Grading the Candidates’ Health Reform Plans

Published January 1, 2008

Twenty years ago Michael Dukakis campaigned for president with the boast, “I have insured everybody in Massachusetts.” Of course he hadn’t, and two decades later it still hasn’t happened.

Along the way, there have been many other plans to create “universal coverage.” They haven’t worked either.

With Campaign 2008 in full gear, nearly every candidate for president has unveiled his or her own health reform plan. What do they look like, and how will they fare? Here’s a quick report card on the health plans of the leading Democrat (Clinton, Edwards, and Obama) and Republican (Giuliani, McCain, and Romney) presidential candidates.

Most Radical: McCain by a good measure. 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 (tie). By their own reckoning, their plans would cost every household in America more than $1,000 per year apiece. Obama’s plan 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 or another would be imposed on individuals, small businesses, and large businesses. Edwards (a true believer in the nanny state as well as a nanny health care system) would even mandate preventive medicine.

Least Coherent: Clinton. 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 that members of Congress currently enjoy. 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 got a clue what this means.

Least Loyal to his Own Vision: Romney. He enters the contest with a huge advantage. He engineered a bipartisan 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.

Problem of Cost

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

If you agree with me that we cannot control costs unless someone is forced to choose between health care and other uses of their money, then the Democrats’ plans are a disaster. They don’t even mention Health Savings Accounts (HSAs), 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 into the failed 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 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 incentives to overinsure and appears to back the concept of a flexible HSA.

Problem of Quality

If you agree with me that substantial health care quality improvements are not possible unless providers compete for patients based on price (and therefore on quality), then here too the Democratic plans are a disappointment. None envisions patients paying a real price for anything.

To make matters worse, they all to one degree or another endorse managed competition, a system in which health plans have an incentive to overprovide to the healthy and underprovide to the sick. Unfortunately, there is no guarantee Republicans will not also succumb to the allure of this faulty idea, as Romney did in Massachusetts.

The redemption for 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 quality 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 Democratic candidates endorse an expansion of Medicaid and the State Children’s Health Insurance Program (SCHIP). Given MIT economist Jon Gruber’s estimate of crowd-out, this means 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 difficult 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 SCHIP 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.

John Goodman ([email protected]) is president of the National Center for Policy Analysis in Dallas and Washington, DC.