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Presidential Politics & the Health Care Debate

 

By Brad Kuhnhausen, Senior Vice President of AIM Administration

 

As President Bush’s second term winds down, it is time for history to begin to evaluate his performance. For serious, market-based advocates focused on health care policy, Mr. Bush is leaving a surprisingly proud legacy. While health care has been under the radar of public discussion during his two terms, his private market, consumer directed policies are starting to show clear positive results. The obvious success of his policies might even be powerful enough to affect the Presidential debate for 2008.

 

Let us consider Mr. Bush’s record:

 

1)     The creation of Health Savings Accounts have exceeded the expectations of its advocates and delivered the exact opposite results feared (and predicted) by its detractors. More people are enrolling than ever predicted – young & old, sick & healthy. In fact, early estimates indicated about 1/4 of those enrolling in individual H.S.A policies used to be uninsured! In addition, people’s behaviors are changing – not by cutting back on preventative and other necessary services – but by switching to generic drugs and eliminating expensive & unnecessary testing. These behaviors are changing simply because people are spending their own money - wisely.

2)     The use of private markets for Medicare Part D has also exceeded the expectations of its advocates and delivered the exact opposite results feared (and predicted) by its detractors. Prescriptions costs are over 30% less than predicted. It turns out that having several large insurers negotiate with several large pharmaceuticals (with broad government coverage guidelines) to develop multiple formularies was the key. All serious analysts agree that the result for seniors was lower costs and more choice of prescriptions than would have occurred under a single government plan.

3)     The MedAdvantage program is another successful private market solution by the Bush administration. By paying carriers a discounted amount of the actual cost of Medicare claims, private industry was able to increase benefits and lower costs for seniors. (Despite the “high private sector administrative costs” that Single Payer advocates assume means higher prices!) This is a classic “win, win, win” outcome. Taxpayers save money, seniors get richer benefits for lower costs, and the private market grows.

4)     Perhaps the most important health care improvement by the Bush administration is the development of standardized, secure electronic medical information data protocol. This is an investment in healthcare infrastructure. It is easy to overlook or underestimate the power of President’s Bush’s executive order in August 2006 to ensure that, beginning in 2007, Federal healthcare IT purchases will all be certified products and on the path to interoperability. This policy will have analogous positive economic effects to when standard gauge railroad track was established in the 1800’s. It makes the whole system work more efficiently and it substantially improves safety. All it took was some leadership on choosing a reasonable standard.

 

Every doctor, hospital, pharmaceutical and insurer is on notice – comply with this standard or stop doing business with the federal government (including Federal Employee, Medicare, Medicaid, and Veteran’s Care). Because of this policy, the cost of health care administration will decrease by billions. More importantly, lives will be saved and treatments improved due to more accurate medical history records.

 

What do the candidates for President in 2008 propose for health care?

 

A review of the top six candidate’s websites reveals some interesting health care positions.

 

Hillary Clinton is the most vocal about health care. She claims her failed battle to create a new health care system in 1993 gives her the experience and credibility to try it again. Although she does not list a detailed policy position on her campaign website for health care, or any topic for that matter (she prefers to show video clips of her personally explaining her positions), she does talk about the Children’s Health Insurance Plan (S-CHIP) currently up for renewal. She ends her video clip with the following statement:

 

"When I'm President, we will have universal health care coverage in our country, so that every American has the quality health care they deserve. As a Senator, I say let's start now by covering every child."

 

John Edwards has the most detailed plan for health care reform in his campaign website:

“Under the Edwards Plan:

The Edwards Plan achieves universal coverage by:

 

Require Fair Terms for Health Insurance: Edwards will require insurers to keep plans open to everyone and charge fair premiums, regardless of preexisting conditions, medical history, age, job, and other characteristics. No longer will insurance companies be able to game the system to cover only healthy people. Several states – including New Jersey, New York, and Washington – have led the way on similar community rating and guaranteed issue reforms. In addition, new national standards will ensure that all health insurance policies offer preventive and chronic care with minimal cost-sharing.

 

Promoting Affordable Care: Health Markets will negotiate low premiums through their economies of scale so they can get a better deal than individuals and many businesses can get on their own. Health Markets will also hold down administrative costs by reducing the need for underwriting and marketing activities (two-thirds of private insurers’ overhead), centrally collecting premiums, and exercising leadership to reduce costs on billing practices, claims processing, and electronic medical records. Finally, they will be able to work with insurers to adopt cost-effective approaches to health care like preventive care and to collect the data necessary to drive quality improvement. [Woolhandler et al, 2003]”

 

As you can see Mr. Edward’s plan would require composite community rating through government run purchasing cooperatives. The States he sites as models have some of the highest premiums and rates of uninsured in the country. His solution to high prices is to mandate the purchase of coverage by citizens. He does not specify what the penalty is for not buying coverage. One wonders if the penalty be financial or criminal?

 

Barack Obama has no history of comprehensive policy positions on health care. In speeches, he has called for “universal health care”, but is providing no details. This is what his campaign website has to say about health care issues:

“The United States is one of the wealthiest nations in the world, yet more than 46 million Americans have no health insurance. Too many hard-working Americans cannot afford their medical bills, and health-related issues are the number one cause for personal bankruptcy. Promoting affordable, accessible, and high-quality health care is a priority for Senator Obama, who is a member of the Senate Health, Education, Labor and Pensions Committee.

1.      Fighting AIDS worldwide

2.      Encouraging Medical Information Technology

3.      Fostering Healthy Communities (promoting fitness & safety)

4.      Empowering Health Care Consumers with Hospital Report Cards

5.      Harnessing the Power of Genetic Medicine

6.      Protecting Our Children from Lead Poisoning”

As you can see, Mr. Obama has not developed a comprehensive plan. In that way, he is similar to the Republican candidates.

 

Mitt Romney has the most information about health care of any Republican candidate. However it lacks detail.

 

 ”The health of our nation can be improved by extending health insurance to all Americans, not through a government program or new taxes, but through market reforms.

Governor Romney: "We can't have as a nation 40 million people -- or, in my state, half a million -- saying, 'I don't have insurance, and if I get sick, I want someone else to pay."
(USA Today, July 5, 2005)

Governor Romney: "It's a conservative idea," says Romney, "insisting that individuals have responsibility for their own health care. I think it appeals to people on both sides of the aisle: insurance for everyone without a tax increase."
(USA Today, July 5, 2005)

What was striking about his website is that there is not one mention of the famous Massachusetts Connector (which is most like Mr. Edwards plan). The entire content of his website entry on health care are the three paragraphs reprinted above.

John McCain has absolutely nothing regarding health care policy on his presidential website.

 

However, his Senate website lists several speeches and bills outlining specific health care positions. They generally involve prescription drugs (advocacy of generic), support of stem cell research and veterans health care.

 

 

Rudy Guliani has nothing regarding health care policy on his presidential website. As mayor of New York, he had no influence or clear position on national health care issues.

 

What does this mean for the immediate future – particularly in light of market based successes?

 

Only time will tell. If pollsters say that Edwards and Clinton are gaining support because of their health care positions, then we could see a swing towards comprehensive reform platforms. If on the other hand, health care does not gain traction in the early election process, other candidates may stay away from proposing wide ranging change. If Mr. Obama passes Sen. Clinton for the democratic nomination based on the Iraq war, he may not need to radicalize his health care position.

 

In the meantime, the market will continue to adjust to Health Savings Accounts and high deductible health plans. So far the actuaries that predicted no change in meaningful utilization patterns are beginning to concede their error. Consumers see the wisdom of insuring only for the most expensive treatments, but need better price and quality information for the market to work. As transparency enters the market, more efficient (and higher quality) decisions will be made by the consumer. Engaging the consumer in the purchasing process will ultimately bring discipline to the industry and lower prices for all.

 

What is the likelihood of federal health care legislation in 2007 & 2008?

 

Certainly the extension of S-CHIP is the first priority. Some would advocate expanding S-CHIP to include parents, but they don’t have enough support to do so. Besides, they would face a certain veto from Mr. Bush. But the S-CHIP program is popular and effective – it will be renewed with overwhelming support.

 

Another potential bill would extend the Mental Health Parity Act. It may be modified to focus on Mental Health conditions with biological causality. It probably won’t be expanded to the small group market.

 

Beyond that, there will likely be no further action legislatively until after the Presidential election. At this stage of the political process, legislators want to see if voters send a message on health care before proposing major change.

 

 

It will be the new President that will dictate health care policy in 2009. By then, we should see if Mr. Bush’s modest market reforms and interoperable data requirements change the landscape of health care. My crystal ball says “yes they will, and in a noticeably positive way”.

 

 

(Mr. Kuhnhausen can be reached at brad@aimadmin.com or at his office in Salt Lake City, 1-800-233-1375)