Campaign Health Care Proposals: A Bush versus Kerry Scorecard

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To the Mods: I have permission to post the whole article below provide I attribute it to Holly Kwiatkowski who originally published it in the August issue of Contingencies, the magazine of the American Academy of Actuaries,

Campaign Health Care Proposals: A Scorecard

By Holly Kwiatkowski

On what issues will you base your vote this November? The economy? Foreign affairs? If you’re like most Americans, health care issues will play a prominent role in your voting decisions. According to a recent study by The Commonwealth Fund, a majority (57 percent) of adults said that candidates’ views on health care reform will be very important to them when they go to the polls.

With health care costs continuing to rise rapidly and the number of people who lack health insurance ballooning to 43 million according to the most recent data, Americans are concerned about their health care coverage and they’re looking for candidates who will offer solutions to rising health costs and rising numbers of uninsured.

This year, for the first time, the Academy published a guide on issues related to the uninsured for voters, journalists, and policy-makers to use as they examine candidates’ health care proposals. The guidebook, The Questions Candidates Should Answer About… Americans Without Health Insurance, tackles head-on the questions that should be addressed in any proposal to expand health care coverage. So, I thought I’d put the current health coverage proposals of the Democratic and Republican presidential candidates to the test! But first, some background on the proposals to date.

Official Positions


President Bush has several different proposals aimed at decreasing health care costs and the number of uninsured Americans. The centerpiece of Bush’s plan is a refundable, advanceable tax credit for 90 percent of health insurance premiums, up to $1,000 per individual and $3,000 per family of four. These credits are phased out at $30,000 for an individual and $60,000 for a family. President Bush also strongly advocates for association health plans (AHPs), which would allow small businesses to join together to purchase insurance coverage. In addition, Bush proposes to:

- Expand community health centers, particularly in rural and under-served urban areas;

- Provide a tax deduction for the premium of a high deductible health plan (HDHP) purchased in conjunction with a health savings account (HSA);

- Restructure Medicaid to make the program more flexible and make available unused funds from the State Children’s Health Insurance Program (SCHIP) for states to expand coverage to the uninsured; and

- Reform the medical malpractice system to limit the number of unnecessary lawsuits and cap noneconomic damages, which would theoretically reduce escalating health care costs.


Senator Kerry’s proposal to expand health care coverage consists of a plan to provide near-universal coverage by allowing Americans to buy into the Federal Employees Health Benefits Program (FEHBP) through a separate pool for small and large businesses, referred to as the Congressional Heath Plan. Other key aspects of Kerry’s proposal are:

- A reinsurance mechanism in which the government would reimburse employer-sponsored plans for 75 percent of catastrophic claims totaling more than $50,000, provided that the companies pass this savings onto policyholders through reduced premiums;

- Tax-based incentives to employers and tax credits to individuals and the self-employed to purchase coverage through the Congressional Health Plan;

- Tax credits for small businesses, workers who are between jobs, and adults between the ages of 55 to 64 who are not yet eligible for Medicare, to purchase health insurance coverage;

- Medicaid coverage for all children, funded by the federal government, provided that eligibility for SCHIP is expanded and all school-aged children eligible for SCHIP are automatically enrolled by the state; and

- A technology bonus incentive to health care providers and insurers who update their procedures and use electronic records; and a quality bonus to hospitals who offer better care while saving money.
How do the Presidential candidates’ proposals measure-up? Do they consider the crucial issues that must be addressed in any proposal to expand health insurance coverage? Let’s see…


Who is the target population?


Bush: Bush’s proposals target the low-income uninsured and small businesses.

Kerry: Kerry aims to provide near-universal coverage. Aspects of his proposals specifically target children, the unemployed, retirees and adults between the ages of 55 and 64, and small businesses.


What is the benefit package?


Bush: Bush’s proposals don’t contain provisions for a specific benefit package. However, Bush has touted HSAs, which are available only to individuals with a qualified HDHP, but would allow individuals to save for future health care expenses on a tax-free basis in the HSA. Bush has proposed making the premium for a HDHP tax deductible.

Kerry: Kerry gives no specific information about benefit packages. However, Kerry’s proposal would allow for buy-in to the FEHBP, providing Americans access to the same health plans and benefit packages that are available to members of Congress and government employees.


What are the costs to individuals/families?


Bush: The tax credit for nongroup health insurance would lower the net premium costs for qualified individuals and families. Additionally, expanding access to tax-free health accounts would increase the ability of families to accumulate funds to pay for future health care expenses on a tax-free basis. Bush also proposes to restructure Medicaid to make the program more flexible and to make available unused funds to expand the SCHIP program. This could provide additional options for the lower-income uninsured.

Kerry: The goal of Kerry’s plan is to reduce the cost of health care for all Americans. Tax credits would reduce the cost of health insurance for certain populations in the group market. An expansion of the Medicaid and SCHIP programs would provide coverage to low-income children and their parents, and eventually to other low-income adults.


What are the costs to employers?


Bush: Association health plans are one way that Bush hopes to lower costs and make it more affordable for small employers to purchase health insurance for their employees.

Kerry: Kerry intends to lower the cost to employers by implementing a “premium rebate pool” reinsurance mechanism. Small businesses would also have access to a refundable tax credit for up to 50 percent of the cost of coverage.


How will the proposal affect the health insurance market?

Bush: Bush would provide a refundable tax credit for individuals to use in the nongroup market. According to the administration, “The health insurance credit could increase the participation in individual markets of a wide cross-section of Americans… This broad increase in participation, especially of younger and healthier people, would improve the pooling of risk in the individual market.” Association health plans, however, could cause a fragmentation of the small group market in some states if they don’t have to abide by the same rules as other insurers in the state.

Kerry: Kerry’s proposal to provide near-universal coverage by allowing a buy-in to the FEHBP and also by providing reinsurance and tax credits to purchase insurance in the group market would increase the size of the employer-sponsored market. Creating a separate pool to allow individuals or groups to buy into the FEHBP could result in market segmentation if health plans in the pool aren’t subject to the same rules as plans in the current individual or small-group market.


What are the costs to states?

Bush: Bush has proposed restructuring Medicaid to make the program more flexible and to make available unused SCHIP funds for states to expand the program. This proposal to restructure Medicaid would provide additional federal funding for the program up-front, with decreased funding in later years. Bush also proposes to continue federal funds to continue to maintain Medicaid coverage for families moving from welfare to work.

Kerry: Kerry proposes to cover every child under Medicaid, with the federal government paying for this coverage if the states expand eligibility and automatically enroll all eligible school-aged children in the SCHIP program.


What is the impact on regulation?


Bush: If implemented, the AHP proposals supported by Bush could affect state regulation if AHPs aren’t required to abide by the same state laws to which other insurers must adhere.

Kerry: It is unclear if the Congressional Health Plan would affect state regulation or ERISA. However, if enough people move out of state regulated markets and into the new pool in the FEHBP, which is federally regulated, the state regulated markets may need more or less regulation depending on the kinds of risks that are left in those markets.


How will the proposal be funded?


Bush: The President has proposed over $117 billion in initiatives to improve access to health coverage and make it more affordable through tax credits for the uninsured, AHPs, tax-free health accounts, etc. However, the funding for these proposals is not specified. The Medicaid proposal is intended to be budget neutral for the federal government over 10 years.

Kerry: Kerry estimates his health proposals would cost $72 billion annually for the first five years and would cover approximately 27 million uninsured. He would fund his plan by “canceling the Bush tax cuts for the wealthiest Americans and closing corporate loopholes….”


What is the impact on overall health costs?


Bush: Bush touts a move toward electronic medical records as a way to lower health care costs. While not part of health coverage expansion, Bush believes that medical liability reform will have a positive effect on rising health care costs. He is a strong supporter of limiting the number of unnecessary lawsuits and capping noneconomic damages, which he feels would reduce high health care costs and make health coverage more affordable.

Kerry: Kerry believes that his plan to create a premium rebate pool reinsurance mechanism will help control spiraling health care costs while passing the savings on to consumers. He is a proponent of improving the medical liability system to make the system fairer and to reduce meritless claims.



However, Kerry does not believe that capping damages in medical malpractice lawsuits will lower the cost of health care. Kerry’s proposal to provide a “quality bonus” would provide incentives to improve the quality of care and reduce health care costs. Similarly, a “technology bonus” would be provided to hospitals and other health care providers to encourage a move toward private electronic records and transactions, which would reduce administrative costs.

The health care proposals of President Bush and Senator Kerry take different paths to the same goals of reducing escalating health care costs and improving the accessibility and affordability of health care coverage. While the proposals do contain some of the information needed to evaluate their potential for success, to date they lack details in some areas and it remains unclear whether their proposals would achieve their intended goals. As stated in the guidebook, The Questions Candidates Should Answer About Americans Without Health Insurance, “Although we recognize that candidates typically put forward broad policy proposals with minimal specifics, properly assessing such proposals often requires more details. Success or failure will likely depend on these details.”

As we consider the viability of the candidates’ health care proposals and prepare to cast our votes in November, we’re left with more questions than answers. Will the amount of Bush’s tax credit be enough for the uninsured to purchase meaningful coverage through the individual market? Are AHPs a workable solution to reduce the number of uninsured or will they cause problems in the small group market? Will those who need coverage the most take up HSAs and will a HDHP be useful to those with low-incomes?
Will Kerry’s reinsurance proposal have the intended effect of stabilizing insurance rates and reducing premiums? How will both candidates’ proposals affect insurance markets and the regulation of those markets? Will the candidates’ proposals significantly reduce health care costs?

Common wisdom has it that the devil is in the details. No doubt the coming months will unearth numerous devils not readily apparent from the admittedly broad outline above, but it’s not hard to sense them in the many questions that remain unanswered. But actuaries have sharp eyes for details, and they’ll be more than happy to point out whatever devils lurk there.

Note to readers: Policy Briefing often deals with rapidly changing events in Congress. Though we take pains to make sure each column is as current as possible, Contingencies' long lead time means that sometimes events inevitably get ahead of us.

Holly Kwiatkowski is senior policy analyst, health (federal) for the American Academy of Actuaries in Washington.

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1. Our Broken Health Care System By David S. Broder

http://www.washingtonpost.com/wp-dyn/articles/A50500-2004Jul14.html

Our Broken Health Care System


By David S. Broder

Thursday, July 15, 2004; Page A21


When Bill Frist talks about health care, it pays to listen. Not only is he the majority leader of the Senate, but, as a physician who specialized in heart transplants, he knows the medical system as well as he knows human anatomy.

What the Tennessee Republican said at the National Press Club earlier this week confirms what many in the health field, in business and in both parties increasingly recognize: The American health care system is urgently in need of a basic overhaul.<snip>

He spelled out some of the scary statistics behind those generalizations. Expense? The United States spends almost 15 percent of its income on health care, far more than other advanced countries. That's about $5,540 a year for every man, woman and child.

Costs are rising four times as fast as wages. One informed estimate places the cost of employer-sponsored health care coverage for the average family at $14,500 in 2006, just two years from now.

The Census Bureau found last year that almost 44 million Americans had gone without health insurance for the previous year. That number has been increasing by roughly 2 million a year. Families USA, a consumer group, says that almost 82 million people, one out of three below age 65, were uninsured at some point during 2002-03, most of them for at least nine months.<snip>


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