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Sunday, May 4, 2008

McCain Seeks to Eliminate Employer Health Plans

Presidential Candidate John McCain presented his healthcare reform ideas on April 30th, to a Tampa, Florida audience. True to his style, Senator McCain has taken a polarizing approach to health care reforms, by seeking to eliminate private employers from the provision of health care in America.
Here are the highlights of his reform ideas:
1. McCain would eliminate the tax preference for employer provided health insurance. Instead of a tax deduction for private employers to provide health insurance, he would offer a tax credit to taxpayer households, $2,500 for individuals and $5,000 for a family.
2. Individuals would purchase health insurance plans on the open market(s).
3. A guaranteed access plan would be available to all, even the unhealthy, whom private insurers would seek to exclude from coverage.
4. He is not in favor of a national health care plan.
5. He would encourage support of health savings accounts.
6. McCain seeks to reform Medicare reimbursements by bundling payments to physicians by disease or diagnosis.
7. Like everyone else, he encourages the proliferation of electronic medical records.

Analysis
Though private employers provide less than half of all the health care for USA residents, a disproportionate share of funding for health care services comes from the private sector. This discrepancy is partially due to the significant uninsured population in the country, which accesses health care through hospitals, thus causing those providers to increase their charges for paying customers, to make up for unreimbursed care. Additionally, government programs like Medicaid and to a lesser extent, Medicare, do not fully reimburse health care providers for their costs, which increases the burden of healthcare financing to the private sector health care system. Senator McCain, by removing the economic incentive for employers to provide health care, will encourage employers to cease providing group medical insurance. The spread of risk over large employer and collectively bargained groups at least provides some stability to the private health care system, which would be jeopardized by his individual market based approach.
McCain has stated that insurers have been taking advantage of healthcare consumers and by creating an individual health care purchasing climate, citizens will be better off, through increased competition in the private insurance marketplace. Need I remind him of the Medicare HMO debacle when the government provided incentives to insurance companies to recruit Medicare applicants to their HMO plans? In this scenario, enterprising insurance companies thought they could profit by insuring Medicare customers on the government’s capitated reimbursement formula only to realize they couldn’t manage the risks. All but a handful of insurers subsequently dumped their customers back into the marketplace, forcing retirees with chronic conditions to change providers yet again. Consumers were not better off with the marketplace approach to care; they were disrupted, in some cases jeopardizing their health. The insurers found managing the population was more difficult than they had anticipated. Though McCain’s health care reforms do not address Medicare, one wonders how an individualized health insurance purchasing market would improve care and reduce cost for individuals and families. One of the basic tenants of risk management is adhering to the "law of large numbers", which means we are better off pooling our resources in fewer large groups than splintered smaller ones. McCain’s health care platform does not seem to support the spread of risk over large populations, but rather "cherry picking" by smaller entrepreneurial insurance companies.
In terms of optimizing government purchasing, his plan adds complexity to the current regulatory climate for health insurance, by creating more entry points for health care initiation. One of the problems with efficient health care delivery in the United States is the variance in administration by virtue of 50 different insurance commissioner’s and their policies on health care underwriting, financial reporting, and administrative oversight. This would seem to be exacerbated by increased variables in his healthcare reform proposal. An open market for individual health care purchasing would increase complexity over the current employer driven marketplace, in terms of communication to households as well. If we consider the different educational levels of individuals, not to mention language barriers, how would this be handled efficiently and efficaciously?
Senator McCain’s ideas to change the Medicare reimbursement process by bundling per case have merit, because managing a patient with chronic disease should be done on a macro basis, not per line item for each transaction. Of course, accommodating patient acuity and cost-of-living factors into reimbursements for disease management would be key to fairness. No mention is made of how Senator McCain would align reimbursement with desired outcomes.
Guaranteed Access to Health Insurance is already provided in some states, like Washington, where the risk pool for individuals who can’t get health insurance through individual markets is managed by the state. The problem with this approach is the cost of the health care is prohibitively expensive for many people, yet these individuals are not poor enough to qualify for the state’s Basic Health Plan or Medicaid programs. McCain provides no specifics on how the federal government would address these concerns, other than to say he would work with the individual states.
The healthpolicymaven believes Senator McCain will experience fierce opposition from union representatives, the insurance industry, and many large employers. Once an organized media campaign is financed by these stakeholders, his health plan and maybe his presidential aspirations will go the way of Clinton’s first term national health plan. I am also betting voters won’t want to lose their employer health plans without a much clearer idea of what they will be getting from Mr. McCain and his advisors, one of whom is Carly (the hammer) Fiorina.

1 comment:

Seth Blades said...

Nice article. You mentioned that Medicare and Medicaid (CMS) only reimburse a portion of the cost to provide healthcare. This does cause a cost shift to the private pay patients. I agree that employers are dumping their health insurance expense forcing their employeess and retirees to go on the open market. This will probably have a ripple effect of increasing the number of uninsured thereby increasing the bill again to the private pay patients. I strongly feel the major problems rests on the shoulders of hospital CEOs, Insurance companies CEOs, Pharm. CEOs, and physicians with their six to ten figure salaries. Someone has to pay the piper. I do like the idea of paying a provider a set cost for a specific disease or illness class. We are only at the tip of the ice berg.