Barring the most unforeseen circumstances imaginable, either Barack Obama or John McCain will be the next president of the United States. With that in mind, it behooves voters to familiarize themselves with both candidates' positions on health care because the differences could not be greater.
Since Obama appears to be somewhat ahead in the polls, it probably makes sense to start with his proposals. Health care expert Bob Laszewski sums up Obama's approach nicely:
....continue down the same incremental line with health care reform--building on the employer-based system where the employer provides so many of us with generous defined benefit health insurance plans that the employer continues to pay most of the cost of no matter how expensive they are....
Obama's plan places heavy burdens on the employer in the name of "universal coverage." According to economist John Goodman:
The Obama plan would subject all employers to a "pay-or-play" mandate-imposing a tax on those who do not provide health insurance for their employees. Following Commonwealth [the Commonwealth Fund - a private foundation that produced a health plan similar to Obama's albeit with much more detail], we assume this would be a payroll tax of 7% of earnings up to $1.25 per hour on employers who fail to pay at least 75% of the premium for a minimum package of benefits.
Were this provision enacted today, it would immediately affect the 40% of small employers who do not offer coverage, the 30 million people in families who have workforce participation, but no health insurance, and millions of Medicaid enrollees who have a workforce connection-to say nothing of all the employers who currently pay less than 75% and/or have plans that are insufficiently generous.
Obama's pay-or-play mandate would come along with an offer, including an income-related subsidy, for the otherwise uninsured to buy coverage from a National Health Insurance Exchange. Perversely, this would encourage people to drop their current health insurance through their employers and buy their own insurance through the exchange. Since the plan has no individual mandate -- and the Exchange would be community rated and guaranteed issue -- many healthy people would likely drop all insurance coverage and just wait until they get sick before getting insurance. Once they did need insurance, the sky would be the limit at the Exchange, which would have a minimum benefits package, but no maximum benefits cap, all funded courtesy of the taxpayer.
If Obama establishes such a system, don't be surprised if federal health mandates imitate the most expansive mandated coverage we've seen at the state level, potentially including coverage for acupuncture, in vitro fertilization, naturopathy, marriage counseling and the like. Meanwhile, employers would still come out on the short end by paying higher wages instead of premiums along with the pay-or-play fees plus income and payroll tax.
At the same time, according to Goodman:
....health plans would be free to set their own premiums, but they would be required to charge the same premium to all comers. This means the plans would make a profit on healthy enrollees and suffer a loss on less healthy enrollees. Consequently, the plans would have strong financial incentives to attract the healthy and avoid the sick. After enrollment, their incentives would be to over-provide to the healthy (to retain their membership and attract more of them) and under-provide to the sick (to discourage their continued membership and repel others just like them).
Another troublesome aspect of this plan is the voluntary nature of its health insurance exchange. Numerous voluntary exchanges failed because healthier people can find cheaper insurance outside the exchange. In turn, when the healthy leave the exchange, prices go up for those who have no other insurance option to remain due to their health problems. As prices go up, the healthy leave in ever larger numbers, leading to the final collapse of the exchange.
Along with employers, parents would also face special burdens under the Obama plan, according to Goodman:
Although Obama would allow adults to remain uninsured, he proposes to force parents to insure their children--undoubtedly through a pay-or-play mandate. The problems here are: (1) mandates usually don't work if people have to pay any portion of the premium out of their own pockets, (2) the end result (health care for children) can usually be obtained less expensively through means other than mandated insurance.
To put it simply, parents would faces taxes for having children -- a troubling concept on many levels. Where would that leave so-called "working families?"
Additionally, the Obama plan also expands enrollment in Medicaid and SCHIP, perhaps by as many as 12 million, substantially increasing taxpayer burden without providing improved care. Indeed, an American Cancer Society study found that depending on Medicaid is almost as bad as being uninsured in terms of delays in diagnosis and treatment.
Ultimately, the Obama plan creates two-tiered health care. Inside the Exchange's government run system, services would be substantially inferior to those experienced by the healthier segment of the population who could access private insurance. Meanwhile, funding for this scheme would come from higher tax rates on capital, which would result in lower capital stock and a diminished national income.
Obama's mantra throughout the campaign has been a generalized call for change, but are these really the changes the voters would want? Only time will tell.
Up next: a look at John McCain's health care plan.
