As a physician, I have a lot of politically conservative colleagues. Much of this stems from our experience with the government. The influence of Medicare helps set prices, which we are not at liberty to change, and affects how we practice. On the other hand, Medicare is usually pretty good at paying its bills—except when it doesn’t. If our costs go up, say in increased rent, we can’t raise our prices. And if we get together with a group of doctors to try to negotiate fees, it can be considered collusion, and as such, illegal. So we’re in a bind.

On the other hand, the current system of multiple payers causes no end of headaches and paperwork. A single payer system could reduce costs through having us deal with a single entity. But Medicare is also subject to the whims of politics, as when earlier this year, Medicare held onto all physician payments while Congress and the President negotiated a new Medicare fee structure. This had a real world impact of making it hard to pay our bills.

But this isn’t about the advantages and disadvantages of a single payer system—neither candidate is proposing such a thing. This is about the disaster the McCain plan would wreak on all of us.

Let’s start with the most insidious proposal—to eliminate state borders with regard to regulation. This idea is both consistent and inconsistent with conservative values. It tramples states’ rights, but it also does away with regulations. What kind of regulations? In my last post, we talked about the problem of diabetic testing supplies, and a reader pointed out that California law mandates coverage. Under McCain’s plan, insurance companies would simply pack up and move to Nevada (or wherever) and be free of pesky life-saving regulations. Sure, this could reduce costs, but how often have we seen these savings passed on to consumers? Plans can become as restrictive as they wish by simply finding a state of refuge.

Moving on to the big part of the proposal, we’ll take an example from my family and my small business. Coverage for my family costs about 12,000 USD yearly. That cost is subsidized and untaxed, making it reasonably affordable for me (I’m paying out of pocket about $1200/year for my coverage). Coverage for the employees of my practice changes yearly because of the costs of the various plans offered. Some years we have a great plan, some years we have a high-deductible plan.

Anyway, under McCain’s plan, our employees benefits will be taxed. That will reduce their income. However, they will get a tax credit. This credit will be worth $2500 for most of them. With this credit, they will be able to purchase only a crappy, high-deductible plan. Why? First of all, we probably won’t provide coverage anymore because it will save our narrow-margin business quite a bit. Second, my employees will no longer belong to a larger risk pool, and will be at the mercy of unregulated insurance companies who can make all but the most basic coverage unaffordable.

Insurance is about pooled risk—that’s what makes it work. On the other hand, if, as an insurance company, you can get away with only insuring low-risk people, your profit will go up. McCain’s plan eliminates state coverage mandates, risk pooling, and the incentive for employers to provide coverage, which is usually better than individual coverage.

McCain’s plan will destroy health insurance as we know it, will save no money, and will increase the dis-incentive to seek preventative and other early care.

One thing was clear in this week’s debate: Obama and McCain, independent of their health care plans, have a basic philosophical difference. Obama sees health care as a right, McCain does not. I know many people who share McCain’s view, but I do not. A healthy society (in all senses of the word) requires universal coverage, large risk pools, and a dose of humanity. Any good health plan will encourage the largest possible risk pool (the entire population), will cover the most important basic health needs, and will take into account quality and cost. It will have to balance the benefits of an open market vs. bureaucratic control. It’s a tough problem. But it’s one we can’t ignore, and McCain’s plan isn’t a solution, but a guaranteed way to exacerbate all of the faults of our current system.

Comments

  1. #1 Chris H.
    October 9, 2008

    Re: eliminating state borders. That encourages, as you describe, “regulatory” or “jurisdictional arbitrage.” It is a powerful force, and if there is an opening for it to occur, it will.

    In the financial services context, this is how credit card companies charge interest rates that would violate usury laws in most states. The Supreme Court held in 1978 that a national bank is not subject to the usury laws in the states where it targets customers. So this allows national banks to export their home state’s usury standard, and that is why credit card companies are all in…South Dakota and Delaware. It’s pathetic.

  2. #2 MPL
    October 9, 2008

    Any time you make a decision about insurance, you’re taking a gamble. As for me, I would much rather risk overpaying when I’m lucky (that is, rich and/or healthy) than when I’m not (poor and/or sick). That’s why I support universal coverage, and tax based solutions.

  3. #3 Karl
    October 9, 2008

    There is an additional problem with McCain’s “tax-credit” proposal. Some people do not pay even that much in income taxes so they will not get any benefit from that system. And, of course, they will be the poorest people in the country who probably need health insurance the most.

  4. #4 Moopheus
    October 9, 2008

    “McCain’s plan will destroy health insurance as we know it, will save no money, and will increase the dis-incentive to seek preventative and other early care.”

    In other words, it likely will work precisely as intended. You make the assumption that a candidate’s plan should help more people afford medical care in some way, and that that is actually the candidate’s intention. But that might not be the case.

  5. #5 Umlud
    October 9, 2008

    I agree with Karl about the problem of using “tax credits”. From wordnet a tax credit is:

    a direct reduction in tax liability (not dependent on the taxpayer’s tax bracket)

    As a graduate student, I earn so little as to not pay taxes (maybe even get a “rebate”). Therefore, my benefit under the McCain plan would be $0.00, since I cannot have a reduction in a non-existent tax liability.

    Similarly, one can argue – as Karl does – that people most in most direct need of medical care are people with lower incomes that cannot afford good (or any) health care. These uninsured are one of the many reasons I see cited as to why health care costs are increasing, since they use facilities in emergency rooms and only when their health situations are highly compromised (both upping the bill for everyone else). Therefore, insuring the poor would also indirectly benefit the rest of society, since they would – theoretically – be able to go to hospital to nip problems in the bud, thus lowering the general cost of health care everywhere.

    Please let me know if my assessment is incorrect.

  6. #6 D. C. Sessions
    October 9, 2008

    There is an additional problem with McCain’s “tax-credit” proposal. Some people do not pay even that much in income taxes so they will not get any benefit from that system.

    In fairness, the proposed rebate is reimbursable. In other words, you get the cash even if you pay absolutely no taxes at all.

    A hint to those facing the outrageous rates for individual health insurance, by the way: look into enrolling in a local university. Not only is it a good thing for its own sake, but student health insurance (although sketchy) is about as cheap as it gets.

  7. #7 D. C. Sessions
    October 9, 2008

    If it’s any comfort, I suspect that the McCain plan would get us to universal coverage much quicker than the Obama plan, assuming that they both made it through Congress unaltered. (Anyone want to offer odds on that?)

    As hard-core revolutionaries put it, “the worse, the better.”

  8. #8 Chris H.
    October 9, 2008

    I find it strange that Obama doesn’t stand up more forcefully to defend the idea that he is requiring individuals to have health insurance.

    In most states, when you drive a car, you have to carry insurance. Here at UC-Berkeley, we required undergraduates to have health insurance in 2000. Why? Because we are not islands. When a student gets sick and drops out (and about 25% of drop outs are because of illness) it imposes significant costs on the university.

  9. #9 M2
    October 9, 2008

    And how will McCain pay for these tax credits? With huge cuts in Medicare and Medicaid, of course! http://online.wsj.com/article/SB122315505846605217.html

    I’ve been a pessimist for a long time. I’m at the beginning of my medical career. I expect the healthcare situation in this country will probably have to get a lot worse before it starts getting better. But recently, at unguarded moments, I find myself believing Obama when he says it doesn’t have to be that way.

  10. #10 D. C. Sessions
    October 9, 2008

    And how will McCain pay for these tax credits? With huge cuts in Medicare and Medicaid, of course!

    And we all know that means cutting benefits, not reimbursements.

    Right? I mean, geezers don’t actually, like, vote, do they? Certainly not for Republicans, anyway.

  11. #11 SouthernFriedSkeptic
    October 9, 2008

    You pay 1200 a year for insurance? My family coverage (just me 31 years old with no record of health problems) and my 5 year old daughter costs me 2400 a year plus has co-pays and a high deductible. And this is subsidized by the state since I am a public school teacher. And as a public school teacher that means I pay nearly 10% of my gross income for my health insurance despite never having an operation or serious illness in my life. I’m pretty sure McCain’s plan is bogus. I hope Obama’s is much better (it sounds good, but then again, all plans sound good on campaign trails), but it’s hard to keep up optimism these days. Any info you could point me to that objectively discusses the Pros and Cons of Obama’s plan would be appreciated.

  12. #12 PalMD
    October 9, 2008

    If I had to buy my plan through my private practice, it would cost my closer to 12K. I currently get it through my hospital, which subsidizes it heavily (and controls it closely).

    Obama’s plan (http://www.barackobama.com/pdf/issues/HealthCareFullPlan.pdf) is a bit too optimistic about the money they can save by increasing efficiencies, etc., IMHO. It is basically a fix of our current system, with the addition of a “fail-safe” plan.

  13. #13 SouthernFriedSkeptic
    October 10, 2008

    Yeah, that’s pretty much the extent I have heard criticizing Obama’s plan. Still, there’s not much positive I’ve heard about it for helping to repair some of the more general coverage problems under control. While I think it’s great to make sure everyone has coverage and support that concept, I’d like someone to address the issues faced by those who are covered. I make monthly trips to the doctor to get a refill on one medication. It’s not critical, but definitely helps my quality of life. Unfortunately it’s also a narcotic and therefore no refills allowed. I calculated this year that without insurance, taking into account my monthly doctor visits, the cost of my prescription, regular check-ups for my daughter, and factored in a just-in-case two emergency room trips for me and my daughter (with a minor emergency-nothing requiring intensive treatment or hospital stay). It came out cheaper than paying my insurance. But, I am not much of a gambler, and I know that anything serious would tilt the balance considerably. I used to feel bad about having to use my insurance to pay for a doctor’s visit every month and pay for a prescription, thinking that it may raise other people’s rates. But I realized that even with those 12 visits and 12 prescriptions the insurance company is still making a profit over what I pay, not even including the subsidization by the state. And what’s more, my doctor is probably making less (if they have to agree to certain rates or discounts) and certainly has more of a headache having to file the information. I haven’t been ill, but I’m starting to feel like I might be…ugh.

  14. #14 D. C. Sessions
    October 10, 2008

    If I could change only one thing about our current non-system, it’s the unfunded mandate to provide emergency care for those unable to pay. That puts a huge distortion in the system (classic cost externalization) and has domino effects that screw up a host of other aspects of health-care economics.

    Put it on the budget, instead of passing the cost on to those not well-enough off to have insurance and too well-off for public assistance.

  15. #15 Mike
    October 10, 2008

    I have always thought that untaxed compensation was one of the most unfair aspects of the tax code. Why should well to do people, who tend to have jobs that provide benefits, not pay taxes on all of their compensation when less well to do people, who tend to not have jobs that provide benefits, must pay taxes on all of their compensation.

    It seems that some people are adamantly opposed to making the tax code more fair and more just.

  16. #16 Morgan K Freeberg
    October 12, 2008

    Obama sees health care as a right, McCain does not. I know many people who share McCain’s view, but I do not. A healthy society requires universal coverage, large risk pools, and a dose of humanity.

    Socialism is not a dose, it is a deluge. And humanity has nothing to do with it. It is the eradication of life’s exigencies to the point of eradicating life itself. It is synonymous with death.

    And if a proposed “right” of yours costs someone else money, then it isn’t a right. Rights have to do with freedoms, because you’re entitled to things you would have if you were the only person on the earth. That includes everything you have the wherewithal to get for yourself, but it doesn’t include things you depend on others getting for you, at the cost of their own lives or of a portion of those lives (their time).

  17. #17 PalMD
    October 12, 2008

    That’s a straw man, Morgan. To assert that health care is a right is not synonymous with socialism any more than public schools or sewers are.

  18. #18 Morgan K Freeberg
    October 12, 2008

    You mistake consequence with intent, sir.

    Socialism has never stopped at any “halfway point,” ever. It can’t. The premise on which it rests (upon which the argument, presented here, rests) is that if something is needed for a robust society, then we jolly well better make it into a right.

    So why stop there? Seriously. What’s the difference between health insurance and food? A place to live? Car insurance?

    There’s no logical reason to stop there. None.

  19. #19 LanceR, JSG
    October 12, 2008

    I call bullsh*t on the anti-socialism rant. Every government, every community, every group larger than an extended family is to some degree socialist. Socialism is *good* in that the alternative is the law of the jungle, making life “nasty, brutish, and short”.

    Nice slippery slope fallacy, btw. “no logical reason to stop there” indeed. Look up the word “logic”, ‘cuz yer doin’ it wrong.

  20. #20 Citizen Deux
    October 13, 2008

    Sorry, Morgan’s arguments are sound. Healthcare is not a right. Compassion, dignity, freedom, equality. Those are rights. If we as a society elect to pay for everyone’s healthcare, then we have provided a service – like building highways. Not everyone will use it at the same rate and some areas of the nation will be better served than others. As we try to balance the right of equality with the service of healthcare, we will find ourselves either paying enormous sums for perfectly equal treatment, or accepting lower service.

  21. #21 Oldfart
    October 14, 2008

    The idea that you should have the same rights in a community that you have alone in the wild has no basis in fact. There is no way you can “prove” that you should have those rights or that self-centered (and therefore selfish) behavior has any place as a main theme in a community of human beings. You are just demanding those rights so that you can avoid any possible responsibility you might owe your fellow man (woman or child) for being a part of said community. In other words, you are justifying yourself being a selfish parasite on the rest of humanity. Kindly leave. We, most of us anyway, are trying to make something work and don’t need to hear the constant whining of those who never made it out of their terrible twos.

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