Mcain's plan will decimate employer based health coverage

[adrenaline]

http://www.nytimes.com/2008/09/16/opinion/16herbert.html?hp

Does anyone else think this is a bad idea?

A study coming out Tuesday from scholars at Columbia, Harvard, Purdue and Michigan projects that 20 million Americans who have employment-based health insurance would lose it under the McCain plan.



For starters, the McCain health plan would treat employer-paid health benefits as income that employees would have to pay taxes on.

“It means your employer is going to have to make an estimate on how much the employer is paying for health insurance on your behalf, and you are going to have to pay taxes on that money,” said Sherry Glied, an economist who chairs the Department of Health Policy and Management at Columbia University’s Mailman School of Public Health.

According to the study: “The McCain plan will force millions of Americans into the weakest segment of the private insurance system — the nongroup market — where cost-sharing is high, covered services are limited and people will lose access to benefits they have now.”

The net effect of the plan, the study said, “almost certainly will be to increase family costs for medical care.”

 

[Evo]

That's insane!

 

[quadraphonics]

I'm too lazy to do the math myself, but given that an increasing share of worker compensation in the US comes in the form of benefits, and specifically medical benefits, wouldn't a new tax on this end up being on of the biggest tax hikes (particularly on workers) ever? Apart from the negative impacts it would have on the health of the entire country, obviously.

 

[Astronuc]

OK - McCain's plan won't work.


But that leaves two main questions.

How do individuals obtain affordable health care?

What is the role of government in the health care system? - Strictly regulatory, i.e. ensure a certain level of quality? Intercession (consumer protection), as in when a health insurance company denies health care?


http://health.usnews.com/articles/health/2008/08/25/how-crafty-health-insurers-are-denying-care.html

. . . . In the United States, it's private insurance companies, which make hefty profits managing half of America's medical expenditures for the non-Medicare population, that in ways often hidden and arbitrary have the authority to deny coverage—and therefore, in all too many instances, care.

An estimated 10 to 15 percent of claims are denied for various reasons, some of them technical, such as not meeting filing deadlines or failing to get pretreatment authorizations. Denials that produce the most disputes are those where insurers judge the care to be unnecessary or unproven, pitting a proverbial sick David against a multibillion-dollar Goliath. What few Davids know is that insurance contracts by law grant companies the legal right to manage a patient's care, including denying it, sight unseen, and give them the final say, if challenged. Unless the state steps in.
. . . .

 

[russ_watters]

I'm too lazy to do the math myself, but given that an increasing share of worker compensation in the US comes in the form of benefits, and specifically medical benefits, wouldn't a new tax on this end up being on of the biggest tax hikes (particularly on workers) ever? Apart from the negative impacts it would have on the health of the entire country, obviously.

What's the fraction of income that is health insurance in a benefits package? 5%? And the highest marginal tax rate right now for middle class people is 25%, so .5*.25= 1.25%.

 

[Ivan Seeking]

What's the fraction of income that is health insurance in a benefits package? 5%?

In some cases it is probably more like 20%. It depends entirely on the employer and the package.

For me to cobra insurance for one, it cost something like $400 per month. Take a family of four with a nominal income...

Btw, that was twelve years ago.

 

[Astronuc]

The cost of health insurance depends on coverage (individual, individual+spouse, family; low-high deductible; medical, dental) and size of group. I've seen $8000-12000/yr for family coverage if an individual depending on where and what.

A friend recently purchased COBRA for a few months at about $1000/mo. My daughter (in college) alone would pay $275 - $400/mo on her own.

Washington, DC – Employer-sponsored health insurance premiums increased an average of 11.2% in 2004 -- less than last year’s 13.9% increase, but still the fourth consecutive year of double-digit growth, according to the 2004 Annual Employer Health Benefits Survey released by the Kaiser Family Foundation and Health Research and Educational Trust (HRET). Premiums for employer-sponsored health insurance rose at about five times the rate of inflation (2.3%) and workers’ earnings (2.2%).

In 2004, premiums reached an average of $9,950 annually for family coverage ($829 per month) and $3,695 ($308 per month) for single coverage, according to the new survey. Family premiums for PPOs, which cover most workers, rose to $10,217 annually ($851 per month) in 2004, up significantly from $9,317 annually ($776 per month) in 2003. Since 2000, premiums for family coverage have risen 59%.

http://www.kff.org/insurance/chcm090904nr.cfm

Compare that to the median annual income of about $47K.

 

[mheslep]

Obama's plan is going to flatline employer based coverage too as the paper from HA suggests, but his plan will eventually dump everybody into 'National Health' instead of building up an individual system.

The referenced journal articles from Health Affairs free online for a few more days:
McCain
http://content.healthaffairs.org/cgi...ff.27.6.w472v1

Senator John McCain's (R-AZ) health plan would eliminate the current tax exclusion of employer payments for health coverage, replace the exclusion with a refundable tax credit for those who purchase coverage, and encourage Americans to move to a national market for nongroup insurance. Middle-range estimates suggest that initially this change will have little impact on the number of uninsured people, although within five years this number will likely grow as the value of the tax credit falls relative to rising health care costs. Moving toward a relatively unregulated nongroup market will tend to raise costs, reduce the generosity of benefits, and leave people with fewer consumer protections.

Obama
http://content.healthaffairs.org/cgi...ff.27.6.w462v2

The health reform plan put forth by Sen. Barack Obama (D-IL) focuses on expanding insurance coverage and provides new subsidies to individuals, small businesses, and businesses experiencing catastrophic expenses. It greatly increases the federal regulation of private insurance but does not address the core economic incentives that drive health care spending. This omission along with the very substantial short-term savings claimed raise serious questions about its fiscal sustainability. Heavy regulation coupled with a fallback National Health Plan and a play-or-pay financing choice also raise questions about the future of the employer insurance market

 

[mheslep]

What's the fraction of income that is health insurance in a benefits package? 5%? And the highest marginal tax rate right now for middle class people is 25%, so .5*.25= 1.25%.

Employers would have to start giving that benefit to as straight salary, as they should be now IMO. Taxwise, you'd still get the break individually on that income that you turned around and spent on health care.

...Americans have paid a steep price, however, by sacrificing their raises as corporate insurance bills exploded, never more so than now.

McCain suggests that we junk all that[employer based]. Say you're earning $100,000 a year and your company provides about $9,000 toward your $12,000 family premium, which is about average. Today you're taxed only on the $100,000. Under McCain's plan, you'd also pay on the $9,000. That could mean an extra $3,000 or so in federal taxes alone. To compensate for the extra levy, McCain would provide a $2,500 federal tax rebate for individuals and $5,000 per family, meaning a family would simply subtract $5,000 from its tax bill, the equivalent of a big cash payment.

Here's where it gets interesting. Employers would no longer be able to buy more health care with $9,000 of their employees' money than the workers could buy on their own. The raison d'être for corporate health benefits would vanish. Employers have another compelling reason to pass the ball to the employee: While wages are rising around 3% a year, their health-care costs are growing at three times that rate.

http://money.cnn.com/2008/03/10/news/economy/tully_healthcare.fortune/

 

[mheslep]

http://www.nytimes.com/2008/09/16/opinion/16herbert.html?hp

Does anyone else think this is a bad idea?

Adenaline:

Given that awhile back you said:

I believe there is little or no market system in play due to the government's intervention in the system via the employer based health care tax exemption, and regulations that restrict nationwide portable insurance...

Agree completely...

what part of McCain's plan do you not like?

 

[mheslep]

Health Plan Scoring That Runs Out Of Bounds
http://healthaffairs.org/blog/2008/09/25/health-plan-scoring-that-runs-out-of-bounds/
Rebuttal to McCain plan critique

 

[adrenaline]

what part of McCain's plan do you not like?

1. Administrative expenses are twice as high in nongroup markets as in group markets. The costs are higher because insurers in this market spend resources on medical underwriting. One reason that nongroup plans appear less costly is that they offer less coverage. The typical deductible in nongroup plans is about $2,750, compared to about $1,000 for group policies. Coinsurance rates average 26 percent in nongroup plans, compared to 20 percent in a typical employer-based plan.. Many services are not covered at all. Most of my patients with individual private insurance do not have basic screenings covered like 3000 dollar screening colonoscopies, mammograms and paps. I can only do a pap on them if they have a vaginitis! I already know that these individual policies do not offer the coverage my group plan does, which covers dental, vision, all screenings etc.


And this is examining healthy applicants. The ill are simply denied coverage outright in the individidual market.


In other words, even if you pay exactly as much as your employer did, your plan will still be worse due to the higher cost of individual underwriting etc. Also, people assume under his plan employers can now give that amount previously delegated to group insurance premiums as extra salary to the employee. As an employer, I don't see any tax advantage of giving my employees a 10,000 dollar a year raise. It's not going to happen.




As for Mcain's worthless tax credit, it is not indexed to health costs -- which rise much faster than inflation -- or really to anything at all. That means, year-by-year, it buys you less.



For the record I don't think obamas plan is any better but why is Mcain destroying what is obviously working welll for most employees? As an employer , his plan will save me money but as a physician I also know what lousy coverage these individual insurance plans cover.God forbid one your kids gets leukemia... guess what, there is nothing to protect the individual family purchaser from getting a statement that doubled or tripled in premiums as soon as the diagnosis is made. ( This happens a lot to my patients with individual coverage.) They pay the triple premiums because they know they can't simply move to another plan now that they have a horrible preexissting condition.

Last , underwriting coverage for millions of individuals will involve more adminstrative expense and not just on the insurance end, m illions of individual plans will also mean millions of different rules and precerts, authorizations etc. Most doctors are not going to blanket accept all these individual insurances even if they pay better, that experiment is already failing with the privatized medicare insurance plans. When Medicare started offering privatized individual plans (Medicare Advantage plans) I saw myself having to hire extra staff just to deal with the paperwork crap. Instead, I only take basic medicare part B ( even though Medicara part B pays me less that cost is offset by not hiring more administrative personel to deal with the privatised plans.) I personally know 15 other docs in the community who refuse to participate with these Medicare advantage plans for the same reasoning.

 

[Art]

I can never understand why America as the richest country in the world doesn't have a national health service. Britain has had theirs since 1946 and even when the most right-wing gov'ts were in power none attempted to disband it as it's advantages overwhelmingly outweigh it's flaws by any metric.

 

[edward]

McCain's plan calls for sending the $2,500 per person or $5,000 per family directly from the treasury to the insurance companies. Other than the fact that individuals, as has been mentioned by adrenaline, can not purchase adequate individual insurance for that sum, it is still a government run plan.

Government involvement is what his plan is supposed to eliminate.

McCain believes that competition will lower costs to the consumer. Where has he been? Competition in the medical insurance field has played itself out.

They have already reduced costs to the point where they are reducing services, and cutting payments to medical professionals.

 

[mheslep]

I'm curious as to why you didn't address your original concurrence that the employer tax exemption was a problem?

Certainly there are low end individual plans with poor coverage. I also know for a fact that I can get my exact same good coverage BCBS group plan as an HSA from BCBS on the individual market for substantially less money. Same plan, less money. The employer contributions to the group plan are the only thing making it worthwhile. Furthermore, there are non employer based groups - professional societies, churches, and I'd expect these to flourish under McCain's plan, happily so, as then health care is not tied to a job.

In general the pre-existing condition issue needs to be addressed - with a GAP or the like. However, I don't know that these problems are limited to the individual market. Getting into and out group plans - changing jobs, etc, causes the same problems, to what extent I can not tell.

...As an employer, I don't see any tax advantage of giving my employees a 10,000 dollar a year raise. It's not going to happen.

As as sometime employer, I can say it will happen or some employees will eventually seek life elsewhere. Because with the individual tax break to cover the health plan from elsewhere they'll see more take home. I don't see any serious dispute about the math on this: with the average health plan (maybe not the Cadillacs) and the planned individual breaks most people come out ahead - at least in the near term. In the future, w/out indexing the break, that might change.

There's also some smug paternalism built into the current employer - employee relationship because of health care that I would like to see dismantled. Instead of 'keep working here because the workplace is rewarding', its 'keep working here because I provide your health care and otherwise you are on your own.'

There's assumption above in cost accounting that health costs will keep rising as they are - 9% / year under the current employer based system. A major reason for dumping employer based is that it will finally create a real market, which we don't have now, and that will bring costs down once people actually start paying for health care themselves. Already, we have people moving much routing medical care under the high deductible HSAs, which by definition has zero claim work, i.e., when a patient just pays cash.

For the record I don't think obamas plan is any better but why is Mcain destroying what is obviously working well for most employees?

At 9% per year its not going to be working well for long for anyone. It is either something like this or the whole thing will be nationalized in 10 years.

 

[cristo]

I can never understand why America as the richest country in the world doesn't have a national health service. Britain has had theirs since 1946 and even when the most right-wing gov'ts were in power none attempted to disband it as it's advantages overwhelmingly outweigh it's flaws by any metric.

That is just what I was thinking on reading through this thread!

 

[mheslep]

McCain's plan calls for sending the $2,500 per person or $5,000 per family directly from the treasury to the insurance companies.

Other than the fact that individuals, as has been mentioned by adrenaline, can not purchase adequate individual insurance for that sum, it is still a government run plan.

We have a tax deduction now, under the employer plan. The money doesn't come 'directly from the treasury', its your money. The govt would not run anything more under McCain, except perhaps the Guaranteed Access Plan, if that. You do not 'buy' your healthcare, group or individual with just the the tax break.

McCain believes that competition will lower costs to the consumer. Where has he been? Competition in the medical insurance field has played itself out.

There has not been a real free market for health care in the US since before WWII when the employer based system was created by accident, and before which health care was almost completely individualized and largely affordable.

They have already reduced costs to the point where they are reducing services, and cutting payments to medical professionals.

That's because you and I don't pay anything besides our $20 bucks. The 'insurers' do it all. That's got to stop.

 

[mheslep]

I can never understand why America as the richest country in the world doesn't have a national health service. Britain has had theirs since 1946 and even when the most right-wing gov'ts were in power none attempted to disband it as it's advantages overwhelmingly outweigh it's flaws by any metric.

That is just what I was thinking on reading through this thread!

How national do you want it? Its already 50% government run by dollars through medicare/medicaid/veterans. Britain is not 100% nationalized either, 10% of Britains are on private plans and growing.

Personally, I find that a) if you get sick and have access the US is the best bet in the world, b)the US system is too expensive and drops many through the cracks.

 

[cristo]

Britain is not 100% nationalized either, 10% of Britains are on private plans and growing.

The point is that regardless of how much money you have, you can walk into a hospital and get treatment if it is necessary, or you can go to a GP and get seen whether you have any money or not.


A grammatical point: the word meaning a person from Britain is 'Briton.'

 

[mheslep]

The point is that regardless of how much money you have, you can walk into a hospital and get treatment if it is necessary, or you can go to a GP and get seen whether you have any money or not.

Does that include illegal aliens?

In the US if you don't have any means, one can sign up for government medicaid. Also, the US EMTALA law guarantees anyone, anytime can go into an emergency room and get help. The problem here is that the overall system costs/head are enormous, so that if you have middling means you can get squeezed hard. The care itself is excellent, if you have access. (Get on a plane and hop the pond if you get cancer in the UK).

Regards walking into UK hospitals:

...And that level of services leaves much to be
desired. Waiting lists are a major problem. As
many as 750,000 Britons are currently awaiting
admission to NHS hospitals. These waits are
not insubstantial and can impose significant
risks on patients. For example, by some estimates,
cancer patients can wait as long as eight
months for treatment.236 Delays in receiving
treatment are often so long that nearly 20 percent
of colon cancer patients considered treatable
when first diagnosed are incurable by the
time treatment is finally offered.237
In some cases, to prevent hospitals from
using their resources too quickly, mandatory
minimum waiting times have been imposed.
The fear is that patients will flock to the most
efficient hospitals or those with smaller backlogs.
Thus a top-flight hospital like Suffolk
East PCT was ordered to impose a minimum
waiting time of at least 122 days before patients
could be treated or the hospital would
lose a portion of its funding.
...
The problem affects not only hospitals.
There are also lengthy waits to see physicians,
particularly specialists. In 2004, as a cost-cutting
measure, the government negotiated low
salaries for general practitioners in exchange
for allowing them to cut back the hours they
practice. Few are now available nights or
weekends.240 Problems with specialists are
even more acute. For example, roughly 40
percent of cancer patients never get to see an
oncology specialist.

http://www.cato.org/pubs/pas/pa-613.pdf, page 24

A grammatical point: the word meaning a person from Britain is 'Briton.'

Arg, apologies all 'round.

 

[Art]

Does that include illegal aliens?

In the US if you don't have any means, one can sign up for government medicaid. Also, the US EMTALA law guarantees anyone, anytime can go into an emergency room and get help. The problem here is that the overall system costs/head are enormous, so that if you have middling means you can get squeezed hard. The care itself is excellent, if you have access. (Get on a plane and hop the pond if you get cancer in the UK).

Regards walking into UK hospitals:

http://www.cato.org/pubs/pas/pa-613.pdf, page 24

Arg, apologies all 'round.

Yes it does include both legal and the estimated 400,000 illegal immigrants. There was a half hearted effort by the UK gov't to deny failed asylum seekers free care but there were so many exceptions and so much administrative chaos it proved impossible to implement. There are also a lot of so called health tourists who travel from poorer countries in the EU to receive treatment they cannot get at home. All of which is a drain on the NHS leading to long treatment times for some conditions such as cancer although this has improved recently with 99.9% of all suspected cancer sufferers now being seen by a specialist within 2 weeks of a GP's referral. http://www.performance.doh.gov.uk/cancerwaits/2008/q1/can_14.html

Britain's NHS is by no means perfect and situations like the above need fixing as does the shortage of physicians in some specific areas such as dental services plus it is still recovering from years of Tory underfunding but overall the core principles of 'free at point of use' and 'treatment based on need' are solid principles to work to.

With the money the US already spends on health they could easily have the best NHS system in the world without any of it's citizens ever needing to worry about the costs of medical bills again.

 

[adrenaline]

I'm curious as to why you didn't address your original concurrence that the employer tax exemption was a problem?

It's not a problem for me.

In general the pre-existing condition issue needs to be addressed - with a GAP or the like. However, I don't know that these problems are limited to the individual market. Getting into and out group plans - changing jobs, etc, causes the same problems, to what extent I can not tell.

We both agree there needs to be some inusrance reform regarding preexisting clauses. Two of my nurses came down with breast cancer,Humana increased their premiums, I threatened to purchase another health care plan for my coorporation. They bought down the premiums. An individual does not have that type of bargaining power.

In the future, w/out indexing the break, that might change.

That is the key, Mcain's plan does not take that into account. Initially, the tax breaks will be fine, but in the near future, not worth a flip.

Instead of 'keep working here because the workplace is rewarding', its 'keep working here because I provide your health care and otherwise you are on your own.'

Not how I run my business, but that is not really on topic here.

At 9% per year its not going to be working well for long for anyone. It is either something like this or the whole thing will be nationalized in 10 years.

If there was a nationalized health insurance my overhead would go down by a huge percentage. I have one medicare/medicaid biller and coder and 8 just to deal with the private insurers ( they check all 300 individual plans for the necessary precerts, prior authorizations, find out what labs I am able to send their blood ( lab corp, quest, hosptial etc.) and that's just the tip of the iceberg. So guess what, if all 15,000 of my patients go on individual insurance plans, I am going to limit it to 300 major ones. The rest are on their own. Theire is a growing and burgeoning movement (physicians for national health insurance) that is gaining quick momentum. The only docs who don't want this are the proceduralist who get excorbitant payments for relatively minor procedures. ( I don't mean general surgeons and vascular surgeons who are grossly underpaid for their time but opthalmologists, dermatologists, interventional radiologists etc.)


I think this link gives a very non partisan critique of mcain's and obama's plan from economists who are a lot smarter than me. The upshot, Mcain's plan will do nothing to lower the number of uninsured and Obama's plan will not necessarily reign in costs. They confirm my impression of both plans. http://ap.google.com/article/ALeqM5j3QFmojE8Ft12Stb5Eru_cHBwqxgD937J6600

With more competition, costs would fall and quality would increase, McCain reasons.

Analysts writing in the journal warned against that approach.

They said employers would be less likely to offer coverage if they knew their workers could get it elsewhere. In all, the authors projected that 20 million people would lose their employer-sponsored insurance under McCain's plan, while 21 million people would gain coverage through the individual market —[b[ little more than a wash.[/b]

And as monthly insurance premiums rise and the tax break stays the same, even that gain would erode.

Another concern is that insurers would gravitate to states with less onerous coverage requirements...

 

[Astronuc]

I see two problems with respect to health care:

1. Too many people with preventable medical problems. The emphasis in health care needs to be on prevention, and that ultimately is up to the consumer. Diet and exercise (and avoiding alcohol/drug abuse and smoking) are key to preventing much illness.

2. Too much administrative overhead on the part of insurance providers. Competition is supposed to put a downward pressure on prices, but I don't see a lot of competition. I do see redundant services - and that leads to excessive overhead.

 

[adrenaline]

I see two problems with respect to health care:

.

2. Too much administrative overhead on the part of insurance providers. Competition is supposed to put a downward pressure on prices, but I don't see a lot of competition. I do see redundant services - and that leads to excessive overhead.

could not agree more. The Physicians for National Health Insurance estimate that " private insurance bureaucracy and paperwork consume one-third (31 percent) of every health care dollar. Streamlining payment through a single nonprofit payer would save more than $350 billion per year, enough to provide comprehensive, high-quality coverage for all Americans"

 

[Astronuc]

could not agree more. The Physicians for National Health Insurance estimate that " private insurance bureaucracy and paperwork consume one-third (31 percent) of every health care dollar. Streamlining payment through a single nonprofit payer would save more than $350 billion per year, enough to provide comprehensive, high-quality coverage for all Americans"

On the other hand, would anyone trust the government based what has happened the Fannie Mae or Freddie Mac? Well they were GSEs.

And whatever happened to the program from the President's Council on Physical Fitness which emphasized good diet and excercise - back 35+ years ago when I was in elementary, junior and high school? It doesn't seem to be emphasized as much.

http://www.fitness.gov/
http://www.presidentschallenge.org/educators/program_details/physical_fitness_test.aspx

 

[adrenaline]

On the other hand, would anyone trust the government based what has happened the Fannie Mae or Freddie Mac? Well they were GSEs.

At the same time, if they had privatized our social security like they wanted to it would be in the tanker with all the bank and investment fiasco we are dealing with.

And whatever happened to the program from the President's Council on Physical Fitness which emphasized good diet and excercise - back 35+ years ago when I was in elementary, junior and high school? It doesn't seem to be emphasized as much.

http://www.fitness.gov/
http://www.presidentschallenge.org/educators/program_details/physical_fitness_test.aspx

My mantra is excercise, excercise, excercise and I think most physicians despite our hectic 85 plus hour work weeks try to lead by example. Most people still find an excuse not to excercise.

 

[Astronuc]

My mantra is excercise, excercise, excercise and I think most physicians despite our hectic 85 plus hour work weeks try to lead by example. Most people still find an excuse not to excercise.

I agree. My siblings are doctors and my mom was an RN, so I know about long hours. I go walking at lunchtime with a colleague and guy from another office - it's both for stress relief and exercise. In the evening, I go walking with my wife.

 

[turbo]

I was a network administrator for a large ophthalmic practice for a number of years, and worked closely with the staff to streamline their work. The biggest problem facing that business was the diversity of insurance plans covering their patients. The practice's coding specialists could make or break that business, and turn the practice from a healthy "going concern" to a swamp loaded with 90-day+ receivables (impossible to get a credit line on that!) in no time.

Every single test, treatment, and surgical procedure had to be coded to conform to the demands of the insurance company, or the claim would be denied, recoded, resubmitted, denied, etc, etc. Going to a government-sponsored single-payer insurance system would drastically reduce the cost of health-care because much of the current cost results from the denial of benefits by insurance companies.