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POLICY: Clinton and Edwards Open the Back Door

Frequent THCB contributor and healthcare rockstar Maggie Mahar is back today with her reaction to the health care plans recently released by the Clinton and Edwards campaigns. What does Maggie think? Read on, but the title should give you a very good idea of the general drift of her logic about what’s really going on behind the scenes. If you want more of Maggie head over to her new blog at The Century Foundation for your fix. You’ll also be well advised to pick up a copy of “Money Driven Medicine: The Real Reason Healthcare costs so much”  one of the most incisive and comprehensive books to be written on this topic in the past 20 years, in my (admittedly slightly biased) opinion, if you haven’t yet done so.  Thanks Maggie! – John.

In Thursday’s Wall Street Journal former Massachusetts governor Mitt Romney underlined what is most exciting about Hillary Clinton’s new health care plan. Okay, Romney didn’t use the word “exciting.” But he did recognize the vital differences between Clinton’s new plan and the one she proposed to the nation in the early 1990s:

First, under the proposal rolled out last week, if people like the employer-sponsored insurance they have, they can keep it. Fine—but this is not what caught Romney’s attention. It’s the alternatives: “people who don’t obtain insurance through their employer are invited to buy a government-run, Medicare-like plan or enroll in the Federal Employees Health Benefits Program (FEHBP). And so, more Americans will end up in government-run insurance. . . . It’s the gentle slope to a single payer, socialized medicine model,” Romney warned.. [my emphasis.]”

Quite simply, Clinton has opened the door to the single-payer model—if people want it. The beauty of her plan is that no one is forced into a government plan. Americans will wind up in a Medicare-like plan only if they choose it over a private insurer.

Clinton is not alone. Last spring John Edwards unfurled a proposal that would force private insurers to compete with a public plan that he calls “Medicare-Plus.” Today, in a web-cast sponsored by the Kaiser Family Foundation, he reiterated his goal “to give consumers a choice; they could gravitate in either direction.”

One journalist on the panel was blunt: “Is this a back-door to single payer?”

Edwards liked the question. “That’s partly right and partly wrong,” he said, with a big smile. “It’s not intended to take us to single-payer. It’s designed to let Americans decide whether or not they want single payer.”

“If I wanted to go [directly] to single payer, there are ways to do it,” he continued. “The benefit of single payer is lower administrative costs . . .. Over time, we will see in which direction this system gravitates. There are benefits in the private system. There are benefits in the public system. The question is: which will be more attractive in the real world?”

To make it a fair contest, public and private systems would need to be operating on a level playing field, and both Clinton and Edwards seem determined to do that. First, private insurers would not be allowed to “cherry pick,” as they do now in most states, either by refusing to insure individuals who are sick—or by charging them exorbitant rates.

(This is one difference between the Clinton and Edwards plans, on the one hand, and Mitt Romney’s Massachusetts plan, on the other. In the Commonwealth, while insurers cannot discriminate against those who are sick, they can charge older customers twice the premiums that they charge younger citizens of the state. As a result, some of Massachusetts’ elderly cannot afford to participate in the state’s plan. They’re not poor enough to qualify for state subsidies, but they’re not wealthy enough to pay sky-high premiums. To “solve” the problem Massachusetts is “exempting” some 60,000 individuals from the mandate that everyone in the state must have insurance. So much for universal coverage. )

Clinton and Edwards, by contrast, are mandating that every American must have insurance, while pledging that the government will offer subsidies that make that coverage affordable for everyone. Today, Edwards promised subsidies for everyone earning up to $100,000, while last week Clinton stated that premiums (minus subsidies) will not exceed a certain percentage of a family’s income (She has not specified the percentage, nor whether the number would be the same for a family earning $35,000 as for a household earning $95,000.) Employers also will help cover the cost either by “playing” (providing coverage to their employees) or “paying” (into a large fund that helps pay for the subsidies and government plans.)

Both candidates insist that private insurers must offer full, comprehensive coverage that will be, as Clinton puts it, “equal to what Congressmen receive under the Federal employees’ plan.”

At the same time, while Clinton isn’t putting an explicit cap on insurance company premiums, she does seems to be putting an implicit cap on how much they can charge by saying that premiums (minus subsidies) cannot exceed a certain percentage of family income. This suggests that insurers cannot raise premiums past a certain point unless the government is willing to boost subsidies—and it seems unlikely that Clinton is setting up a system where insurers can keep raising the bar for government subsidies. As for Edwards, he has declared that under his plan, an insurers’ profits and administrative costs cannot exceed 15% of total premiums.

Think about it: if insurers can’t cherry-pick young, healthy patients, if they are required to provide full, comprehensive coverage, and if their premiums cannot rise above the government’s willingness to expand subsidies . . . won’t some just drop out of the insurance business?

Meanwhile those that remain will have to compete with a public sector insurer that should be able to provide more coverage for less. “Medicare-plus,” after all, won’t need to generate profits for shareholders and will have lower administrative costs (both because it won’t need to advertise nearly as much, and because it won’t be paying its executives salaries that resemble telephone numbers). I don’t see how private insurers could win the competition.

Of course there is always a difference between with candidates propose and the legislation a president signs. If elected, would either of these candidates stick to their guns or would they compromise with private insurers?

On the other hand, I wonder, how could for-profit insurers force a compromise? What could they say: “We don’t want to compete with Medicare-plus on a level playing field.? It’s just not fair!? We’re really not more efficient than government.” But I’m sure they would find an argument.

Still, today, Edwards declared that he would not compromise on making coverage universal—which means that it must be affordable, which in turn, puts a brake on insurers’ earnings growth.. Moreover, he went on to say that if he doesn’t get the full support he needs from Congress, he will go directly to the American people: “If Congressmen are reticent, I will go to their districts. This is what happened with Iraq. Republicans are shifting their positions, [not because of what is happening in Washington,] but because of what is happening [in their districts].

Clinton has said that she wants to draw the lobbyists who represent the for-profit health care industry into the discussion, but Edwards rejects this notion. “”Her lesson is, give them a seat at the table,” Mr Edwards said recently. “I think if you give the drug companies, insurance companies and their lobbyists a seat at the table, they’ll eat all the food.” (Financial Times, Sept. 19)

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EdSmithMaggie MaharPeterjdSteve Schuster Recent comment authors
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Peter
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Peter

Barry, if single pay were the reason for too many primary care visits creating a doctor shortage then would also the over use of the (free) ED be a condition of single pay? The research I have been able to see shows Americans and Canadians visit the Ed at about the same rate (11% CA to 13% U.S.) This doctor shortage started with you quoting a Quebec doctor about 800K PQ’ers without a primary doctor. I will put forward another possible reason for this shortage in PQ other than single pay. It’s the necessity for PQ docs to speak French.… Read more »

Barry Carol
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Barry Carol

This sounds like the repetition of an urban myth the RAND Institute manufactured years ago to support the insurance industry. Let’s get real. If you have a problem that will just get better in a day or two are you really going to stop working for two hours (lost wages $100 – $200), or leave a sick bed (discomfort $200 – $500), arrange childcare (hassle factor ($50 – $100), tick off your boss (yipes, $1000 to ????) because, there is no $20 copay and you can get in sometime in the next four hours rather than tomorrow? Urgent care clinics… Read more »

EdSmith
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EdSmith

“If I don’t feel well and I can access a doctor quickly without any payment responsibility at the point of service, I’m more likely to have my problem checked out rather than wait a day or two in the hope that it will resolve itself, as it does most of the time.” This sounds like the repetition of an urban myth the RAND Institute manufactured years ago to support the insurance industry. Let’s get real. If you have a problem that will just get better in a day or two are you really going to stop working for two hours… Read more »

Peter
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Peter

“Unless the U.S. moves strictly to a true single-payer system, I am pretty dubious that any future supply-side techniques will due much to slow healthcare growth.”
My point all along.

MG
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MG

While some supply-side techniques have been effective at controlling healthcare costs in other industrialized countries, they have been generally ineffective or an overwhelming failure in the U.S. Some great examples are Certificate of Need programs and the Nixon price controls on healthcare during the 70s.
Unless the U.S. moves strictly to a true single-payer system, I am pretty dubious that any future supply-side techniques will due much to slow healthcare growth.

MG
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MG

Peter, I think you are missing the point on some of what Barry is trying to convey. It is really a societal choice on how much we spend on healthcare in the U.S. Americans generally have pushed their politicians to spend ever increasing amounts on healthcare. This started with the passage of the Hill-Burton Act in 1946 and has continued through this day. The real important question to ask about healthcare spending in the U.S. is what is the incremental value of these investments. It is a difficult question to answer and can vary considerably but work by David Cutler… Read more »

Barry Carol
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Barry Carol

That would be about 3%, the same as Canada’s. I don’t think possible with your mild “solutions” No, I was referring to GDP in nominal dollars, not real (inflation adjusted) dollars. So, assuming 3% long term annual secular growth in real terms and 2%-3% inflation, nominal dollar GDP growth would be 5%-6%. Medical cost growth this year, according to the major managed care companies, is 7.5% plus or minus 50 basis points. I think the goal is quite achievable, though not immediately. It is also important to note that approximately 50% of total healthcare costs in the U.S. are attributable… Read more »

Peter
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Peter

Well Barry the U.S. also “decide at a political level how much of the society’s resources to devote to healthcare.” It seems THAT cost is about double other industrialized countries. If U.S. politics does not determine healthcare costs then you’d have to deny the role of lobbyists and political contributions. Political inaction is also political policy. “I would be more than satisfied if we could eliminate enough waste to pay to cover the uninsured while holding our spending as a percentage of GDP to its current level and reducing future medical cost growth to a level in line with the… Read more »

Barry Carol
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Barry Carol

Peter, I wouldn’t expect doctors to complain about over utilization because, for them, utilization translates directly into income (except for salaried docs). Besides, as I’ve said numerous times before, doctors drive virtually all healthcare utilization by admitting patients to hospitals, prescribing drugs, ordering tests, consulting with patients and doing procedures themselves. I put forth my ideas about how to safely reduce utilization in the U.S. by changing the incentives in the system related to how doctors and hospitals are paid and greatly improving access to and availability of information that will foster more cost-effective medical decision making. With respect to… Read more »

Peter
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Peter

“At the same time, a single payer system like Canada’s that insulates patients from the cost of care and often does not even require copays in order to save on administrative costs, the undesirable unintended consequence is to increase utilization of healthcare services from what it would otherwise be.” Barry, if that were the case then Canada’s, and other single pay countries, would be showing higher healthcare costs than the U.S. when in fact their costs are about 1/2. If you are arguing that the reason there are too few primary care docs in Canada is because the system does… Read more »

Barry Carol
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Barry Carol

Peter, On the subject of pay and benefits, it doesn’t matter if we are talking about doctors, nurses, teachers, truck drivers, journalists, securities analysts or whatever. I always believed that pay and benefits should be sufficient to attract and hold employees who can perform their jobs in a competent and professional manner. To the extent that an employer can make the job more attractive through such intangibles as flexible hours, work-life balance, and creating a culture that treats everyone with respect and dignity, that is all to the good. For medical personnel, if higher pay is required to attract doctors… Read more »

Peter
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Peter

Barry, I did some more research on the PQ primary care doctor shortage and indeed it does appear that there are not enough physicians. That said is this because of single pay and salaries. I don’t think it is that simple. The U.S. also has a doctor and specialist shortage, particularily in rural areas. Pay is not necessarily the cause or the answer, but I will agree that it is a factor. http://www.cbc.ca/health/story/2006/11/02/quebec-familydoctors.html You will notice in the link below the cost of U.S. med. school has prevented many low to moderate income students from being docs. The result is… Read more »

jd
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jd

Maggie, I’m not sure I understand the thrust of your response to me. There may be no disagreement at all. Just to be clear, by “cadillac” I meant by it not simply a health care system that offers full coverage, but one that does so in an a relatively inefficient manner. So, much as the car (historically) gets poor mileage and has low reliability compared to better-made alternatives, so too does our healthcare system when “fully loaded” result in massive waste, error, etc. We have a healthcare system with tailfins. I of course completely agree with you that “the highest-quality… Read more »

MG
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MG

Great response as usual Maggie. I actually have to pick up your book and read it when I have some time. I still think the real action in health care policy has been and will continue at the state-level for the next several years. The Mass. health plan will be interesting to watch but I am truly fascinated by what is happening in CA. If Schwarzenegger can get his health care reform passed, it would be a major accomplishment because it will require both Republicans and Democrats to compromise on some difficult issues. I am willing to bet that it… Read more »

Maggie Mahar
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Maggie Mahar

Thank you for your comments. Let me begin by responding to MG, David, Barry and j.d. MG and Barry and j.d. –You are absolutely right that it is essential to rein in future health care inflation. The way to do that is to cut the waste in our system. Research done by Dartmouth’s Dr. Jack Wennberg (who j.d. refers to) shows that $1 out of every $3 that we spend on healthcare in this country is wasted on unncessary, often redundant tests, over-priced, often unproven drugs, devices and procedures, and unnecessary hospitalizations. I’ve written about Wennberg’s work here. http://dartmed.dartmouth.edu/spring07/html/atlas.php. (I… Read more »