Health care is a pressing and constant concern in America, 45 million Americans don’t have health insurance and people keep asking the candidates what they are going to do about it. Both Bush and Kerry have detailed plans, but experts at the Wharton School don’t think either plan will be implemented, nor would they achieve the desired goals even if they were:
- Would either proposal solve the three broad issues facing American health care: mushrooming cost, inadequate availability and uneven quality? Is there any way to stimulate market efficiencies to contain costs and get care to the 45 million Americans who don’t have insurance?
Three Wharton health care experts doubt either candidate’s plan could be enacted as proposed – or would lick all those problems if it were. The problems are so complex, and Americans’ expectations of top quality affordable care are so deeply rooted, that it’s far from clear there is any satisfactory solution for the near term. “I don’t think either of them has a clue how to do it,” says Mark V. Pauly, professor of health care systems at Wharton.
….President Bush wants to encourage people to find insurance on their own. He has proposed tax credits to make insurance more affordable to low-income people, and he wants to extend the reach of Health Savings Accounts, created early in 2004. These allow participants to put pre-tax money into accounts similar to 401(k) retirement accounts. Participants buy health insurance with high deductibles – at least $1,000 a year for an individual, $2,000 for a family. High deductibles are meant to keep premiums as low as possible. Money from the tax-free savings account would be used to pay deductibles, and it could build up over the years. Bush wants to make premiums tax deductible as well. And he’d tackle the soaring cost of malpractice insurance with tort reforms such as capping awards for pain and suffering.
The total cost for Bush’s plan is estimated at about $90 billion over 10 years.
Kerry’s plan is estimated to cost seven to 10 times as much, perhaps more, but it would bring coverage to some 27 million people who don’t have it now. That’s about 10 times the reach of Bush’s proposals. Kerry wants to pay for his plan by rolling back the Bush tax cuts for taxpayers making more than $200,000 a year.
Kerry calls for a government insurance pool that would cover 75% of the cost of any individual claim exceeding $50,000. That is intended to reduce employer premiums, encouraging more companies to offer coverage. He also would allow ordinary citizens to participate in the health coverage provided federal workers such as members of Congress. And he would loosen eligibility requirements for participation in Medicaid and the State Children’s Health Insurance Program.
….But neither approach would do enough to change the market forces that keep driving health costs higher, says Lawton R. Burns, professor of health care systems at Wharton. “There are other approaches that would have a bigger impact on markets.”
Many factors drive health care costs up. The public sees the problem as one of rising prices, ignoring the fact that quality improves at a dramatic rate. Today, people get joints replaced and have laproscopic surgery to repair damage that past generations just lived with. “It’s increasing because there are now more expensive products and ways of using old products,” says Pauly. “Now everyone gets their cholesterol lowered.”
Adds David: “Quality increases, so you’re actually paying for a different thing … It’s pretty safe to say that half of the increase in cost can be attributed to price changes and half to the [increasing] amount of service” consumers receive. For a market to be efficient, you want consumers to have control over demand,” he says, adding, however, that when it comes to health care, providers heavily influence demand.
….Pauly and Burns believe that one of the most promising approaches is “consumer-directed health care.” At its heart, it means consumers pay more out of their own pockets. Although many people resist this, the only other proven way to restrain growth in costs is managed care such as health maintenance organizations, and people don’t like this much, either, Pauly says. “If we’re going to control spending, we’re going to have to go to one or the other of those. At the moment, the winds are blowing in the direction of patient cost-sharing.”
Consumer-directed plans are “as good as any idea out there,” adds Burns, who is writing a book on four such plans. Essentially, he says, the idea is “to empower, engage and enlighten the consumer … to make the consumer a more active chooser of these products and providers.” Plan participants are given extensive information on prices for drugs, procedures and other services. They get training so they can assess what kind of care they are likely to need. And they get the information required to compare one provider with another.
Humana, a health insurer in Louisville, Ky., has had good results experimenting with such a plan on its own employees, Burns says, adding that this model looks more like auto insurance than health insurance. Employees choose which elements of coverage they want from a wide-ranging menu, based on their willingness to pay out of pocket expenses and their assessment of likely need. “You let people customize how they use health benefits.”
In such a plan, employees typically have the first $500 of annual health care expenses covered, as well as anything above $2,000 a year. Thus they can spend as much as $1,500 a year on their own. Humana has found that this approach does cut health care spending, Burns says, noting that “people become much better consumers.”
….Pauly suggests Americans may have to change their attitude and accept that it’s worth spending a lot for top-quality health care. “The real question is, if you stopped spending that money on health care and gave up whatever you had to give up – the good drugs for your migraine headache or whatever it was – would the other things you spend money on give you more satisfaction?”
In other words, we are going to have to pay more out of pocket, which will force us to better consumers, and leave insurance to the big things, and in the case of the Humana plan above, little things. That would be great for me: I have not personally had more than $500 in annual health care costs, um, ever; but I have also been very lucky.