Obamacare: Better Than It Looks

The health care primary, Part 1.

I’m giving serious thought to becoming a single-issue voter in the 2008 presidential election. The candidates themselves aren’t making a deep impression, possibly because there are so damned many of them. Remember when we all chuckled back in 1987 about the “seven dwarves” chasing after the Democratic nomination? This year I count eight—nine in the unlikely event that Al Gore, one of those earlier “dwarves,” jumps in—plus 11 Republicans. And that’s just “major” candidates. Who can keep straight the various character strengths and weaknesses of 20 presidential candidates? Better to focus on issues.

The issue of greatest immediacy is the Iraq war, but none of the candidates has a brilliant idea about what to do. Even if he (or she) did have an effective plan, it would still be a crapshoot as to whether he (or she) would implement it if elected. Presidents seldom do what they’ve told voters they were going to do when it comes to fighting wars or making peace. Anti-terrorism is important, too, but the main differences among the candidates are in styles and degrees of chest-thumping, not policy. (I assume, perhaps naively, that whoever I’m even vaguely tempted to vote for can be counted on to undo Bush’s suspension of habeas corpus.) Immigration is the hot issue of the moment, but I presume that by Election Day either it will be resolved or the warring parties will have resolved not to resolve it.

That leaves health care.

Health care has lately ranked second, third, or fourth in polls asking what the federal government’s greatest priority should be, and I predict it will soon settle in for a long run as No. 2. (For the foreseeable future, the Iraq war will remain No. 1.) As I’ve noted before, the American health-care system is in an advanced state of collapse owing to the failure of an 80-year experiment in market economics. Politically, the problem has grown more urgent because rising health-care premiums and diminishing coverage are starting to cause serious problems for the middle class. Health insurance costs more and more and covers less and less. Per capita health-care costs are about twice what they were when Hillary Clinton tried unsuccessfully to reform the system in 1994, and the ranks of the uninsured have increased by 13 percent. Universal health insurance, which has eluded the political system at least as far back as 1912, when former president Teddy Roosevelt endorsed it in his failed Bull Moose bid, is starting to look inevitable. Even insurance companies think so, according to a May 30 article by Jackie Calmes in the Wall Street Journal. According to the Journal, the insurers have given up blocking universal health care, “Harry and Louise“-style, and are now redirecting their energies toward co-opting it.

It’s a shame no one has alerted this year’s presidential candidates to the public’s growing  radicalization on health care. Almost none of their proposed solutions goes far enough. What follows is the first in a series of columns measuring the candidates’ various health plans by a consistent set of yardsticks.

Candidate: Sen. Barack Obama, D.-Ill.

Elegance:Sen. Obama is a very elegant candidate, as the comely Obama Girl attests in her lip-synched video, “I Got a Crush on Obama.” But I refer not to the man but to his health-care plan (click here to read it), which is not remotely elegant. The Hawaii-raised candidate has given us a pupu platter of regulations, employer mandates, subsidies, public-private partnerships, and new programs.

Market gimmicks:Obama would establish a National Health Insurance Exchange that would create “rules and standards for participating insurance plans.” Anyone could buy private health insurance through this exchange, and presumably be guaranteed a certain price (on a sliding income-based scale) and a certain breadth of coverage. Participating insurers would not be permitted to exclude less-desirable (i.e., sick) customers. This scheme is based on the new Massachusetts health-care plan signed into law by former Gov. Mitt Romney, who is seeking the Republican nomination. As a presidential candidate, Romney himself previously distanced himself from the plan, but at a June 5 debate he managed to tout it (“The market works. Personal responsibility works.”) without saying “Massachusetts,” a word his advisers have urged him to avoid. The National Health Insurance Exchange isn’t very gimmicky, but I’m not convinced it would be very effective. (It’s too soon to know how well it’s doing in Massachusetts.)

Susceptibility to the insurance lobby:Nothing in Obama’s plan says that insurers would be required to participate in the National Health Insurance Exchange. That will please insurers. To whatever extent the Exchange were to become a significant market, insurers would of course want to participate, and would pressure Congress to allow them greater freedom to set rates and coverage as they saw fit. The hazard with regulatory schemes in general is that the more complex they are the more susceptible they become to pressure from lobbyists to weaken them.

Cost: $50 billion to $65 billion annually, funded by allowing Bush’s tax cuts for families earning more than $250,000 to expire at the end of 2010. Obama says his plan will save a “typical American family up to $2,500 every year on premiums.” Note use of squishy terms like “typical American family” and “up to.” Obama would invest $50 billion over five years to accelerate adoption of electronic health records, a vital and necessary reform that would reduce medical errors and thereby save lives. It would also save money by avoiding needless duplication such as blood tests that have to be performed more than once because paper records have gone missing. How much? Obama cites a Rand Corporation study that predicts savings of “up to” $77 billion. A similarly laudable proposal to allow Medicare to negotiate prescription drug prices would produce savings that “could be as high as $30 billion.” Overall, it’s impossible to get a real fix on the cost of Obama’s plan, because there are too many “up tos” and too few hard numbers.

How universal? Not entirely. Only children would be required to have health-care coverage. Obama doesn’t specify how this would be achieved. I tend to be wary of health reform schemes that “require” people to purchase health insurance. What exactly are you going to do to me if I don’t?

How socialistic?The best (and least-discussed) part of Obamacare is a public health-insurance program with comprehensive benefits (similar to those available to members of Congress) and strict limits on premiums, co-payments and deductibles. No one could be refused coverage because of pre-existing conditions, and subsidies would be offered to lower-income participants. (If they were very low-income, they’d receive Medicaid instead, unless they were over 65, in which case they’d receive Medicare.) The bad news about Obamacare’s (shhh!) socialized-medicine component is that it would be offered only to the self-employed, to employees of small businesses, and to people whose employers didn’t give them health insurance. But this last group is growing larger every day, and the mere existence of a public health-insurance program would likely cause businesses to drop out of their private health-insurance plans in droves. That would be fine by me, provided the public health-insurance plan were a decent one. Eventually, all the other parts of Obama’s plan might well wither away, leaving only this one. Some people would be alarmed by that thought. I find it the most attractive (not to mention elegant) possible outcome. The least attractive outcome would be for the insurers participating in Obama’s National Health Insurance Exchange to persuade the government to make its new public health-insurance program (a potential competitor) so chintzy that no one would want to participate in it.

How disciplined: The best way to impose discipline on the medical system would be to eliminate fee-for-service payments to doctors and replace them with straight-up salaries. No politician within a mile of the political mainstream is willing to suggest this. But in his new book, A Second Opinion, Arnold Relman, former editor of the New England Journal of Medicine, makes a powerful case that this must be done. Relman points out that the people responding to market forces in the current commercialized medical environment aren’t patients, who usually lack the knowledge to make informed choices, but doctors, who maximize their income by maximizing the number of procedures they perform. Relman cites as an example a company (unnamed, alas) that sells or leases an expensive gizmo that doctors use to treat back pain. The doctor pays for the gizmo by paying a fee to the manufacturer each time he uses it on a patient; he later recoups the fee (and a sizable profit) through the patient’s medical insurance. The company will even provide an assistant to perform the procedure, freeing up the doctor to see other patients. The gizmo is approved by the Food and Drug Administration, but it “has not yet been systematically compared with the many other techniques for the treatment of back pain.” The main attraction, then, for a doctor to install the gizmo in his office is financial rather than clinical. According to Relman, this is made plain in the gizmo’s marketing brochures, which “emphasize the financial benefits to physicians at least as much as the alleged (but still unproven) benefits to patients.”

In her forthcoming book, Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer, journalist Shannon Brownlee argues that the maximization of medical procedures takes a toll not only on economic efficiency (Relman’s ripped-off patient with back pain and his ripped-off insurer) but also on patients’ health. Hospitalizations and medical procedures, after all, entail some measure of physical risk. The potential threat to health is an even more urgent reason to compensate doctors by salary rather than by payments for individual medical procedures.

Obama’s plan wouldn’t make doctors salarymen. It would, however, let Medicare negotiate drug prices, and it would accelerate the move toward electronic medical records. (See “Cost.”) These are two worthwhile measures that would save some money and improve patient care.

Impact on employers: Implementing Obamacare would cost employers an unspecified amount of money. That’s because the government would require those employers it judges too stingy in providing health care for workers to contribute a percentage of payroll to the new public health insurance plan (see “How socialistic?”). On the other hand, Obama would limit (to an unspecified amount) the liability of small businesses for catastrophic care expenses. Since the most serious illnesses account for about half of all health-care costs, then either this provision would cost the government a lot of money, or the “unspecified amount” would be set so high that it wouldn’t do employers much good. If the public insurance part of Obama’s plan caused businesses to give up providing health care to their employees, then Obamacare would be great for employers.

Longevity: By “longevity” I mean not how long a given patient lives, but rather how long the entity that pays for the patient’s care will continue to do so. In Best Care Anywhere: Why VA Health Care Is Better Than Yours, journalist Phillip Longman demonstrates that one reason the VA is able to provide cheaper and better patient care than its private-sector counterparts is that it is invested not in a particular medical procedure but rather in the patient himself. Gains from preventive care improve the VA’s own bottom line because they keep in good health patients who will remain in the VA system for the rest of their lives. (Full disclosure: I wrote the introduction to Longman’s book, which expands on a Washington Monthly article by Longman that I praised in this space.)

The public-insurance part of Obama’s plan promotes longevity because it is “portable,” i.e., you can remain in the plan if you change jobs.