Hillary Clinton’s universal health care plan

WHY IT IS IMPORTANT

Health insurance premiums have skyrocketed in the last decade. Health care has become one of the most expensive services purchased by the American people, and the costs keep going up. Despite the fact that we spend an excessive amount of money on health care, many Americans are not covered. There are 47 million uninsured Americans by today's count. For most people, insurance is tied to employment. During bad economic times, the loss of a job can mean a loss of medical care. For the chronically ill or those who suffer catastrophic events, the burden this places on their families can be crushing. Savings and assets can be wiped out just to keep a loved one alive.

The gaps in health coverage in America is a national embarrassment. Conservatives have decried the socialized medicine in European countries, but the horror stories in the United States keep stacking up. For those who can't gain access to the system, it does no good to tout American medicine as "the best in the world". It is quite good if you have money. For those who fall through the cracks, it is nonexistant.

According to the Centers for Medicare and Medicaid Services, the cost of health care as a percentage of GDP is rising. "By 2015, health care spending in the United States is projected to reach $4.0 trillion and 20.0 percent of GDP" (www.cms.hhs.gov). The masses of uninsured people in the United States contributes to the high cost. Those who get coverage have the cost of their care spread over a smaller segment of the population, increasing the individual cost. Also, those who are uninsured do not get regular medical checkups. They only visit the hospital when they have an illness that gets unbearable. Diseases that could have been treated early become expensive to manage. The uninsured become susceptible to illnesses that could have been completley prevented if they visited a doctor on a regular basis.

We should not kid ourselves. The answer to this problem will not be a laissez faire, free market answer. Of course we would prefer to keep the government out of any industry as much as possible, this is one area in which the market has failed to produce an acceptable solution. As it is currently configured, the market encourages insurance companies to reduce their risk by increasing the risk of everybody else. The insurance companies are playing a numbers game, a game which they cannot lose, and which siphons money out of every participant. The question is not whether government should get involved, but how much, and it what way.

A SUMMARY OF THE CLINTON PLAN

The health plan is tastefully named the "Health Choices Plan". It is not hard to spot the framing in that title.

Right up front, she makes it clear that you can keep your current health insurance if you are happy with. She proposes measures that will bring down the cost of heath care, so theoretically, your curent insurance would be cheaper with her plan. This part of her plan appears to be an attempt to head off criticism from those who believe that "universal health care" is an wholely government-run operation. Hillary wants to ensure skeptics that their old plans will not be ripped from them. Will this tactic of appeasment work?

Large corporations which already offer health coverage would be expected to continue to do so.

If you are not happy with your current insurance, or if your small business employer doesn't offer insurance and you can't afford it, Clinton's plan allows you to choose from the same menu of options that is available to Members of Congress, the Federal Employees Health Benefit Program (FEHBP). Here is an interesting twist. She will make the options available to you, but who pays for it? If your employer can't afford the menu, the government will give the employer a tax break to offset the cost. If you are buying the insurance on your own, you will get a tax break to cover it.

For those who are too poor to benefit from a tax break, Hillary plans to strengthen Medicaid and the State Childrens' Health Insurance Program (SCHIP). The net result is that everybody who is currently covered would still be covered, and everybody who is not covered would receive health insurance either through a tax break to buy into FEHBP, or through the current Medicaid or SCHIP programs.

Another important part of the plan is in cutting the costs of health care. By eliminating insurance discrimination, the cost of health care is spread over a broader stretch of the population. This is done by requiring guarantee issue (insurance companies must issue the policy to the applicant), automatic renewal, rating protections, and other non-market measures.

The plan cites a RAND study that says $77 billion per year could be saved by using information technology and modernizing the health insurance industry. Also, by emphasizing prevention, expensive medical treatments in the future may be avoided. Hillary also proposes to allow the government to negotiate lower drug prices, and fund research to find the most effective treatments. In total, the savings are alleged to amount to $110 billion dollars, most of which would be reinvested in the government-funded portions of the plan. This, I think, rounds out the cost-savings portion of the plan.

GOOD POINTS ABOUT THE PLAN

The plan boasts that it creates no new bureaucracy, which is technically true. There are no new offices or agencies created. All of the new coverage would fall under existing agencies and programs. FEHBP, Medicaid, and SCHIP would handle the bulk of the new coverage. Negotiations with drug companies would be done by Medicaid.

The tax breaks to pay for the plan give the illusion that the government is not paying for it. While that may be true in one sense, it still amounts to taking money out of the general fund to pay for health insurance. This may have a positive effect, though. By giving Americans the money to buy the insurance themselves, they can see the actual cost of care. In a single-payer plan, the cost is virtually invisible to the patient.

Paying for the tax breaks is another matter. While most of my dear readers, if uninsured, will receive a tax cut, the plan proposes to "discontinue portions of the Bush tax cuts for those making over $250,000" (pg 3). This amounts to redirecting tax breaks from higher incomes to lower incomes. The term "redirecting tax breaks" is used on page 10.

The savings measures are integral to the plan. Certainly the measures that she proposes would save something, though it is likely that simply covering everybody would alone reduce costs to some degree. If the savings really come through, then those who choose to keep their own plan would benefit. It would be a nod do the free market, allowing insurance companies to compete to keep customers.

But does it cover everybody? At this point, I see no gaps in coverage. Medicaid and SCHIP already serve low-income families. Ironically, the middle class who make too much money to qualify for Medicaid, and not enough money to afford their own insurance, have the most to gain from universal health care. For those already covered, very little would change.

THE HILLARY CLINTON PLAN VS. THE JOHN KERRY PLAN

I find it interesting to contrast the current Clinton plan to John Kerry's proposal in 2004. John Kerry's plan was a more straightforward single-payer plan. Kerry planned to just roll everybody into FEHBP and have the government pay for it. There was probably an option for people to keep their own health insurance, but it was much less emphasized. Kerry also proposed using the negotiating power of the government to induce drug companies to provide more affordable medicine. In those aspects, the differences between the Kerry Plan and the Clinton plan are minimal.

Kerry departed from Clinton in the area of medical liability reform. He proposed to set limits on the kinds of malpractice cases that could go forward. Hillary does not mention liability reform. The worlds "liability" and "malpractice" do not appear in the Health Choices Plan. Kerry added this angle to his proposal as an answer to George Bush's counter-proposal, which relied on Health Savings Accounts (HSA's) and medical tort reform to solve the nation's health care problems. My understanding is that medical liability is a negligible contributor to the overall problem. Bush's plan would have left patients who were harmed by doctors out in the cold. Kerry refused to remove the current protections for patients.

Kerry wanted to fund his plan by rolling back the Bush tax cuts. That is nearly identical to what Hillary wants to do, but she focuses more on specific portions of the Bush tax cuts and "redirects" rather than "cuts" them. Six of one, half a dozen of the other.

CRITICISMS OF THE PLAN

The insurance companies will hate it, and they will come out against it with all guns blazing. The plan will not necessarily put them out of business, but will stop them from playing their very profitable shell game. Insurance companies are not in the business of providing insurance. They take your money, they invest it elsewhere, they keep the profits, and when you need their services they try to provide as little as possible. When they do pay out, YOU actually pay the costs, deferred over the the life of your policy. If you need their services more than they are willing to provide, they drop you. They can't lose. The insurance companies will stop at nothing to protect their cozy arrangement.

It is not a free-market plan. George Bush's plan was more of a free-market approach. With HSA's, the consumer of the health care would also pay the cost of the health care. There are a variety of reasons why this would not have worked, but that is a subject for a different blog. The bottom line is: the government will demand a lot of changes to the existing industry. Insurance companies will be required to eliminate discrimination, required to guarantee issue, required to automatically renew policies. In reality, these requirements amount to a new set of market forces, which will cause some kind of reaction. How will the health industry respond? It is not entirely predictable.

A single-payer plan would be less complicated. Hillary is bending over backward to permit as many choices as possible in her plan. This increases freedom for the consumer, but it also reduces efficiency. Consumers must figure out which category they fall into-- FEHBP? Medicaid? I would like to see a system in which a person could simply walk into a hospital and get treatment. I'm sure that is too much to ask. As more people take advantage of the system, waiting lists would grow longer. But for my dad, who has a heart problem and no insurance, I would like to see a system in which he could get treatment in a reasonable amount of time without having to pay. Hillary's plan does not do exactly that, but at least it gets in the ballpark.

I am dubious about the savings measures. These things never work out as well as advertised. I don't for a second believe that we will save $110 billion. We would get some good out of it, but how much? What is the real number? $100 billion? $50 billion? It is difficult to say, but I can say with some confidence that it will be a number below $110 billion. How will that effect the re-investment of funds to pay for the program?

THROUGH THE POLITICAL GRINDER

As I said in a previous blog, all proposals must be looked at in light of the political environment. No proposal passes without changes. If Hillary Clinton is elected president, and if her party still controls both Houses of Congress, some kind of universal health care plan will be passed. What will the final product look like?

It is instructive to look at the Kerry Plan. His limited medical liability reform was a nod to the physicians' lobby (as proposed to the Bush plan, which was the physicians' lobby's wet dream). I would not be surprised to see some similar liability reform tacked on to Hillary's plan. I do not expect it produce much in the way of savings, but it would be a reasonable compromise to obtain support from doctors.

Some of the savings measures will be negotiated down to something more modest. The drug companies will lobby to eliminate the government's ability to negotiate prices, but I have a feeling that they will lose that battle this time around.

The non-market reforms required by the plan will probably be easier for Conservatives to swallow than the increase in Medicaid and SCHIP. Conservatives do not like entitlement programs. Hillary will face a stiff battle to keep Conservatives from limiting the expansion of Medicaid and SCHIP to the point that there are gaps in coverage. They could remove the "universal" from universal health care. Hillary may win that battle, but she will expend a good deal of political capital to do so.

All the special interests involved-- the pharmacutical lobby, the insurance lobby, the physician's lobby-- will bring all of their weight to bear to stop the plan. I do not think they will succeed, but I suspect they will at least mitigate some of the reforms that puts pressure on them to provide better service.

THE BOTTOM LINE

In determining if I would support Hillary based on her Health Choices Plan, I am envisioning the plan as it would actually pass through Congress, not as it is currently written. The savings will be less than advertised, but there will be some savings. The costs will be higher, but could still be lower than the current costs. The changes negotiated by the special interests may allow some people to fall through the cracks, but those people could be picked up by FEHBP. Insurance companies would face an unusual problem: their customers could go somewhere to get real coverage. The insurance companies would have to actually provide good service to keep customers.

I believe we need universal health care in some form or another. I would prefer a single-player plan, but I am willing to compromise. If a single-payer plan is proposed by another candidate I will consider it. However, if a single-payer plan is proposed by a candidate who has no chance of winning, I will not put much stock in it.

Health care is one of the stakes in this election. People are losing their savings right now, and facing life-threatening illnesses for lack of insurance. I don't want to overstate the case, but people do live or die based on the quality of their health care, and health care will be an issue decided in the upcoming election. I could not, in good conscience, refuse to participate in the election. If a good universal health care plan fails to pass, I would hold myself partially responsible for the hardship my fellow Americans will face.

© 2007 Bryan Lower

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