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.

By MAGGIE MAHAR

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)