Candidates on Health
by John Goodman
Issue 97 - December 12, 2007

I served as one of the judges for the National Journal's recently published report card on the health plans of the leading Democrat (Clinton, Edwards and Obama) and Republican (Giuliani, McCain, and Romney) presidential candidates.

In some cases, my scores differed substantially from those of the other judges. Anyway, here is my take:

Most Radical: McCain by a long shot. He would completely replace our arbitrary, regressive, wasteful system of tax subsidies for private health insurance with a $2,500 refundable tax credit for everybody ($5,000 for couples). By contrast, the leading Democrats would not repeal a single existing subsidy; they just add new ones. (That is why their plans are so costly.)

Most Expensive: Clinton and Edwards. By their own reckoning their plans would cost more than $1,000 per year for every household in America. Obama, a mere piker, comes in at only half that amount.

Most Oppressive: Edwards. All three Democrats would force people to buy insurance, whether they want to or not. Mandates of one sort of another would be imposed on individuals and/or small businesses and/or large businesses. Edwards (a true believer in the nanny state as well as a nanny health care system) would even mandate preventive medicine. (You veel get your mammogram!)

Least Coherent: Hillary. The Democratic Party is full of people who are dead certain they know how to reform health care. Unfortunately, they don't agree with each other. Some want socialism (Medicare for everybody). Some want to keep their current employer plan. Some want the health system available to members of Congress. Hillary's answer: All of the above. Everybody can pick and choose.

Most Loyal to Bush's Vision: Giuliani. He endorses the idea of a standard health insurance deduction that is independent of the amount people spend. Economists love this idea, because it eliminates perverse incentives in the current system. (No one could lower his taxes by buying more insurance.) Unfortunately, voters haven't a clue what this means.

Least Loyal to his Own Vision: Romney. He enters the contest with a huge advantage. He engineered a bi-partisan plan to credibly create universal coverage in Massachusetts. (Compare that to Hillary's failed reform.) So what does Romney do when he gets in front of primary voters? Pretends it never happened.

Now let's turn to the questions of cost, quality and access. Regular readers of Health Alerts will not be surprised to learn that the results are disappointing.

Problem of Cost. If you agree with me that we cannot control costs unless someone is forced to choose between health care and other uses of money, then the Democratic plans are a disaster. They don't even mention Health Savings Accounts and all leave the impression that ideal health insurance is first dollar coverage. To make matters worse, Clinton and Edwards would inject an additional $1 trillion-plus dollars into the system over the next 10 years.

All three Republicans endorse HSAs, which encourage cost control despite all the defects in their current configuration. Romney is most explicit about endorsing complete HSA flexibility - which would greatly expand their use and their impact. Unfortunately, Romney offsets these advantages with an aberrant idea - the deductibility of all out-of-pocket spending. (This is a virtual invitation to all taxpayers to spend, spend, spend!) McCain gets the edge from me here because he completely removes the incentives to overinsure and appears to back the concept of a flexible HSA.

Problem of Quality. If you agree with me that substantial quality improvements are not possible unless providers compete for patients based on price (and therefore on quality), then again the Democratic plans are a disappointment. None of them envision patients paying a real price for anything. To make matters worse, they all to one degree or another endorse managed competition - a system under which health plans have an incentive to overprovide to the healthy and underprovide to the sick (more on that in a future Health Alert). Unfortunately, there is no guarantee that the Republicans will not also succumb to the allure of this faulty idea - as Romney did in Massachusetts. The redemption for the Republicans is HSAs. To the degree patients manage their own health care dollars, they will force providers to compete on price and quality.

Problem of Access. If you agree with me that access to care for low-income families will not improve unless they have access to the same doctors and facilities that other patients have, we are left with a mixed bag. All the Democratic candidates endorse an expansion of Medicaid and SCHIP. Given MIT economist Jon Gruber's estimate of crowd out, this implies that millions of people would move from private plans (where they generally have wide access) to public plans (where access is limited). On the other hand, it's hard to spend $120 billion a year without some expansion of private coverage. So on balance, the Democratic plans are moderately positive on this measure. I give higher marks to the three Republicans because I assume they would use free care and Medicaid and S-CHIP money to enroll people in private plans - where access to care is much greater. But not much higher, because none of them is explicit enough on these points.

I cannot resist commenting on one more reform idea. Sen. Clinton has repeatedly stressed that insurance premiums should be totally unrelated to health status. But they are already largely unrelated. Do you suppose she intends to go all the way - allowing people (no matter how sick) to enroll in any plan at the drop of a hat? If so, the number of uninsured would double or triple. (Why pay expensive premiums when you are healthy if insurance is always available once you get sick.) The problem with grading her plan is: do we take her statements seriously?

John Goodman is President of the National Center for Policy Analysis.