H/T Kevin Sack at the New York Times's Caucus Blog whose first paragraph:
Senator John McCain’s top domestic policy adviser, former Congressional Budget Office director Douglas J. Holtz-Eakin, recently said in a conference call with reporters that Mr. McCain’s health care proposal would "put 25 to 30 million individuals out of the ranks of the uninsured, into the ranks of the insured." In an article released Tuesday, a panel of prominent health economists concludes that Mr. Holtz-Eakin’s projection is off by, well, 25 to 30 million.
made me click through to the original article in Health Affairs
I know that McCain's plan has no fans on Dkos, but those interested in the issue should read on to see just how bad the professionals think it is.
It is important to note that these are professionals. Health Affairs is a peer-reviewed academic journal, and the 4 authors of this paper are from high-level institutions.
Tom Buchmueller is the Waldo O. Hildebrand Professor of Risk Management and Insurance in the Ross School of Business, University of Michigan, in Ann Arbor.
Sherry Glied is a professor and chair of the Department of Health Policy and Management, Mailman School of Public Health, Columbia University, in New York City.
Anne Royalty is an associate professor of economics, Indiana University--Purdue University at Indianapolis (IUPUI).
Katherine Swartz is a professor of health economics and policy in the Department of Health Policy and Management, Harvard School of Public Health, in Boston, Massachusetts.
The abstract pulls no punches. McCain's plan would take us backwards.
Moving toward a relatively unregulated nongroup market will tend to raise costs, reduce the generosity of benefits, and leave people with fewer consumer protections.
The body gives us the gory details.
1) No dent in the uninsured population.
While they stress that there are a lot of unknowns in how employers would react to the lack of deductibiliy, and what plans insurers would offer, they estimate that 20 Million people would lose their employer based coverage, while 21 Million would purchase new non-group plans. A one Million gain in number of people covered is trivial given the size of the uninsured population.
How does McCain claim that his plan will significantly reduce the number of uninsured? The authors give a hint:
Models predicting increases in coverage generally assume that very few employers would drop health benefits. This assumption runs counter to most empirical evidence and to economic theory
In a non-academic forum like this, I can translate the above as "McCain is making the numbers up."
2) No Change was the good news. Now it gets worse.
Over time, the value of the tax credit will get eaten up by inflation, resulting in a net increase in the number of uninsured. This is true even if the credit is indexed to the CPI because health premiums tend to rise 6% higher than the CPI
Over time, a refundable tax credit would not automatically adjust as health care costs increase--which is quite different from the current tax exclusion of employer premium payments. Thus, the effectiveness of the tax credit in inducing people to buy coverage would inevitably decline over time. Even if the tax credit were indexed to the Consumer Price Index (CPI), if the annual growth in premiums exceeded CPI-measured inflation by 6 percent--as was the case between 1999 and 2007--the value of the credit would be eroded so much that in just five years, five million more people would be uninsured.
3) And how would coverage compare?
The authors assume that premiums in the non-group market would have to be about 1/3 less than the group premiums in order for them to avoid an initial increase in the number of uninsured. Why can premiums be lower?
Because the benefits are worse (as has been detailed many times on Dkos).
The typical deductible in nongroup plans is about $2,750, compared to about $1,000 for group policies.20 Coinsurance rates average 26 percent in nongroup plans, compared to 20 percent in a typical employer-based plan. For plans with copayments, the average copayment in the nongroup market is between $30 and $40 per doctor visit, well above that of group plans. Many services are not covered at all. Thus, much of the apparent savings from shifting to nongroup coverage would be offset by higher out-of-pocket costs for care.
In addition, non-group policies can exclude those with pre-existing conditions. They could also exclude overweight people, or those with poor genetics, heck, let the market decide. (Sorry, snark mode off now)
So, we have fewer people covered over time, and covered in less generous plans. We also decrease the social insurance aspect of health care by making people who are older and sicker pay more.
4) How does McCain claim to fix these problems?
He wants to beef up the state high-risk pools for those who cannot get private insurance. These plans currently cover only 200,000 people because
states deliberately restrict benefits and keep enrollment low. For example, Florida's high-risk pool has been closed to new enrollees since 1991. California has rationed access to its pool by limiting the amount of time enrollees can be covered through the program and by capping enrollment
So, without massive increased spending, McCains idea that the high-risk pools would be the safety net for his plan is a fantasy.
Another McCain idea is to have insurers offer multi-year guaranteed coverage plans. The problem is that there is nothing preventing them from doing so now, and nothing in McCain's plan to encourage them to do so. McCain is ignoring what the market is telling us, because it doesn't fit his vision.
5) Deregulation to the rescue. Or not.
McCain's other "improvement" would be to establish a national market where insurers licensed in one state could sell in every state. McCain has a fantasy about this too.
With more choice and competition, he believes that costs would fall and service quality would increase.
I'll let the authors devestate this idea by themselves.
Everything we know about nongroup insurance markets, however, suggests that this vision is wrong. Health care is the ultimate local good: it is provided face to face, between doctor and patient. Today, most health plans negotiate contracts with local providers, directly or through intermediaries. The only truly national plans are traditional indemnity plans that do not negotiate with local provider networks. Such plans were once the backbone of American health care. They lost out to more tailored plans, however, because they could not compete effectively. Without an informed local network, their prices were higher and quality was lower. There is no reason to think that this has changed.
The result would be that insurers would flock to low regulation states, and those of us who live in states that do regulate their health insurers would be thrown to to wolves.
The main effect of establishing a national market would be to undo state laws designed to establish minimum levels of coverage and protect consumers. In a national market where state licenses are not required, insurers will charter in places where regulations are scarce--much like credit card companies do today. As a result, people guaranteed basic benefits today would find those benefits eliminated under the McCain plan. People in most states would lose access to procedural protections, such as requirements that disputed decisions by managed care plans be subject to external review.26 People also would lose access to many benefit protections. For example, forty-seven states now require mental health parity, forty-nine states require coverage of breast cancer reconstructive surgery, and twenty-nine require coverage of cervical cancer screening.27 All of these requirements--as well as regulations in several states that limit the rates that can be charged to higher-cost consumers and that limit who can be excluded from a health plan--would be eliminated under the McCain plan. Without legal requirements in place, plans would no longer offer these benefits at all in many markets, even if many consumers want them.
So, we have fewer people covered, in worse plans, and with fewer protections. All at a cost of only 1.4 Trillion over 10 years, not counting the higher out-of-pocket costs to consumers. At that rate, the bridge to nowhere might be a good idea.