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Health Care Jungle

May
1
2008

My six weeks of traveling the world on an extended honeymoon is over. With my lovely wife Amanda I’ve been diving on coral reefs, sleeping under the stars with the Bedouin, exploring 3,500 year-old tombs, watching lions tear apart a buffalo, and tracking chimps hanging out in the rain forest.

What better way to return than to enter the jungle of U.S. Presidential politics? So Tuesday, I sat in on two conference calls. One from the McCain camp on their health care proposal, the other from the Campaign for America’s Future, which is promoting Yale professor Jacob Hacker’s plan as the theory behind both Clinton and Obama’s policy intentions. Like the lion and the buffalo, it wasn’t pretty.

McCain’s proxies were Douglas Holtz-Eakin, sensible former director of the Congressional Budget Office, a usually fair-minded group of bean counters, and Carly Fiorina, the former CEO of Hewlett-Packard, apparently on the shortlist for the vice presidency.

The two surrogates offered a taste of what we can expect the Republican version of the health care debate to be as the election moves closer: For Carly it’s either free market choice, or the government telling your family which doctor you can go and see. You’re going to hear “government run heath care care” uttered as a threat – just as if we were all moving to the Gulag. Tomorrow.

After a lot of platitudes about medical homes and transparency and electronic medical records – Holtz-Eakin finally got down to the meat of the campaign’s proposal. McCain aims more or less end the employer-based system that’s currently in place for most Americans by taking away the tax deductibility of health benefits for individuals.

Instead, every family will get a $5,000 tax credit to go buy insurance in the individual market and they will no longer be restricted to buying insurance their own state thus, in theory, creating more competition between insurers. Holtz-Eakin has been sensible enough to get McCain to identify the problem associated with the main thrust of his plan: the consequences of forcing people into the individual insurance market. As many frustrated Americans know, under such a system most healthy people will find a high deductible policy that costs less than $5,000 a year but those with pre-existing conditions – like John McCain (were he not a Federal employee and eligible for Medicare) – would find insurance unobtainable.

There is a rational way out of this fix for those (including me) who want to hasten the end of employer-based health insurance. Establish a regulated national insurance market which forces insurers to take all comers. Massachusetts has made vague efforts towards creating such a market. And Sen. Ron Wyden has proposed something similar. But doing that without killing the insurance market requires the government to force everyone to buy in to the plan. It also means that benefits and options have to be made similar by regulatory fiat, and that a system of risk adjustment between those insurers needs to be in place. Failing that the whole thing collapses because insurers will be left with all the sick people while the healthy ones opt out of the system.

There’s no reason that McCain couldn’t have gone some way down that path – Wyden’s plan has Republican support. But McCain’s answer to the problem is literally, “we’ll study it more”.

Now, this should be sweet hay for the Democrats and the AFL-CIO. And yes, the Campaign for America’s Future’s folks were very persistent in reminding us that 1) McCain wants to take away employer-based health insurance and 2) you’re on your own in the individual market.

Funnily enough, though, they focused on point one – changes to health care tax deductibility ending the employer-based health care benefit. Instead they should explain the obvious about point two – the individual market is run by insurance companies who focus on attracting healthy customer who need fewer services, not on the sick. In the political jungle it should be pretty fair to say that the individual market is run by insurance companies (like some in California that retroactively cancel all sick people’s policies) and that under the McCain plan that’s the only place you’d be able to buy insurance! But I’m sure we’ll hear loads more about that come the Fall, won’t we?

But the lack of pointed Democratic criticism aside, why is straight talking maverick John McCain spouting the free market line drawn by the National Federation of Independent Businesses and the Cato Institute? Isn’t this a great area to be a maverick and deviate from the Bush rhetoric?

I assume that the answer is McCain feels health care is important enough that he has to say something, but he’s more concerned about not upsetting the health care industry. After all, even if he does win the election by some miracle (or the usual Democratic ineptitude) he’s not actually going to do anything about health reform.

But then again, my guess is neither are the Democrats.

Share  Posted by Matt Holt at 1:23 AM | Permalink

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