Dog Bites Man: The Obama Health Plan Beats McCain's for a Single Mom and Her Children

Tony Pugh of McClatchy Newspapers recently ran an article comparing the McCain and Obama health plans.

The flaws in Pugh's article are noted in a great posting by Publius in obsidianwings.

Despite these flaws, Pugh's article is valuable because it gives the problem a human face: in this case Susana Espinosa, a 45-year-old San Diego mother of two who earns $39,000. Right now, Ms. Espinosa covers herself through her employer. Her kids are uninsured with some predictable consequences. Pugh considers how Ms. Espinosa would fare under the McCain or Obama health plans.

Pugh's article highlights several problems in the campaign health policy debate. The article gives the McCain plan too much credit for its supposed "potential for containing health care spending" by imposing financial responsibilities and risk onto individual consumers.

The article also shows the difficulty of explaining complicated issues to everyday people -- McClatchy readers, and Susana Espinosa herself. She believes -- wrongly -- that she would benefit from the McCain plan. In fact, Ms. Espinosa would get large subsidies for her and for her children's health coverage under an Obama plan. In dollar terms, she would get larger subsidies and more comprehensive coverage under what Obama proposes.

I don't understand why Espinosa's children are not on California's SCHIP program, which covers kids up to 250% of the federal poverty line, or $43,400 in family income. Presumably, she is just above the line. So it is especially rich that McCain voted against a proposed SCHIP expansion that would have insured almost 4 million children, concentrating most of the benefit to families like hers with incomes below 300% of the poverty line.

In focusing on a one family, the article shows that it is even harder to explore the broader harms McCain's proposal would do to our entire health system. For example, McCain proposes to eliminate the tax-deductibility of employer health coverage. He rightly notes that most health economists dislike this unduly regressive and inefficient piece of tax policy. McCain would unravel key advantages of employer-based coverage. Yet he offers nothing in its place to accomplish the same tasks. For example, employers provide better risk-spreading for individuals with chronic conditions than is obtained within the market for individual coverage. Employers provide better quality control and monitoring than individuals can. Employers also offer economies of scale in administration through professional benefit managers. For these reasons and others, I would wager that 75% of health economists support Obama and oppose the McCain plan.

Unpacking Espinosa's dilemma highlights that McCain's proposals are not really a "plan" at all. We know that the McCain plan would provide the Espinosa family with a $5,000 tax credit to help buy private coverage. That seems pretty simple, but it is not.

When we consider what she could or would buy with this credit, we can't really know. McCain and his advisors have slapped something together to say that they have something. Yet they have left the hard stuff unspecified, or they provide implausible explanations of what he would actually do.

What would happen to her employer-based coverage under the McCain plan? What would happen if one of the Espinosas contracted liver cancer? Will she get financial help in paying the resulting higher insurance premiums and medical bills? Could she renew her policy, and if so at what rate?

Until six weeks ago, the McCain plan essentially ignored the problems faced by millions of cancer survivors and others whose efforts to buy insurance are complicated by preexisting conditions. Shamed by Elizabeth Edwards, who noted that neither she nor Senator McCain could buy coverage under his plan, McCain announced that he would support safety-net "Guaranteed Access Plans." How these work, who is eligible, how GAPs are financed -- no one knows. As the New York Times put it at the plan's unveiling:

Mr. McCain was vague Tuesday about just how his safety net would be structured, and did not specify how much it might cost... But his top domestic policy adviser, Douglas Holtz-Eakin, said in an interview that the federal share could cost between $7 billion and $10 billion -- money he said could be redirected from existing federal programs that pay for uncompensated medical care, mainly in hospitals. Mr. Holtz-Eakin said that sum, when combined with contributions expected from the states and insurers, could provide coverage for the five million to seven million uninsured people that he estimates cannot obtain it because of their health or age.

Economist Richard Zeckhauser once stated that the best tool of policy analysis is long division. The resulting arithmetic is daunting. Using Holtz-Eakin's figures, the federal government would provide less than $2,000 per-person for the precise populations insurers don't want to serve due to costly health problems. By way of comparison, per-capita Medicaid expenditures for disabled persons are about $14,000. Either this program is more costly than McCain claims it is, or it will cover fewer people.

There is one more possibility. Senator McCain could leave others holding the bag for some very large bills. According to the April 30 Washington Post, McCain promised "not to create a new entitlement." I am confident that cancer patients won't get their entitlement, though I wish they would.

In the same interview, McCain promised not to "saddle states with another unfunded mandate." I am less confident about this one, at least for the states that actually help those Senator McCain's plan would leave behind. Indeed, McCain's proposal is even worse on states, localities, and safety-net providers than my back-of-the-envelope calculation suggests. Holtz-Eakin reassures us the $7-10 billion "could be redirected from existing federal programs that pay for uncompensated medical care." Run through the Washington budget-language decoder, Holtz-Eakin proposes to finance this new program by cutting the same programs that now keep safety-net providers afloat. Senator McCain would also require the states to develop risk-adjustment bonuses to help high-cost and low-income families. How states, already reeling under rising healthcare costs, would do this remains mysterious.

Finally, one must consider the coverage Ms. Espinosa and her family would buy if McCain's plan becomes law. His basic goal is to encourage the use of "catastrophic" plans that include limited coverage, high deductibles, and co-payments to constrain health services use. A $5,000 credit covers less than half the cost of a typical insurance plan for a family of three. So catastrophic coverage is probably what Ms. Espinosa would decide she can afford.

Now there is an interesting argument to be had about whether Harold Pollack should buy such a policy. Data from the RAND Health Insurance Experiment suggest that middle-class people who bear first-dollar responsibility for medical care use markedly fewer services with little apparent harm. There are lots of caveats here, not least being that the data are now a quarter-century old.

Yet the same RAND data suggest that Susana Espinosa and her family are precisely the wrong people to buy these plans. Low-income families in catastrophic plans were less likely to obtain important preventive services, including mental health care, optometry, and dental care. Perhaps most important, they were less likely to regular blood pressure checks and were therefore more likely to display uncontrolled hypertension. Requiring low-income people to pay marginal costs of care imposes large burdens and requires families to make difficult decisions to balance their financial security and their physical health. There is little evidence that people make these decisions well.

Ironically, if Ms. Espinosa or one of her sons does contract a serious illness, she is likely to discover that her no-frills plan doesn't actually prevent the financial catastrophe she hopes to avoid. The RAND catastrophic plans were actually quite comprehensive. The McCain plan lacks regulatory oversight required to ensure that current plans are, too. To keep plans affordable to $5,000 credit holders, insurers will surely shift many costs and risks onto policyholders.

If history is any guide, many people will not realize this until they or a loved one becomes ill. Recent studies indicate that three-quarters of Americans who fall into medical bankruptcy had health insurance when they became sick. Insured families who fall into medical bankruptcy often lose their coverage or have high out-of-pocket medical bills they cannot pay. We don't exactly know what will happen under Senator McCain's plan. We have little reason for optimism here.

Ms. Espinosa doesn't know it, but she should hope for an Obama victory. Senator Obama and his supporters must explain this to Susana Espinosa and millions of others like her before November.

Comments

[johnwinner]

You know how to tell McCain is a hasbeen Obama whips in a landslide? because by mid-summer, the common working joe and josephine will read a piece like this and say, "Obama better for me than McCain? so what else is new?"

[TXfemmom]

If the system were handled correctly, with a single payer system such as France's, every employer and every person would have to pay toward it, and they collect in taxes, sixty percent less than what Americans just pay for premiums to private insurance, not counting co-pays and the millions who are not covered. France also has the finest universal health plan in the world.

[UnbiasView]

Liberals would still bitch about the 15% that they would have to cover themselves like in the France system.

[egal]

Every liberal I know NEVER complains (seriously) about their own medical costs unless they literally are living at the poverty line, not always able to feed their children and able to get medical care only when the problem has escalated to fatal or catastrophic level because only emergency care is covered without the copays they can't pay for.

Yes, I know numerous people whose children or spouses have died because they were turned away in the earlier stages of disease or illness due to no coverage, and others whose family members ended up dying because they had to wait until things were so bad an ambulance would go pick them up due to being unable to afford a car or public transportation.

And there are plenty others of us who honestly can't afford that 15% you think is so small. Try having to purchase $5000 worth of pills every month, minimum, because you'll have seizures (that would keep you from working) and most likely die without them, but only making $14000 a year. Add the minimum $10000 coverage--that's 15% of the total--of the two emergency hospital visits averaged per year and requiring tons of tests, surgery, etc.

That 15% becomes impossible.

It's not too much more manageable for middle incomes, either.

For the most part, the ones complaining about the 15% honestly can't afford to pay it.
But feel free to gripe like someone who doesn't understand "needy" and scorns those who have to live it.

[bgregs]

No, it's only the conservatives who bitch about having to spend money! I wouldn't bitch about 15%, it's less than I'm paying now as a percentage of my health care AFTER the premiums.

[oafishcad]

LOL, yeah right it's LIBERALS who are preventing single payer. Stop, you're killing me. No really, you are.

[TXfemmom]

Obama's health plan may be better than McCain's, but it does not have mandates for people to purchase insurance, and it doesn't have mandates on the insurance companies having to take all comers, and it does not mandate that employers must contribute so much to it, if they do not purchase it.

If those things do not occur, then we shall see people who can afford it not purchase it, and then become ill, the young won't buy it because they think they are invinceable, employers won't contribute, and the insurance companies won't take all comers.

Those are really serious issues in this.

[HAP]

Obama's plan does not have a mandate requiring individuals to purchase coverage for themselves. It actually does have the other elements. Check out mybarackobama.com for the details here.

[FlyingEagel]

I completely agree with you and I believe BO knows this. He is just trying to get the ball rolling. You have to start out slow and add to it as time goes on otherwise it will fail just like Hilary's plan did.

[bgregs]

Actually, I'm pretty sure that his plan does require insurance to take on all comers.

[oafishcad]

If you have a low income barely gettin by, getting a tax break for ANYTHING is meaningless. Utterly meaningless. It's just more evidence that Compassionate Conservatism is an oxymoron.

[UnbiasView]

So do what do you expect, free handouts that other people pay for?

[oafishcad]

Yes. That' is the duty of a compassionate society. Those of us who have should help those who don't. I know you think liberals will just run away from your satanic idea of screw the poor, we won't.

[klmebane]

i don't believe that was what oafishcad was saying. i think their point was that a 2000 dollar tax break would go to bills, not medical care, because they were stretched so thin before that they have to try to catch up.

i don't want free health care. i want to pay something i can afford for coverage, and get decent coverage, like every other uninsured american. i want a plan that won't deny me medical care i need so they can make money. i want a government that works to insure my general well-being (which is why we pay taxes, among other reasons like administration of the gov't) and make sure that insurance companies aren't taking advantage of me at every turn. large corporations have resources the average american doesn't. they can spend a fortune fighting a rightfully submitted claim. meanwhile, the average person who needed the care just dies waiting.

[Bluesue]

Quote: The article gives the McCain plan too much credit for its supposed "potential for containing health care spending" by imposing financial responsibilities and risk onto individual consumers.

I'm a former benefits manager. A larger and larger percentage of the costs have been shifted to employees for years and it hasn't worked. And the idea that competition will drive down costs hasn't worked either. Insurance companies have been competing for corporate business for years. And companies have also aggressively shopped their business and put pressure on insurers. It hasn't worked.

I hate the idea of a tax credit (McCain's proposal - $5,000 for a family). If you can't afford the insurance to start with, how does a credit at the end of the year help?

Factcheck has a great analysis of McCain's plan.
http://www.factcheck.org/mccains_5000_promise.html

[HAP]

Thanks. Great point.

[NABNYC]

We should have a program to give all kids healthcare including vision and dental. The parents can opt out if they provide evidence of insurance for the kids every year. If they stay in the program, parents should be charged some amount per child depending on the parents' gross income (not net, since the deducations obscure ability to pay).

Then go to the other end: people 50 and over. That's when the health insurance companies start getting rid of people, just like employers do. That's when people start having health problems (heart, blood pressure, cholesterol, knee, neck, back, carpel tunnel, diabetes) and that's when the health insurance companies raise the premiums to unaffordable levels. I knew a guy who had a heart attack, surgery, and when he got out his premiums were raised to $1500/month, which he could not afford. Include dental (which can be associated with other more serious problems) and vision. Each person in the system should be charged based on gross income. The group rate discount should be available if this is combined with Medicare.

Start with those two groups. Get that working, gradually allow people in the middle groups to opt in or keep private insurance at their choice.

[HAP]

Universal kidscare gets a lot of attention from health policy wonks, especially if the next round of health reform doesn't get to universal care.

[QualityCounts]

An excellent analysis that debunks the notion that individuals with limited resources can be given an apparently generous but really very small tax credit (at least when it is compared to actual healthcare expenses) and then be expected to successfully navigate a complex market that even healthcare professionals who are expert in health economics and outcomes research (which I am) often cannot comprehend. What we have now is not what anyone would create if we were starting from scratch, but any plan that goes directly to a single-payer or some other wholly new arrangement would die a very quick legislative death. The challenge for Obama is to reassure people who are happy with their current coverage that it will remain intact (though less expensive) under his plan, to make clear to people who are uninsured or underinsured how they would fare under his plan (generally much better), and to make clear to everyone how much the plan will cost the government and how it will be financed. A tall order, but doable.

[HAP]

Thanks man (or woman).

[noneIn2008]

Excellent. I quit working because I was tired of paying taxes. I do need better insurance. Keep increasing those benefits. We need many more free things. I would also like a gasoline benefit to help offset the increased costs of going to play tennis. Fortunately, my electricity subsidy covers the daily costs of playing video games and my time online.

My only worry is if too many others discover this "no work" policy, who will pay?

[rtrickey]

You're lying.

[oafishcad]

Clearly you have never been up against it in your life. You're attitude towards the less fortunate is beneath contempt.

[Chavez08]

The era of robber barons is over. The only ones who are in favor of the status-quo are wealthy leeches who never worked a day in their lives or Limbaugh followers who were born with a severe shortage of oxygen (as if there is any other type...)

[UnbiasView]

wealthy leeches?

Who is going to be footing the bill for your health care plan?

[oafishcad]

Everyone. Is that why you object?

[oafishcad]

Every person, not just single moms and kids, needs to be covered. Men are not throw away objects in America. Though looking at most skid rows you'd think so. I'm sorry, I think all people are deserving of the nobility of not having to beg or ask when they're sick. All people. Not just the rich, not just the poor. All people. The present system of rationing by income is just not acceptable in to an evolved, civilized nation. If Iceland can afford it, America can.

[Overd0g]

So the single mom can vote for the best plan for her, and I'll vote for the best plan for me. That's democracy. It just happens that for me, the best plan is the status quo, at least compared to the candidates offerings.

[HAP]

Maybe her uninsured kids can vote for the best Social Security transfer to you when you retire or the best Medicaid plan for you if need long-term care. We're all in this together, overdog.

[Overd0g]

No, they can't vote.

[oafishcad]

The status quo is rationing by income instead of by need. The richest and best insured get to cut to the front of the line and 45 million Americans aren't allowed in line at all. GOP helathcare-sick and poor? die, just die.

[UnbiasView]

"California's SCHIP program, which covers kids up to 250% of the federal poverty line"

Here is lies the problem.

[bgregs]

So, what, you're saying that those who can't afford the payments that I'm making (with a VERY good, cheap plan) of $300/month should be punished??? When you add in my premiums, and copays, and prescription copays, etc.... I'm spending more than $600/month out of pocket for health care, and as I said, I've got the best plan I've ever heard of, both in terms of what it covers and in terms of what it costs me!

[UnbiasView]

I'm saying that if you are 250% above the poverty level you shouldn't be receiving government handouts. It's kind of like when you are 25 years old it's time for you to leave be out of your parent's house wearing some big boy pants and living on your own.

[BillZBubb]

This is just another example of why Obama is going to lose in November. Obama's health care proposal is a mess. And you know it. Saying it might or might not be marginally better for Ms. Espinosa is hardly a winning argument.

People understand a $5,000 tax credit, that is tangible and not a difficult concept. Obama's Goolsbee inspired spider's web of half assed coverage is too hard to explain--even if the explanation were good.

The Democrats should be fighting for single payer, universal health. Instead, we get Obama's Republican lite baloney and McCain's Republican slight baloney.

[HAP]

BillZBubb,

You are making the perfect the enemy of the good here. I happen to also favor a single payer. Get me 60+ Senate votes and we'll talk. In the meanwhile, there is nothing Republican lite about the Obama plan. If we get it, it will be the most progressive piece of social policy in a generation.

[oafishcad]

My problem with Obama, contrary to the propaganda of the right, is he's too conservative. This is an example. I'll still vote for him. We're choosing a direction to go, and his is the right direction. It is certainly not the final or best answer.

[scottarino]

That's my opinion, as well.

[klmebane]

5000 dollars for a family that can't pay premiums already does nothing. 5k doesn't even cover a years worth of premiums. tell me, where is a broke family supposed to come up with an extra 10 grand a year?? not to mention they would end up having to pay for a whole year of coverage at once because that would be the only time they would have anywhere near enough money. just cuz mccain's plain is simple enough for a dummy to understand doesn't make it better. yes we should be fighting for single payer, but we have to change the narrative by which we argue this point first. the gop has their base so terrified of the word socialism (Even though it works for police, ambulances, and fire trucks...) that they will vote against their own interests. it is in everyones interest to pay less for healthcare and still get the coverage they need. it is in everyone's interest to not have to worry about being excluded from insurance coverage because they have previously been sick.

[SpoxLogic]

Great article.
But, how does Obama explain, in terms that won't bore them, what you have written in this article?
Two sentence sound-bites won't do, and good luck trying to get the MSM to explain it as you did.
Doing a commercial might work, but it would be lengthy and costly. Mailings? Would they get read?

[HAP]

That's the challenge! We're open for ideas.

[bgregs]

While I agree with McCain as regards the difference between the taxes for those who get an employer plan versus those who get an individual plan, I must say that the logical fix for this problem is to reduce your tax burden by that amount for the individual plan holders, rather than RAISE the tax burden by that much for the employee plan holders.

Furthermore, what the hell are you going to buy as far as health insurance for $5,000? I've got one of the best employer sponsored plans I've ever heard of, and I'm STILL paying more out of pocket than $5,000 annually. And to make matters worse, since it's spread out over the year, when I got it in April, it would be damn difficult to save that money to use ONLY for medical coverage.......

[HAP]

Unfortunately, the answer is that this doesn't work unless someone else helps you pay or you have a high income. Mean cost for one person is $4400.

[bgregs]

Exactly, and I've got myself, my wife, and three kids!