From Ezra Klein:
EzraKlein Archive | The American Prospect: MCCAIN'S HEALTH CARE PLAN: HEALTH INSURANCE YOU CAN'T BELIEVE IN, OR RELY ON: Health Affairs has released two papers offering critical analyses of the candidate's health care plans today, and one paper outlining what a synthesis approach would look like. The first, written by Thomas Buchmueller, Sherry A. Glied, Anne Royalty, and Katherine Swartz, examines the cost and coverage implications of McCain's proposal. "Senator McCain's health plan has three central features," they write. "Withdrawing the current tax exclusion of employer payments for employer-sponsored coverage (in other words, taxing premiums paid by employers), introducing a refundable individual health insurance tax credit, and deregulating nongroup insurance by permitting the purchase of policies across state lines."
The big mover here is is the tax increase on employer-based health care.... "Eliminating the tax exclusion would greatly reduce the number of people who obtain health insurance through their employers," write the authors. "This decline would be driven by three factors: the effective price of employer-sponsored coverage would increase, the nondiscrimination rules would no longer apply, and low-risk employees would have less incentive to remain in employer-sponsored groups...the elimination of the income tax preference for employer-sponsored insurance would cause twenty million Americans to lose such coverage."... [T]his is the main fact worth knowing, and repeating, about John McCain's health care plan: Its first-order effect would be to take employer health insurance away from 20 million Americans who currently have it. And this estimate is on the low-end. The authors write that it only looks at what employers would do in response to the new tax rules. It does not examine "the number of low-wage workers who might lose employer-sponsored insurance when employers are no longer bound by the nondiscrimination rules, nor do they capture the impact of breaking up existing risk pools." In other words, 20 million plus will lose their employer-based health insurance.
That, of course, is not the whole story. Kicked out of employer pools and pocketing a shiny new tax credit, a fair number may seek care on the individual market. The problem, though, is that care on the individual market is far worse. Here, I'll let the authors explain in full:
Administrative expenses are twice as high in nongroup markets as in group markets. The costs are higher because insurers in this market spend considerable resources on medical underwriting, and economies of scale are lost. It is much more expensive to sell insurance to millions of individuals one individual at a time than it is to sell to a much smaller number of employer groups, each comprising thousands of employees. For a typical family that moves from group to individual coverage, therefore, the move to nongroup insurance will raise premiums for an identical policy by more than $2,000 per year. Shifting people into the nongroup market would not save money for most Americans. Rather, it would lead to increased spending on administrative costs and a decrease in the portion of health spending that actually goes to providing care....
And this is examining healthy applicants. The ill are simply denied coverage outright. "A recent survey looks at the experience of people who are less healthy in nongroup markets. One-third of such people buying or looking into nongroup coverage were denied coverage or charged more because of a pre-existing condition. Nearly half found it difficult or impossible to find the coverage they needed, and more than two-thirds found it difficult or impossible to find affordable coverage."...
The plan also has a Trojan horse. The tax credit that meant to help people purchase individual market insurance is not indexed to health costs -- which rise much faster than inflation -- or really to anything at all. That means, year-by-year, it buys you less. Even if the McCain administration did index it to core inflation -- an assumption the authors are making because leaving it totally unindexed would be too cruel a joke -- "the value of the credit would be eroded so much that in just five years, five million more people would be uninsured."
Then there's McCain's plan to bulldoze state regulations and create a truly national market.
The main effect of establishing a national market would be to undo state laws designed to establish minimum levels of coverage and protect consumers. In a national market where state licenses are not required, insurers will charter in places where regulations are scarce--much like credit card companies do today. As a result, people guaranteed basic benefits today would find those benefits eliminated under the McCain plan.... People also would lose access to many benefit protections. For example, forty-seven states now require mental health parity, forty-nine states require coverage of breast cancer reconstructive surgery, and twenty-nine require coverage of cervical cancer screening. All of these requirements--as well as regulations in several states that limit the rates that can be charged to higher-cost consumers and that limit who can be excluded from a health plan--would be eliminated under the McCain plan.
In other words, the health industry will evolve to imitate the credit industry, where most companies crouch in states like South Dakota that have made the devil's bargain to attract their business by refusing to regulate. As we can see in the credit crisis, the outcome of dismantling regulatory protections has not been good for consumers, nor conducted transparently, nor checked by government oversight. It is not a model one would naturally select for exportation. McCain is exporting it to heath care....
[McCain's] plan makes health care more expensive, less comprehensive, and less secure. It is health reform you can't believe in, or rely upon...
Insurance denied: Living Well Articles: self.com: Have you ever had irregular periods? A cesarean section? Allergies? You may find yourself in the same position as these women: eager to buy coverage—but unable to get a company to sell it to you.
Jacqueline Ruess was lying on a bed inside a hospital in Boca Raton, Florida, still woozy from anesthesia but hoping that, maybe just this once, she'd caught a break. She'd had laparoscopic surgery in order to examine a growth her gynecologist thought might be ovarian cancer. Ruess, who was 34 at the time, in the fall of 2001, feared that her two young boys, whose father died from a congenital heart defect three years earlier, were on the verge of losing her as well. "It was probably the darkest week of my life since my husband passed away," she recalls. But as Ruess regained consciousness, she saw her own mother at her bedside, looking relieved. She began to process what she was hearing: You're going to be OK. The growth was on the fallopian tube, not her ovary—a far less worrisome situation. Soon after, a pathology report would confirm that the tumor itself was benign. "The only thing I could think about was my boys," Ruess says, "and the great relief in knowing I was going to be around to raise them after all."
But four months after Ruess's medical crisis passed, she faced a financial one. The Insurers Administrative Corporation (IAC), the company in Phoenix that managed Ruess's health care policy, completed what it says was a routine review of her records and discovered what it called evidence of a preexisting gynecological condition. Because Ruess had not disclosed the symptom on her application, her insurer said she had never been eligible for coverage of gynecological problems. The result: Ruess was on the hook for the cost of her surgery, which, including doctor and hospital bills, amounted to more than $15,000. Ruess was flabbergasted. "I was—please forgive me for lack of a better term—pissed off," she says. What IAC called a preexisting condition was a one-time notation in her file regarding "dysfunctional uterine bleeding"—that is, irregular periods, a common issue that at some point affects between 10 and 30 percent of women in their reproductive years.
At the time she experienced erratic periods, Ruess had lost her husband and her father had died, too, which is why her doctor attributed the symptom to stress. Reassured that there was nothing medically wrong, Ruess quickly put the problem out of her mind and didn't even bother to fill the prescription for the birth control pills her doctor had given her to regulate her cycle. Even though there was a question on her insurance application about "abnormal menstruation" in the past seven years, she didn't think it applied to her because her symptom hadn't been attributed to an underlying medical problem. "It never crossed my mind to mention it on the form," Ruess says, noting that she'd been forthright about a more serious issue, her son's asthma, when she applied to another insurer for a policy for him. She'd correctly predicted that he would be declined coverage because of it. "If I was going to hold back anything," she says, "I would have held back that information." Here, too, she'd acted in good faith, she explained to IAC. Her irregular periods had nothing to do with the growth on her fallopian tube. The insurer, she felt, was simply looking for an excuse to avoid paying her bills...
Jonathan Cohn again:
The Essence of McCain's Health Plan: Don't Get Sick - The Plank: According to a recent report from the Commonwealth Fund, an additional 25 million "underinsured" Americans--or nearly half the number of the uninsured--face precisely these sorts of situations. And under John McCain's health care plan, that number would likely go up. Maybe way up. That's the most important argument put forth by a new article, out this morning in the policy journal Health Affairs, by four well-respected scholars--among them, Columbia' Sherry Glied....
Why should we worry about this? McCain thinks we shouldn't. If fewer people got group health benefits, many of them would go out and buy coverage on their own, directly from insurers. This, he and his advisors have claimed, would set up a much more vibrant market that would--through the magic of consumer power--bring down the cost of medical care. But almost nobody with serious policy credentials believes consumer power can have such a dramatic impact on costs, particularly since it's a lot harder to find decent coverage in the individual market--for reasons Glied and her colleagues explain:
The reality is that providing coverage through nongroup plans is much more costly than providing that coverage through groups. Administrative expenses are twice as high in nongroup markets as in group markets. The costs are higher because insurers in this market spend considerable resources on medical underwriting, and economies of scale are lost. It is much more expensive to sell insurance to millions of individuals one individual at a time than it is to sell to a much smaller number of employer groups, each comprising thousands of employees. For a typical family that moves from group to individual coverage, therefore, the move to nongroup insurance will raise premiums for an identical policy by more than $2,000 per year. Shifting people into the nongroup market would not save money for most Americans. Rather, it would lead to increased spending on administrative costs and a decrease in the portion of health spending that actually goes to providing care.
Another virtue of the employer-sponsored system is that it encourages what wonks like to call risk-pooling. Government regulations stipulate that, in order to qualify for the existing tax break, companies must offer similar benefits to high- and low-wage employees. And in group plans, companies (more or less) have to make coverage available to everybody, even people with pre-existing medical conditions. The result is a situation where, thanks to the large numbers of people covered, large numbers of relatively young and healthy people are paying into the system--enough to cover the costs of those few people with really expensive-to-treat medical problems.
This doesn't happen as much in the individual market. Instead, carriers try to avoid people who have pre-existing conditions--either by charging them higher rates, excluding coverage of their illnesses, or simply denying coverage altogether.... Glied and her colleauges examined the existing literature, extrapolated from it, and determined that--at first--the number of people without insurance would be roughly the same as it is now. But the type of insurance would be different. About 20 million would have lost group health insurance while another 20 million would have picked up individual coverage. That's not a change for the better.
Oh, and that's not to mention the fact that--as presently structured--the tax break would not keep up with the rising cost of medical insurance. Over time, that means it'd become less and less valuable. So the overall rate of people without insurance would climb, too. Fewer people with health insurance. Weaker insurance for those who already have it. This is McCain's solution to the anxiety over rising medical bills?...
The best analogy here is to a table with a faltering leg. Universal coverage advocates would replace with the weak leg with a strong one. McCain would replace it with an even weaker one.