” the bill. The legislation “bars Medicare from negotiating prices directly with drug makers” for the medicines it buys and has proven “to be a financial windfall [for big drug companies], larger than even the most optimistic Wall Street analysts had predicted.”

- Misrepresented Cost Of Medicare Part D: After the bill passed, the Bush administration “announced the program would actually cost $534 billion to implement, nearly 40 percent more” than Thompson and other administration officials advertised. “In March 2004, Richard Foster, the chief actuary at the Centers for Medicare and Medicaid Services, “revealed he had been threatened by the Bush administration that he would be fired if he told Congress the true cost of the policy.”

- Proposed Poor Block Grants To States: Thompson’s proposed radical restructuring of the Medicaid program would have taken “advantage of the states’ dire fiscal situation and their real need for federal aid to further the Administration’s goal of undermining the Medicaid entitlement.” The proposal increased “the pressure for states to reduce coverage for low-income people” and would have eliminated “the Medicaid entitlement for the nearly 12 million ‘optional’ beneficiaries, including 100 percent of children enrolled in SCHIP, 56 percent of seniors, 22 percent of people with disabilities, 43 percent of parents, and 20 percent of children enrolled in Medicaid.”

- Censored Racial Disparities Report: In 2004, Thompson admitted that his department succumbed to political pressure and submerged evidence of “profound” ethnic and racial disparities in health care in order to accommodate President Bush’s proposed cuts to programs “that recruits blacks and Hispanics for careers as doctors, nurses and pharmacists.”

How McCain Misunderstands Health Insurance Benefit Mandates»

During Tuesay’s presidential debate Sen. John McCain (R-AZ) argued that his proposal to allow insurance companies to sell policies across state lines would free insurance providers from “costly” benefit mandates and lower health care costs.

When the senator unveiled his health care plan in April, he suggested that state-imposed consumer protections — which mandate that insurance companies cover diabetes care, cancer screenings, and maternity care — drive up health care costs:

They urge universal coverage, with all the tax increases, new mandates, and government regulation that come along with that idea. But in the end this will accomplish one thing only. We will replace the inefficiency, irrationality, and uncontrolled costs of the current system with the inefficiency, irrationality, and uncontrolled costs of a government monopoly.

McCain’s argument appeals to the bargain hunter in all of us. As McCain explained last night, “Why not? Don’t we go across state lines when we purchase other things in America? Of course it’s OK to go across state lines because in Arizona they may offer a better plan that suits you best than it does here in Tennessee.”

If an individual doesn’t need maternity care, why should he pay higher premiums for a benefit his state requires, but he doesn’t use, McCain is asking. The answer is quite simple: people buy insurance in case they get sick – not to find the services that they ‘need’ — and insurance companies lose money covering serious illnesses, not complying with benefit mandates. In fact, according to state experiences and an exhaustive study by the Congressional Budget Office, “eliminating some of the most expensive mandates — maternity, mental health, and preventive care for children — would bring” only a small reduction to health care premiums.

In other words, insurance companies lose money by insuring sick people, not though benefit mandates. In McCain’s “national marketplace,” some insurance companies (Travelers, we’ll call them) will move to states with few consumer protections and offer cheaper, but less substantive health insurance policies.

The healthiest individuals will likely gravitate towards the cheaper plans, but Americans looking for substantive coverage (of diabetic supplies, for instance) would not be able to purchase coverage from Travelers because these companies would have stripped their plan to the bare essentials in order to attract the healthiest applicants.

Individuals in need of diabetes care would buy coverage from the non-Travelers. But non-Traveler companies would have to increase their premiums, “not because of the cost” of diabetic care “but because of the risk pool” that diabetic care attracts.

Non-Travelers would charge higher premiums because their risk pools are full of diabetic patients who need to use their health insurance; healthier Americans, who balance out the sicker patients in the employer health insurance system, have rightfully migrated to the cheaper plans available across state lines.

Thus, in McCain’s unregulated insurance market, the sick would pay more for coverage, while the not-yet sick won’t have much to look forward to.

UPDATE: Over at Triage, Sandy Praeger, insurance commissioner for Kansas and president of the National Association of Insurance Commissioners, wonders if insurance commissioners will have authority over plans bought across state lines:

“Does my Kansas consumer who buys that product have to go back to the New Jersey commissioner [of insurance] if they aren’t getting the benefits they think they’re entitled to? Do I have the authority to intervene on their behalf?”

Consumers may end up being referred to federal authorities if they have complaints, as is already the case for people who get health insurance from companies that are exempt from state regulation. Large companies that fund their own health plans rather than purchasing insurance fall in this category.

But the reality is that regional offices of the U.S. Department of Health and Human Services aren’t set up to handle consumers’ insurance concerns in a timely fashion, Praeger said. “It’s very difficult for consumers to get their complaints dealt with,” she said.

Palin Asserts McCain’s Health Care Plan Is Free: ‘Doesn’t Cost Anything And Doesn’t Increase Taxes’»

As health care issues heat up on the campaign trail, Sen. John McCain (R-AZ) can’t seem to get his plan straight. Last Sunday, the senator admitted that his health care plan would increase taxes. On Friday, the campaign inadvertently called McCain a liar. And yesterday, in an interview with a local NBC affiliate in Florida, Gov. Sarah Palin again disagreed with McCain and explained that their health care plan “doesn’t increase anyone’s taxes”:

Q: Obama campaign calls Sen. McCain’s health care plan radical. That there could be a chance your Medicare could be in dander if not taxed then in some way cut. Explain John McCai’s health care plan.

PALIN: Maybe it’s radical because we don’t want the government to control it all we want the private sector we want through competition for American families to be able to afford health care. Doesn’t cost the government anything and certainly doesn’t increase anyone’s taxes.

Listen:

Well, it either does or it doesn’t, and both McCain and the Wonk Room agree that it does.

Everyone also agrees that McCain’s health care plan is radical, and, despite Palin’s best attempts to pivot the argument in her favor, most observers aren’t buying her spin. In fact, today’s New York Times reports that numerous business groups and associations oppose McCain’s proposal to replace the current tax exemption for employer-sponsored health care benefits with a one-size-fits all tax credit.

The officials, with organizations like the “U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Business, predicted in recent interviews that the McCain plan, which eliminates the exclusion of health benefits from income taxes, would accelerate the erosion of employer-sponsored health insurance and do little to reduce the number of uninsured from 45 million”:

- R. Bruce Josten, Chamber of Commerce: “To some in the business community, this is very discomforting. The private marketplace, in my opinion, is ill prepared today with an infrastructure for an individual-based health insurance system…There are huge questions about the $5,000 per family being an insufficient amount in terms of being able to purchase the same coverage.”

- John J. Castellani, Business Roundtable: “One of the things we don’t want to do, is jeopardize 170 million Americans who do get insurance through their employers.”

- Helen B. Darling, National Business Group on Health: “The last thing you want to do to the average working person, especially when you’re bailing out big financial companies, is take something they hold near and dear partially away.”

Recent analyses of McCain’s health care plan suggest that 20 million Americans could lose their employer-sponsored health care coverage (while 21 million would pick up subprime health insurance plans in the individual insurance market).

UPDATE: Appearing in Jacksonville, Florida Palin said, “our health care plan will give millions of middle-class families access to better health care without costing them a dime.”

McCain Reveals His Health Plan Will Force Benefit Eligibility Cuts In Medicare And Medicaid»

Karen Davenport and Ellen-Marie Whelan contributed to this post.

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.

More »

McCain’s Health Care Concession»

In one of the more bizarre parts of Douglas Holtz-Eakin’s health care memo, the McCain senior policy adviser argues that McCain’s health care plan preserves employer coverage because “younger and healthier employees with the McCain health care tax credit will have a bigger incentive to stay with the employers“:

For example, a 25-year-old employee in the 25 percent tax bracket with a $2,500 tax credit could either purchase a policy in the individual market for the same amount or stay with his employer plan and receive a $5,000 policy with an additional $1,250 to invest in a portable health savings account. Why would people choose worse insurance and less money?

Ironically, Holtz-Eakin highlights the inefficiencies of the individual market and undermines the very rationale behind McCain’s health care plan.

For months, the McCain campaign has maintained that the senator’s health care proposal would lower costs by allowing healthier Americans to find cheaper coverage in the individual market. During the unveiling of his health care plan in April, McCain argued, “Americans need new choices beyond those offered in employment-based coverage. Americans want a system built so that wherever you go and wherever you work, your health plan goes with you.”

Free market capitalism is at the very heart of McCain’s proposal. By equalizing the tax treatment of individual and employer health care plans, McCain hopes to entice healthier workers (the only ones who could find affordable coverage in the individual market) to opt out of the employer system and invest in their own health, make their own health care decisions.

McCain surrogates have suggested that unfettered from burdensome mandates and regulations, insurance companies will develop innovative health care plans with dramatically lower premiums, and out-of-pocket expenses. Competition and a national health insurance market will rein in growing health care costs and Cadillac and caviar health care plans will become a thing of the past.

So why the flip? Well, in order to defend the McCain health proposal from critics who charge that it would undermine existing coverage, the campaign is awkwardly trying to convince Americans that healthier workers won’t flee employer-insurance pools and increase costs for those who are left behind. In the process, they’ve admitted that the individual health insurance market offers inferior coverage, conceded that workers value the employer health contribution, and have stepped all over their talking points.

All in all, it’s kind of fun to watch.

McCain Proposes Medicare And Medicaid Cuts To Pay For Health Plan»

Despite previously insisting that their health plan would allow Americans to keep their current insurance coverage, the McCain campaign has now admitted that it would slash $1.3 trillion from Medicare and Medicaid over 10 years.

McCain’s cuts echo a 1995 effort to “cut $270 billion, or 14 percent, from projected Medicare spending” over seven years and force millions of elderly recipients into managed health care programs or HMOs. As Speaker of the House Newt Gingrich admitted, “We don’t want to get rid of it in round one because we don’t think it’s politically smart,” he said. “But we believe that it’s going to wither on the vine because we think [seniors] are going to leave it voluntarily.”

Shifting individuals out of Medicare/Medicaid/Employer insurance is the goal of McCain health reform. In fact, throughout his career, McCain has regularly supported More »:

- McCain has voted to cut, restrict, or underfund Medicare at least 28 times.

- McCain voted to restrict access to Medicare at least two times.

- In 1997, McCain voted in favor of raising the eligibility age for receiving Medicare from 65 to 67 with the change being phased in between 2003 and 2027.

- McCain voted against ensuring Medicare’s future by opposing efforts to extend its solvency at least 9 times.

McCain’s latest proposal will undermine Medicare and Medicaid benefits, increase costs, and further burden state budgets. But for the senator, this is no bother. In fact, his $1.3 trillion trim compliments his overall health care philosophy. Remember, McCain believes that Americans use too much health care. His solution to the health care crisis is simple: push Americans into the individual health insurance market and leave them alone to pay their health care bills.

UPDATE: During a conference call, former Sen. Bob Graham (D-FL) observed that McCain’s proposal “would cut Medicare and Medicaid by over 20% over the next 10 years…it would dramatically reduce the quality of health care for older Americans and the poorest and sickest Americans while at the same time adding to the burden of state governments”

FactCheck Misrepresents McCain Health Controversy»

On Friday, Paul Krugman highlighted an article by Sen. John McCain (R-AZ) in which the senator made the case for deregulating the health insurance industry by extolling the benefits of the last decade of deregulation in the banking sector.

After Sen. Barack Obama (D-IL) ran an ad attacking McCain’s untimely comparison, FactCheck.org falsely argued that the ad improperly conflated banking deregulation with McCain’s plan to allow health insurers to sell plans across state lines:

The ad relies on a single phrase from a journal article under McCain’s byline, in which he said he would reduce regulation of health insurance “as we have done over the last decade in banking.” But the full context reveals that McCain was referring narrowly to his proposal to allow people to purchase health insurance across state lines.

But allowing banks to flout state regulations and permitting insurance companies to sell policies across state lines would have the same negative consequences.

In 2002, “Georgia became the first state to tell players in the secondary