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The Future of Health Care

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It's Friday night at Cooter Brown's Tavern, and 14 of the 15 televisions in the Uptown bar are tuned in to either baseball or football. Way back in the corner, tucked behind the video poker machine and the pool tables, a dozen people crowd under a screen watching a different kind of sport as Senators Barack Obama and John McCain duke it out in the first presidential debate of the season.

"What does that even mean?" says at least one onlooker every 10 minutes or so.

At one booth in front of the TV, three 21-year-old Tulane undergraduates — who will vote in their first presidential election this November — are doing their civic duty by trying to be informed voters. But after the hour-and-a-half presidential debate, Sam Pasquesi, Rachel Brotman and Thomas Eskew don't feel like they've learned much.

Particularly hazy are the candidates' health-care platforms.

"I don't think I gleaned much about McCain's policy," Pasquesi says.

"I think Obama's trying to imply universal care," Brotman says.

"He's not gonna say universal health care," Eskew says, "but I think that's where Obama's going."

Even if the candidates had spent the entire debate on health care, chances are, it would still be confusing. The United States' health-care system is one of the most convoluted bureaucracies on the planet. America spends more than $2 trillion on health care every year, which translates to the world's most expensive health-care system per capita. Yet we have some of the worst health indicators in the developed world, including higher infant mortality and lower life expectancy than countries spending significantly less on medical care per capita. Despite the money poured into the system, 16 percent of all Americans are completely uninsured. The rate is slightly higher in New Orleans.

When it comes to the behemoth that is the American health-care system, both McCain and Obama agree it clearly needs a shake-up. They both say they support better care and more choices at a better price. Their ideas on how to make it happen, however, are fundamentally different.

"The issue will be the role of private insurers and the federal government," says Robert Zirkelbach, spokesman for America's Health Insurance Plans (AHIP), a trade group that represents 1,300 companies that insure 200 million Americans. If either candidate gets his way, these roles will look very different in the coming years.

Health-care coverage in the United States is, in many ways, an insurance-driven system. Aside from the Veteran's Health Administration and military care, the American government isn't in the business of employing doctors directly. As it stands, federally backed programs like Medicaid and Medicare insure a quarter of Americans. A little less than two-thirds of Americans are covered by private insurance, most through employers. Only 6 percent of privately insured individuals buy their coverage directly. The rest — 46 million people — have no insurance at all.

Both presidential candidates envision extended coverage. The crux of McCain's plan is deregulation of health insurance, while Obama's plan would increase government oversight of insurers and potentially develop public insurance plans beyond Medicare and Medicaid.

If McCain has his way, insurance will move more toward an individual-based system. He would like to get rid of tax breaks for employers who provide health insurance. This is what Obama referred to in the debate when he said McCain's plan would make employers "pay taxes on the health care that you're getting." Instead of that, McCain would give individuals and families a tax credit of $2,500 and $5,000 respectively to help pay for private insurance. His thinking is that if individuals can buy plans instead of their employers, they will be more choosey, thus encouraging insurers to compete for customers by offering cheaper, better plans.

"There's a thought that it would be less employers insuring," Zirkelbach says of McCain's plan. "We don't support abandoning employer coverage. It works for millions of people."

Right now, the average annual premiums for self-insured individuals and families are approximately $4,500 and $12,000. It's not clear how low-income buyers will be expected to make up the difference between the tax credit and the premiums under McCain's plan.

Obama also wants to increase coverage and competition, but his methodology is different. He hopes to mandate coverage for all children and, instead of repealing employer tax breaks, increase adult coverage by creating a 'national health insurance exchange."

Although detractors often refer to Obama's plan as socialized medicine, it's not the same. "He's trying to do what's called managed competition," says Dr. W.J. Lane, chairman of the University of New Orleans' Department of Economics and Finance and an expert in health-care economics. The managed competition model mixes private insurers and public programming. The government still won't provide doctors directly, but Obama's plan calls for a government-run insurance program and private insurers that would operate under heavier oversight.

The mandatory coverage of children basically relies on an expansion of the State Children's Health Insurance Program (SCHIP) and the hope that a new system will encourage more adults to buy family insurance. Obama's exchange is patterned on Commonwealth Connector, the state agency developed to facilitate Massachusetts' universal coverage mandate. Acting as a third-party purchasing agent, it will negotiate with private insurers and offer pre-approved plans to individual buyers. The exchange also will manage a new federal insurance plan that will be an option alongside the approved private plans. People who enroll through the exchange will be eligible for subsidies based on income.

Under Obama's plan, employers still will get a tax break for offering insurance. Those who don't offer insurance benefits will be taxed for not doing so (very small employers are exempt under the plan). The tax revenue will be one source of funding that can be used to underwrite the public plan and the exchange.

It's an anachronous quirk of American health care that most insurance is purchased through employers. It's a tradition that began in World War II when wage freezes, coupled with a domestic labor shortage, led employers to offer benefits like health insurance instead of higher salaries. When the war ended, the popular benefit perks did not. After a while, employers were simply expected to offer health insurance.

"Why should employers be shopping for health insurance?" Lane asks. He compares employer benefit shopping to buying a car. If the person buying it isn't the one who will drive it, they aren't necessarily going to purchase the best product features for the user. Maybe an employee with perfect eyesight wouldn't ask for ophthalmology coverage, but they have to pay for it anyway because that's part of what the employer picked out. "[Employers are] told to buy extra quality without ever making a decision on whether it's necessary," says Lane.

What the employer-driven system has going for it is diversity in the patient pool. If everyone in the office is insured, the medical cost of taking care of the sickest among them is offset by people who never get sick. There is some concern with both candidates' plans that, if left to their own devices, individuals who are healthy will be less likely to spend thousands of dollars annually on insurance. People who need more medical care will be more likely to buy insurance, thus driving up the cost of coverage despite either set of new policies.

One issue on the minds of many voters, and therefore the presidential candidates, is the cost of prescription drugs.

Both McCain and Obama are in favor of speeding up the amount of time it takes to get a generic drug to market. Currently, name-brand drugs have seven or eight years of patent protection after they enter the market, sometimes longer. During that time, their drug's formula cannot be reproduced into a cheaper generic. In the past, pharmaceutical companies have fought shortening patent periods, asserting that longer patents help cover the enormous costs of research and development, which generic producers do not have to worry about.

The candidates also have called for allowing the importation of generic drugs produced abroad into America. Currently, the United States is not allowed to import generic drugs from countries that have not respected the patents of domestic pharmaceutical producers.

Beyond that, Obama wants to repeal an act that bans the government from negotiating prescription drug prices. "Currently Medicare pays a price based on average prices, while Medicaid pays the lowest average price and the military negotiates prices based on volume," explains Dr. Bill Kirchain, chairman of the Division of Clinical and Administrative Sciences at Xavier University College of Pharmacy. "It is generally thought that allowing the federal government to negotiate prices directly would bring down the majority of drug prices."

"There's lots of decisions made by people not getting the benefit," Lane says. Between the politicians, the insurers, the drug companies and the providers, it's easy to forget that the patient ultimately will be at the receiving end of all these reforms.

In fact, navigating the health-care system is so difficult, there's an academic term for when the information is incomprehensible to a lay person.

"We call it asymmetric information," Lane says.

It's no wonder that understanding the candidates' proposals can be so frustrating. "I think the candidates are being intentionally vague," says Brotman, one of the three co-eds following the presidential debate at Cooter Brown's. To be an informed patient, and ultimately an informed voter, she and her cohorts have their work cut out for them.

JOHN MCCAIN 2008
  • John McCain 2008
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