Sunday, October 31, 2004

Election 2004: Issue #8- Good For Your Health?

The election is 2 days away and the final issue that VOR will address is health care. Health care issues are far too complicated and diverse to provide a proper treatment in this space, so this piece will only provide a broad overview. However, health care is one of the issue areas where clear differences exist between the candidates, so it’s a worthwhile topic indeed. Specifically, this post will focus on the attributes of each candidate’s “health care” plan, with little or no emphasis on other important health issues like prescription drugs, the flu vaccine, and stem cell research. (Much of this analysis is supported by the candidates’ websites and a very helpful health care primer by the eminent health economist, Uwe Reinhardt, at http://www.j-bradford-delong.net/movable_type/health/Reinhardt.pdf)

At the heart of President Bush’s plan for health care reform is a belief that individuals should have ownership over their health care spending and internalize the true costs of health care to better align incentives. The long-term goal would be portable health savings accounts, which would allow tax-deductible contributions, along with high deductible health care policies. If implemented, this plan would lay the framework for a radical shift in the way Americans pay for and receive health care services.

Bush’s plan attempts to broadly address the larger systemic problem—Most Americans consume healthcare without having to pay anything close to the real cost and therefore they consume large quantities that are very expensive. Bush’s plan is also juxtaposed in a larger ownership society program, which includes private accounts for social security, and represents the foundation of Republican talking points for Bush's 2nd term. I give the GOP credit for coming up with a “big idea” and tying specific proposals to it. (The Democrats could learn a lot from this approach) Republicans have excellent rhetoric on these issues, even where voters trust Democrats more. Talking about “socialized medicine” and “rationing” seems to work pretty well in combating Democratic proposals. But the actual substance of Republican ownership policies are lacking. Many Americans will have nothing to contribute to a health savings account, while the upper income brackets will be rewarded with yet another tax-deductible investment vehicle. The accounts may work well for those who probably already have health care, but misses the boat entirely on the most vulnerable populations. Maybe if aspects of the ownership society were combined with a minimum income subsidy, as suggested by Milton Friedman, VOR could find more promise in the idea.

Kerry’s plan proposes a much larger role for the federal government, augmenting employer health care plans, expanding Medicaid and related programs, and buttressing the market for individual health policies. According to Reinhardt’s report, a study by the Lewin group estimated that Kerry’s plan could cost 900 billion dollars between 2006-2015. It sounds like a large number, but it isn’t really a large percentage of overall health care costs for this long a period of time. Furthermore, the plan cannot fairly be called universal care, because it is far from it. In addition, Kerry would change the Prescription Drug Benefit to allow the government to negotiate drug prices with the drug companies, which Bush made illegal.

Kerry’s plan is predictably cautious with the bold tag line of providing the same insurance plan to regular American that members of Congress get. Democrats are still scarred from the failure of the Clinton health plan, which led to the stunning 1994 election disaster where Republicans gained control of the House. Now, Democrats (besides long shots like Dennis Kucinich) can only whisper in private quarters about moving towards universal health care, and have to instead rely on more incremental approaches. While Democratic partisans may wish otherwise, Democrats need to move slowly towards their goal, much like the GOP and the flat tax, if they ever hope to achieve it.

Likely faced with a Republican Congress, Kerry would have almost no chance of passing his plan as it stands today, so it is a largely symbolic gesture to highlight the glaring problems in our system. On the other hand, Bush’s plan does almost nothing to directly address the real crisis in health care; namely the 40+ million uninsured, the rising costs, and sharp differences in quality. Estimates are that his plan would only increase coverage to at most a few million of the uninsured.

Why does Bush’s plan seem to sidestep the major issues? The honest answer may be that some policy analysts believe that many of the uninsured are actually getting access through other means (i.e. Emergency room care), and that some people choose not to have health insurance. While we all know college students who go for years at a time without health insurance, the vast majority of Americans without insurance are not in this category and many are children. The sad fact is that insuring the uninsured is a costly proposition that most Americans are simply not willing to pay for. This political reality is something that the Republicans benefit from and Democrats wished they could ignore.

Technology is the no-brainer response (see Kerry’s strong support for stem cell research) to rising costs and uneven quality, but these problems are also tied to demographic trends. People are living longer, healthier, lives. That’s a good thing but it also means that we spend more time and money on keeping the oldest and sickest among us alive. Preventive care is a good general idea but true incentive alignment might require a carrot and stick approach that might seem unpalatable to most. This line of thinking leads us to a crucial moral dilemma. Since individuals have less incentive to take care of themselves when we provide health care at little or no cost, we end up subsidizing care for many self-inflicted conditions. The costs (real and opportunity) of paying for multiple heart surgeries for citizens who abuse their own health through lack of exercise and poor diet are huge. We must find a way to encourage healthy lifestyles and behavior without losing our compassion. Neither candidate has truly challenged Americans to take responsibility for their own health.

With Kerry’s politically unrealistic plan and Bush’s misdirected plan, we are left with very little hope when it comes to improving health care quality, lowering costs, and expanding the ranks of the insured. While health care is a very real concern for most Americans, politicians have not found the language and policy mix to move us very far in either direction, so VOR expects little progress in the next 4 years. If Kerry is elected however, and the Democrats make gains in the Congress in 2006, we may see real reform in Kerry’s first term.

R.C.

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