Business owner: Gary Cox and his family are home builders in Delaware, Ohio. He belongs to a group health plan through the local chamber of commerce. He backs McCain. (Melanie Stetson Freeman/The Christian Science Monitor)
Candidates’ healthcare fixes: tax credits vs. more federal spending
The US spends twice as much on healthcare per capita than other nations but still trails in access to care.
By Alexandra Marks | Staff writer/ October 20, 2008 edition
Reporter Alexandra Marks talks with Dr. William Winkenwerder, healthcare advisor to Sen. John McCain's campaign.
Reporter Alexandra Marks
Reporter Alexandra Marks talks with Dr. Irwin Redlener, senior health policy advisor to the Obama-Biden campaign.
Reporter Alexandra Marks
Rich Clabaugh
Delaware, Ohio
Over the past 25 years, the American healthcare system has been steadily unraveling.
More than 45 million Americans now have no health insurance at all. Another 25 million have some coverage, but not enough to pay their medical bills.
For the 6 in 10 Americans who do have healthcare plans through their employers, each year finds them paying higher premiums and higher deductibles even as their coverage shrinks.
Their employers, meanwhile, have to cope with annual premium increases of 10, 20, or 30 percent. Many have to shop around each year just to find an insurance policy they can afford. Some give up and stop offering insurance altogether.
In short, the American healthcare system is a mess. And recent polls show that, next to the economy and Iraq, healthcare is foremost on voters’ minds.
“We’re spending twice percapita what other countries are spending and we’re 19th out of 19 for conditions that are amenable to medical care,” says Karen Davis, the president of the Commonwealth Fund, a nonprofit, private foundation dedicated to improving the nation’s healthcare system. “Two-thirds of American adults have a problem either getting or paying for medical care.”
The presidential candidates’ prescriptions to fix the healthcare system are strikingly different. John McCain would offer tax credits to help people buy insurance. He’d pay for it by taxing as income the healthcare benefits that people currently receive from their employers.
Barack Obama, on the other hand, would build on the current public/private system by expanding Medicaid and the State Children’s Health Insurance Program (SCHIP). He’d create a National Health Insurance Exchange that the uninsured and small businesses could buy into. To pay for it, he would roll back the Bush tax cuts for the wealthy.
Each plan is expected to have a very different impact on individuals like Mindy Hedges, who just lost her insurance, as well as on businesses like Cox & Sons, which is struggling with high premiums.
Here’s a look at why.
A fundamental problem
The nation’s healthcare system has evolved into a huge Rube Goldberg-like contraption. Fix one part of it, and you can cause worse problems in another. At the core of that complex machine are millions of uninsured Americans.
When people don’t have insurance, they tend to put off getting care that medical doctors say is necessary. The result: those conditions can deteriorate. The uninsured often end up in the emergency room, where hospitals are required to treat them, even if the people can’t pay. That drives up healthcare costs for everyone.
“The important thing is to ensure that everybody has health insurance,” says Dr. Henry Simmons, president of the National Coalition on Health in Washington. “Every other country that today has universal coverage provides it at about one-third to one-half the cost, every bit as good coverage – in some cases better.”
Many individuals and families in the United States are uninsured because they have preexisting health conditions that insurers refuse to cover because of the anticipated cost. Mindy Hedges is one of them. She owned her own advertising company here in Delaware for 18 years, but as a result of the economic downturn it’s been forced to close. Though it was a challenge, she had always helped to provide coverage for as many as 14 employees.
Ms. Hedges has been diagnosed with what doctors call “Type 1 Diabetes,” for which they sometimes prescribe expensive treatments. That made it hard to get insurance for her small company in the first place. But she managed to find a policy.
When her business closed, she was stunned to discover that small businesses of 25 or fewer employees don’t qualify for COBRA (Consolidated Omnibus Budget Reconciliation Act), the federal rule that allows people who have lost or changed jobs to continue buying their company insurance plan for 18 months. She and her husband have been uninsured since July.
“For the first time in my life, I don’t have insurance,” says Hedges. “It makes me cry.”
Each candidate’s plan would attempt to provide Hedges with access to care.
The McCain plan relies on his tax credits of $5,000 per family and allowing people to buy health insurance across state lines, to drive down overall costs and help people find the coverage they need.
If they still can’t find a plan, McCain calls for the expansion of state-run high-risk pools that would be required to take people with preexisting conditions, but he doesn’t put any limit on how much those insurance plans could charge individuals.
The Obama plan would require health insurance companies to cover people with preexisting conditions “at fair, stable premiums.” The idea is that if every health plan had to cover everyone, those with healthcare needs as well as those without, the average cost of insurance would go down.
National insurance exchange offered
Individuals like Hedges could also buy an insurance plan from the proposed National Health Insurance Exchange. While Obama would require large businesses to provide coverage or pay into a kitty to help subsidize the uninsured, that requirement does not apply to small and medium-sized companies.
Hedges favors the Obama plan, primarily because of her experience trying to find an individual health policy she can afford on her own.
Most insurance companies she contacted didn’t return her calls for a quote when they learned she had a preexisting condition, she says.
AARP (formerly known as the American Association of Retired Persons), which she joined just so she could buy its health insurance, did return her call – but only to turn her down. She did receive a few quotes of between $2,500 a month and $5,000 a month for comprehensive health plans, but she’s currently unemployed and couldn’t afford that.
The experience has made her an adamant opponent of the McCain plan.
“What McCain is offering is not even a plan – for $5,000 I can buy two or three months’ worth of health insurance, and then what do I do?” she says.
McCain’s advisers argue that expanding the current state-run high-risk pools would allow people like Hedges to buy insurance. They admit there would be no cap on how much those plans could charge, but contend that by allowing insurance companies to sell their policies across state lines, people like Hedges could find a suitable policy in another state.
But opponents say such a system would encourage insurers to locate in states with the fewest restrictions, so they could continue to deny coverage to people who need it most, simply “cherry-picking” the profitable, healthy ones. That, they contend, would ultimately undermine remaining state regulations.
That argument doesn’t sway Gary Cox.
He and his wife own a small construction company in Delaware, Ohio, that builds custom homes. As the only employees, they are essentially self-insured. They buy their health plan through the chamber of commerce. That ensures they have access to care when they need it.
“But they are still pretty high rates and we have a high deductible to even get to the rates we’ve got,” Mr. Cox says.
He favors McCain’s $5,000 tax credit plan. He also likes the idea that he could go anywhere in the country to look for the best options available because it introduces what he believes is “much-needed competition” into the healthcare market.
But Cox is wary of McCain’s proposal to pay for the program by taxing the health benefits people currently receive.
“I’ve never been a believer that taxing people on their income is a fair and equitable way to work the tax code,” he says.
Still, Mr. Cox is even more opposed to the Obama plan, which is designed to expand the current employer-based and public sector insurance programs. He believes the way they are currently structured creates disincentives to individuals to spend their money wisely.
‘It’s morphed into a monstrosity’
“It’s morphed into a monstrosity where the insurance company is paying every time I go to the doctor, so I don’t bother to shop for the best rates because somebody else is going to pay,” Cox says. “We need to reintroduce competition into the healthcare industry, or we’re going to be faced with ever-increasing high healthcare costs.”
Cox is also opposed to Obama’s plan to subsidize some individuals or small businesses so they can afford to buy into a national insurance pool.
“My firm belief is that it never should be the government’s responsibility – and therefore us, the citizens and taxpayers – to pay for somebody’s health insurance premium anymore than I would expect the government to pay my car insurance premium or my homeowner’s insurance premium,” he says. “We’ve continually been on an ever-increasing slippery slope where we citizens think it’s everybody else’s responsibility to pay [our] bills.”
Margaret Demko of Albany, Ohio, agrees everyone should be responsible for themselves.
But she also believes the free market has failed the healthcare system miserably. That’s left too many people, like her family and every other family that lives on her rural road in Appalachia, without healthcare coverage.
“It’s a basic human need to be able to know that if you get sick or break your leg or get into a car accident that you’ll be able to have coverage,” she says. “At some level it becomes a moral issue as well, because it’s all about taking care of people and each other.”
Ensuring that everyone has access to care has become a full-time cause for Ms. Demko. She and her family have been without insurance since her daughter was born four years ago with what doctors say is Down syndrome. Her husband is a self-employed contractor so the family had relied on her job as a substance abuse counselor for their health insurance.
But Demko said she couldn’t keep working full time with an infant with special needs. When she quit, she didn’t realize that would result in her family’s being unable to get health insurance.
Ohio does not require insurance companies to cover children with disabilities considered to be preexisting conditions. Both she and her husband have also had minor health issues, but she never imagined they might also be a barrier to finding an affordable healthcare plan.
The Demkos’ income is nearly three times the poverty rate. That’s too much for their daughter to qualify for Ohio’s SCHIP plan and not enough to qualify for another state-sponsored program.
She’s gotten quotes for family health plans that start at $3,000 a month, which is almost as much as they earn.
For too long, she believes, insurance companies have been allowed to put profit before people, selling lower-priced plans to the healthy and at the same time charging exorbitant rates for people who have healthcare needs or just denying them coverage.
“The insurance agencies are like this huge unruly child who’s never had any boundaries on it,” she says. “To me the Obama plan tries to put some important boundaries on them – that’s what the government’s supposed to do, right? If people aren’t being taken care of and can’t get into the health insurance system, who else is going to take care of the situation?”
Shopping for healthcare plans
Laurie Gross now runs Gross Electric, a family-owned company in Toledo, Ohio begun in 1910. The company provides its 62 employees health insurance coverage. But the biggest problem they face every year is affordability.
“We’ve had four different plans in five years because every year the increases are so astronomical we have to shop around,” she says. “We’re coming to the point where it’s going to be very, very difficult for us and our employees to pay for insurance.”
The company now pays about $1,000 a month per family for coverage, and that goes up every year. The employees pay part of the cost. Advocates of the McCain tax credit argue it would help employees offset that cost, even though their overall health benefit would be taxed.
They also contend that Obama’s plan to expand public programs would cause many companies like Gross Electric to stop providing health coverage all together, because they knew their employees could get it through a government pool.
But Ms. Gross says she is committed to providing her employees coverage. The key, she says, is creating a risk pool of employees that is large enough so the insurance coverage for everyone is affordable.
The McCain camp believes that can be accomplished by allowing individuals to buy insurance on their own, across state lines, thus creating a national risk pool that would drive prices down. But Gross doesn’t believe that would work.
“I’ve never seen an insurer that looks at you as part of a bigger pool when you have a claim,” she says.
Critics of the Obama plan argue that forcing large businesses to pay for health insurance or pay a fine could drive some companies under.
A business the size of Gross Electric would be exempt, but Gross still supports the idea of requiring all companies, regardless of size, to provide health insurance because in the end she believes that’s the only way to create a risk pool big enough to ensure that health insurance is affordable.
“If I’m willing to buy my people insurance, why should someone who doesn’t – who can sell things at a lower price because of it – have an advantage over me?” she says. “At some point everybody is going to have some health issue, and at some point everybody is going to be paying an astronomical amount unless we do something to fix the system now.”
Comments
2. Christopher Cobb | 10.20.08
The reason for nationalizing the health care system in some form is not to give everybody something for free but to bring price controls into this market. The idea is to give the industry some stability and rationality. This country has paid far too much a premium for its services in medical care and pharmaceuticals. The days of gouging the customer are coming to an end. Theses industries have made profits in socialized medical markets and didn’t close there door. Its time this industry started working with Americans instead of against it for its own greedy needs. If we control the prices then the insurance companies can be mandated to pass that savings down to the user and still make a good profit.
3. Anonomous | 10.20.08
Why is their so much focus on affordable health care insurance when it is probably the cost of the healthcare that is the problem in the first place? Not that I have any authoritive understanding.
4. Allan Hancock | 10.20.08
We in Minnesota have a health care plan called the Minnesota Health Act (SF 2324 and HF 2522) the senate and house bills that were submitted this year and will be introduced again in next years legislative session. Essentially it is an affordable publicly financed, privately run plan that gets the insurance business out of running the health care in our state. It will take some courageous legislators to stand up against the strong lobbyists at our capitol to have a chance to pass it. If interested in a true solution to the nation’s health care problems I urge people to read “The Health Care Mess” by Kip Sullivan a well researched book which exposes the inefficiencies, waste, and profiteering of our current system and provides a real solution that the politicians are afraid to advance. Candidate for the State Legislature
5. Amit Sarkar | 10.20.08
What the federal government MUST do is to provide a BASIC coverage (major medical,hospitalization, and “essential” generic prescription drugs)under a single payer system. This would cost UNDER a couple of hundred a month for a family of 4.
Insurance companies will then be allowed to only compete nationally for coverage over and above the basic coverage under a completely free market. No restriction on either coverage (e.g. cosmetic surgery) or prices charged, only on uncompetitive behavior like price-fixing.
Unfortunately, my fellow Americans, middlemen like Insurers would be negatively impacted. They currently “own” U.S. Congress. So, NOTHING substantial is going to happen.
6. Norman Isaacson | 10.20.08
Since we are already spending twice what other contries are on health care, but are at the bottom in coverage and quality, why will it cost us more to fix the problem? Seems to me we should be able to do better for less. Unless, of course, we’re afraid to make our citizens the winners instead of the insurance companies.
7. ZachJonesIsHome | 10.20.08
As the election draws near, my worry about America’s future increases. I continue to have faith that American’s will make the right choice (as long as ACORN doesn’t steal it). The article America’s Attachment to the Idea of Change is the Perilous “Will o’ The Wisp” That’s Confounding Voter’s Perceptions sums up my concerns. It is found at:
http://zachjonesishome.wordpress.com/2008/10/19/voters-obama-will-o-the-wisp-change-confounding-voters-perceptions/
8. Terry Conklin | 10.20.08
I wish someone (including McCain or Obama) would describe the candidates’ health plans well. I see that the fundamental difference between the two is direction. Obama wants to continue and even expand upon the employer based or government run insurance scheme. McCain want to dump that approach and move to individual control of insurance enrollment. We’ve tried the Obama direction since WWII and it has proven disastrous so it seems a no brainer to move in McCain’s direction. Why should those 10-20% of us who buy our insurance do so with after tax dollars while subsidizing the employer based, tax free, insurance that has bloated health care costs? We need to become aware of health care prices and make some healthy choices in our lives. Buying insurance based on these choices (from companies who “cherry pick”) only makes sense, both personally and nationally. Our nation is becoming an unhealthy one and only a vastly improved policy will push those changes. McCain’s plan, even if without McCain, is the one we need to use.
9. Bill Vosteen | 10.20.08
The canditates should look at a system more like Singapore’s which is a combination of public and private insurance which promote competition. The main feature is a mandatory health savings account to draw from for each citizen.
See: http://healthcare-economist.com/2008/01/14/singapores-health-care-system/ for a quick description.
10. Tess Wacker | 10.20.08
I would like to comment on Mr. Cox’s point of view regarding his negative take on OBama’s health care plan. Mr. Cox seemed to be saying that subsidizing health care for those who truly need it in our country is not in his best interest. My point of view is different. I say that helping those who truly need help with health care is not about “paying for everybody else’s bills” as Mr. Cox indicated. Having good health care is not equivalent to having satellite dish TV or a membership in a popular, local gym. There are decent people in our country who truly need health care but honestly cannot afford it. I don’t look at health care in our country as “every man for himself!” I look at us….as a country, pulling together.
We are people: rich, poor, strong, weak …..and we need to help one another! THAT, to me, is the measurement of our truest integrity and highest worth as a country.
11. Dylan Voltaire | 10.20.08
How can Mr. Cox have such a callous stance against the millions of children who go without healthcare every year. Health insurance and automobile insurance are totally different items. One can get by without owning a car, no one can get by without healthcare. Cox is the very heart of a heartless Republican party.
12. Dan C. | 10.20.08
Many countres do health care better than us. They have socialized, partially socailized, and private set ups. The big difference is that at the beginning of each year, the government sits down with the health care industry and negotiates prices on services and medicines. The citizens have access and are content with their care. Moreover, in other countries, no one has ever heard of a family going bankrupt because of medical bills. (Frontline)
Meanwhile, we have partisan interests and PR firms that sway someone like Mr. Cox, an otherwise intelligent and rational individual (I assume), to beleive that ensuring all American children healthcare is some dispicable form of socialism (and that is bad).
It is pretty sad commentary that we would allow such a devastating situation to exist in our country. Look at that chart above. Seventy per cent of the 46 million are full-time workers. How do the Mr. Cox’s of the country explain that away?
Americans should be ashamed; ashamed into doing something about it.
Now, Mr. Obama has a plan to cover as many of those children as he can reach. The man is not a terrorist. The corporations who hold our government hostage are the terrorists.
NO MORE PLUTOCRACY! OBAMA IN ‘08
13. Swampfox | 10.21.08
We need to change up the tax code so that the individual is on an equal footing with a corporation when it comes to deductions for health care. I’d rather get paid what my employer spends on health care for me and go find my own insurance. I’d try and get an inexpensive plan, pocket the money, and I wouldn’t have to worry about losing health care when I change jobs. Much better.
Plus, after reading how things run behind the scenes in Canada, I can say I don’t want their system. Here’s a great interview with an ex-Canadian radiologist:
http://www.americanexperiment.org/uploaded/files/2008_publications/kurisko_oct_2008_web.pdf
14. John Cottle DO | 10.21.08
Neither candidate appears ready to tackle the single largest problem: a bloated bureaucracy which sucks billions out of the “healthcare system” without contributing anything to health!
I’ve been a family physician for 26 years. During that time, my income has risen not quite half as fast as my charges. Where has the rest of the money gone? To huge numbers of people who process information, more often than not slowing the delivery of care, while many health conditions worsen, driving costs up, while not saving any money overall!
Let’s accept that we cannot afford to provide “the best” healthcare for everyone, but that we can and ought to provide basic care for everyone with a bare bones govt policy. Then allow for small to large HSA’s which can be used for market driven decisions. Anyone else thinking like this?
15. Robert | 10.21.08
It’s time to get the cost of healthcare off the backs of businesses that are trying to create jobs in America. Once a national health insurance system is up and running, employers can expand business, engage in trade, hire employees in America who will become taxpayers based on earned wages, capital gains, and rental and investment incomes, etc.
The increased tax base on income will cover the cost of the health system. As to the naysayers, swindlers, and profiteers who oppose affordable health care, I say it is their civic duty to participate, and to cooperate in this system. Furthermore, having experienced health care abroad, I can’t for the life of me imagine why the USA is so damned stubbornly backward on this issue. We should lead the world and are failing miserably by making this hodge-podge, multi-payer, for profit system the responsibility of already-overburdened businesses looking to save on costs, or else cut jobs and move overseas. This is unsound health policy, as it is madness as economic policy. Let’s grow up, pay our taxes, and keep our jobs. Let’s join the civilized world.
16. Fern D | 10.21.08
Cox comments that he doesn’t bother to shop around because his insurance company pays every time he goes to the doctor, but elsewhere states that he has high deductibles. Those contradictory statements should have been clarified, as it appears there is either a misunderstanding or somebody’s not telling the truth. He goes on to complain that the system is not competitive. When individuals do not shop around, where is the incentive to compete?
17. Louise Ash | 10.21.08
Health care providers should all be nonprofits. There should be no for-profit HMOs. I like what Doc Cottle says, too. Too much time and energy is wasted shuffling papers. Retrain those people to be nurses aides or clinic workers or PAs because emergency rooms are overcrowded with people seeking basic health care. If there were a ground-level policy that covers everyone–then there’s your huge pool that dilutes the cost for all. Why should Senators and Representatives in Congress have better health care coverage than the rest of us?
18. Dan C. | 10.21.08
Health care isn’t something people have time to “shop around”. When my son is sick, I don’t go through the yellow pages looking for the doctor with the best price for his/her services. You just can’t make a good comparison between shopping for cars and health care.
20. Philip Dennany | 10.21.08
Until the People of the United States require that their elected represntatives actually represent them, the People will continue to decline into nothingness. The bail-out for the crooked big is another fine example. An estimated 69 persent of the voters felt that failed businesses should not be bailed out by the taxpaying public, and that allowing them to fail was a better option. That is what happens to poorly managed and corrupt business.
Yet our “representatives” chose instead to risk sending our money after bad, against the People that elected them into office, while the corrupted missmanagers were given great sums of money for their failures. Our own “representatives” received large sums of money(bribes) from the very ones that they bail out. Both the Republicans and Democrats, if not jailed for their own corruption, should be removed from office and allowed never to return to public office.
21. Dr. Stephen Keister | 10.21.08
Both of the candidates health care plans are flawed, but the McCain plan is actually regressive.The Obama plan is a start in the correct direction. Granted that the Obama plan may be more expensive to the taxpayer; however, ethically health care spending, in my opinion, trumps needless military spending or using tax payer money to bail out corrupt Wall Street Bankers.
Ideally, and much less expensive to the tax payer is the plan developed over 15,000 physicians over the past 20 years as per Physicians For A National Health Program , and is incorporated in HR 676 now in committtee in the congress. This approach is noew endorsed by the 125,000members of The American College of Physicians. This bill would produce universal, single payer health care with little if any additional cost to the taxpayer. The USA now ranks 25th among nations of the world in health care per The Commonwealth Fund.
22. t. soule | 10.21.08
Why is health care the responsibility of the workplace? Health care should not be connected to employment in any form. Putting the employer in the middle of this debate only confuses the issue.
23. bw | 10.22.08
http://ap.google.com/article/ALeqM5hlMSr7A7sLEd5t6wAG8jdaXxhR7QD93S3VNG0
HONOLULU (AP) — Hawaii is dropping the only state universal child health care program in the country just seven months after it launched.
Gov. Linda Lingle’s administration cited budget shortfalls and other available health care options for eliminating funding for the program. A state official said families were dropping private coverage so their children would be eligible for the subsidized plan.
“People who were already able to afford health care began to stop paying for it so they could get it for free,” said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. “I don’t believe that was the intent of the program.”
State officials said Thursday they will stop giving health coverage to the 2,000 children enrolled by Nov. 1, but private partner Hawaii Medical Service Association will pay to extend their coverage through the end of the year without government support.”
24. Laurie | 10.24.08
As an employer it would be great to have everyone carry their own personal insurance that I don’t have to pay for, I would love it! But the people saying they can do it cheaper have never shopped for insurance, there’s nothing inexpensive out there, and heaven forbid they should have a large claim. I also agree the only people making out in this whole deal are the insurance companies. All the rest of us, doctors, employers, everyday people, are paying for bureaucracy and paper pushing. The alternative listed above of a basic govt plan with above & beyond being free market would give the insurance companies something to sell & still make money on, while providing basic coverage to everyone else. Let the people who want the “extras” pay for them. And let us employers go back to paying people for the work they do & not have to pay for a bunch of “hidden” benefits that people can’t use to pay their bills!
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1. travis | 10.20.08
All these ideas are just a continually patchwork of a failed system. The politicians don’t want to step on the healthcare industries toes nor do they want to step on the insurance companies toes. If you really want universal healthcare one group ie the insurance companies and/or healthcare companies are going to have to suffer the consequences. Nobody is going to keep profiting from healthcare and be able to provide affordable healthcare, it won’t happen!
The other option is to create a complete free market for healthcare. Sorry to break it to everyone who says that the freemarket has resulted in a failed healthcare system, but it is not a free market for healthcare at all. There are so many state and federal regulations and mandates imposed on companies and businesses that it is no longer a free market. Navigating through all these government restrictions props up a system that is half market driven and half government driven, it doesn’t work.