08 October 2008 ~ 0 Comments

Which Candidate’s Health Care Plan Would Work Best For Me?

What will happen to me if I get sick and need health insurance?  What if I lose my job in this unsettled economy and then find out I have cancer? What if I have a pre-existing condition, let’s say diabetes, that makes me virtually uninsurable? How would the presidential candidates’ health reform plans help me?

Today, in advance of a presidential debate that will almost surely touch on health care themes, I put these questions to Karen Davis, president of the Commonwealth Fund. The New York-based foundation sponsors extensive health policy research and recently published an analysis of the candidates’ health care proposals.

Davis, an economist by training, is former chairwoman of the department of health policy and management at The Johns Hopkins School of Public Health and a former deputy assistant for health policy in the U.S. Department of Health and Human Services.

Q. Let’s start with Sen. Barack Obama. How would he help people who are sick or who have pre-existing conditions and who can’t get health insurance?

A. Sen. Obama would change the way insurance is regulated. Under his plan, insurers would have to issue all applicants a policy and renew that policy upon request. Also, insurers would have to charge a premium that did not depend on health status.

[These policies are known as guaranteed issue, guaranteed renewal and community rating.  Guaranteed issue requires insurance companies to issue policies to all applicants.  Guaranteed renewal requires companies to renew policies, upon request.   Community rating means that everyone is charged the same premiums, regardless of whether they’re healthy or sick.]

Q. Would this apply to every insurance plan?

A. Yes.

Q. What are the advantages of this approach?

A. It ensures the availability and affordability of coverage for people who are sick or who have pre-existing conditions – people who by definition are at high risk.

Today, only a few large states – Massachusetts, New Jersey, New York – have policies like this. For most people across the country, if you’ve got a health problem, you can’t get coverage at all or you can get it only at a very high price or with provisions that exclude the [medical] conditions you have.

Q. What are the disadvantages?

A. These policies raise premiums for people who are healthy. The advantage of excluding sick people from insurance is that everyone else can get cheaper coverage.

One way to deal with that is to do community rating by age bands. Essentially, you divide the population into groups by age and you say everyone in each of those groups pays a uniform rate. That way, you don’t mix in people in their 20s with people in their 50s. Massachusetts does it that way.

In New York, it’s one premium for everyone regardless of age. You tend to get an older group enrolled when you structure it this way. Young adults don’t want to pay the premiums.

Q. How would Obama’s plan keep premiums affordable?

A. People would get income-related premium assistance. You’re not going to find specific details in his plan. But the basic idea is that lower income people would pay a share of their income. Any [health insurance] premium over that amount, the government would pay.

In Massachusetts, everyone below 100 percent of the federal poverty line pays no premium. [A family of four is considered poor if it earns $21,200 a year or less.] Then, you get assistance on a sliding scale up to 300 percent of poverty. [$63,600 a year for a family of four]. Above that level, you have to pay the full amount.

In the Tax Policy Center’s study [of the candidates’ health plans], they assume Obama would help people all the way up to 400 percent of poverty. But I don’t think he’s made those decisions yet. It really depends on the economic situation and what the cost turns out to be.

Q. Is that it for affordability?

A. The third thing Obama would do [in addition to community rating and premium assistance] is create a public plan with benefits similar to those available to members of Congress. The idea is that it would have low administrative costs, like Medicare, and pay providers less than private insurers do, also like Medicare. We modeled how a plan like this would work, and it lowered premiums 30 percent.

Q. Let’s shift to Sen. John McCain’s plan. How would it help people who are sick or who have pre-existing conditions?

A. Senator McCain has what he calls Guaranteed Access Plans. Essentially, he builds off the existing high-risk [health insurance] pools in the states (These pools extend coverage to people who are considered high risk and who can’t get it elsewhere.)ditto His idea is that when people are turned down for individual insurance, they’ll get it through these pools.
Under McCain’s proposal, he’d give the states more money but he hasn’t said how much that would be yet.

Currently, 34 states have high risk pools. (Illinois is among them.) But if you look at them, they’re really quite small. Altogether, about 190,000 people are enrolled currently.

Q. I’ve heard premiums can be really expensive.

A. Yes. Because you’ve got a pool of sick people who need a lot of care, it’s costly to cover them. Even with the high premiums that people pay, states are losing money on these programs. On average, premiums cover just 61 percent of their costs.
States like Minnesota address the problem by capping premiums [for the high risk pool] at 125 percent of the standard rate for a policy in the individual market. In Florida, the cap is 250 percent.

Let’s say, you’re an individual who would pay $4,000 for a policy in the individual market. In Minnesota, the policy would be $5,000 through the high risk pool; in Florida, it’d be $10,000.

Q, Are there other issues?

A. Some state high risk pools have waiting lists of up to six months before you qualify. Some have very high deductibles: in Idaho, for instance, you have to pay the first $5,000 [in medical expense] yourself. Even once you get covered, you can run through benefits. Five states have capped maximum benefits at $75,000 to $300,000 for a single year. More states cap lifetime benefits. In Oklahoma, where I come from, they cap you at $500,000 over your lifetime. In Minnesota, which has the largest pool, there’s a $5 million lifetime cap. The most typical is a limit of about $1 million.

Q. Do we have any idea what it could cost to cover people in these pools under the McCain proposal?

A. The Tax Policy Center has said it cost could $1 trillion over 10 years.

Q. That’s a lot of money.

A. Because people who are sick account for the majority of expenses in our health care system. Ten percent of people account for 64 percent of all outlays.

Q. Couldn’t McCain change the way these high risk pools operate?

A. Yes. He could come in and say I’m going to give you more money and I want you to cover more people and get rid of the waiting lists and not cap the benefits or charge premiums above a certain level.

But no matter how far he goes, what it really comes down to is that you’re going to have people who are sicker paying more [than other consumers] and having less adequate benefits and not having the security of knowing that they will be able to get whatever health care they need. That’s because even though McCain has said the federal government will give more money to support high risk pools, there’s no guarantee that premiums will be affordable for individuals with lower or moderate incomes.

For the Commonwealth Fund’s complete analysis of the Obama and McCain health reform proposals, click here.

Taken from the Chicago Tribune