December 10, 2008
3 min read

How will the economic crisis affect health care reform?

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On the surface, Barack Obama and John McCain appeared to have very different approaches to health care. However, once in office and faced with the current economic realities, the two approaches may have more similarities than differences.

In his successful bid for the presidency, Barack Obama proposed reliance on the government rather than the markets to improve and reform the health care system. John McCain would have preferred to have the marketplace and Adam Smith’s “invisible hand” provide the guidance.

It is said that 47 million people are uninsured. To decrease the number of uninsured, Obama proposed using “guaranteed issue” to stop insurance companies from denying coverage. Under this approach, an insurance company could not deny coverage to a person because of a pre-existing medical condition. He would also expand the current federal health care programs such as SCHIP, Medicaid and Medicare. At the federal level, a program similar to the Massachusetts plan — with a National Health Insurance Exchange similar to the “Connector” in that state — is proposed. “Pay or Play” would be invoked. The employer would either share the cost of insuring the workers or pay into a national plan. In either case, the money that the employer paid would not be his own but rather that which the employee has earned. Subsidies would be provided for those with low incomes in order to help them buy coverage. Such subsidies would apparently be plentiful as by his own estimate they will cost the government (ie, the taxpayer) over $100 billion.

Richard Dolinar, MD
Richard Dolinar

McCain’s approach to the uninsured would have used the Guaranteed Access Plan. This plan would establish high-risk pools to cover those who are uninsurable. He would have modified the tax code by providing refundable tax credits for the purchase of health insurance. The refundable tax credit for an individual would be $2,500 and $5,000 for a family. More importantly, he would have allowed for the interstate purchase of health insurance and rely on marketplace competition to drive the price down. We currently use our health insurance out of state when we travel or when our children attend out of state schools. Some of us use it to buy drugs from out of state. Why not buy insurance from out of state? Purchasing and owning our own policies would also confer other advantages. Currently, under Cobra, when people lose their jobs they lose their health insurance in 18 months. Unless they find a new job with insurance they wind up in the uninsured pool. With McCain’s approach, because people would own their own insurance, they would have remained insured as long as they paid their premiums.

Each supported importation of prescription drugs. They also supported the use of various forms of “price controls” in health care. As the costs of health care go up, especially with the impending retirement of the baby boomers, one could have expected both candidates to respond by relying on the imposition of ever stricter price controls. One type of price control currently in vogue at CMS and likely to have continued under either is “Pay for Performance.”

It is tax payer dollars that our government has been spending recently at a ferocious rate in an attempt to bail out Wall Street. Prior to the passage of The Economic Stabilization Act of 2008 on October 3, it had authorized nearly a trillion dollars. With passage of the act (both President-elect Obama and Senator McCain voted for it) it approached the $2 trillion mark. Millions in the act are earmarked for Puerto Rican and U.S. Virgin Islands’ rum, (Sec. 308), Nascar racing tracks (Sec. 317), wooden arrows used by children (Sec. 503) and the lion’s share of nearly $45 billion is for film and TV productions (Sec. 502). And all of this in a nation that was already $10.6 trillion in debt prior to passage of the act. This surely gives credence to the old adage: “Don’t let your dog watch your food. Don’t let Congress watch your money!”

With so many dollars being spent for the Wall Street bailout, how much money can possibly be left over for health care? The financial crisis, which began with “toxic” subprime mortgages, has gone worldwide and is now estimated to be a $2.5 trillion problem. Along with dollars, coercion is also being used in an attempt to solve this problem. Each morning the headlines scream with the name of the latest financial institution “seized” (the media’s term, not mine) by the government. And this $2.5 trillion problem, which is shaking world economies, pales when compared to the $66 trillion of unfunded liabilities of the entitlement programs. The entitlement problem is just starting to ramp up as the boomers begin to enter these programs. How much money will we have to address it?

What will happen to Obama’s health plans after he enters this economic crucible? Financial constraints could significantly limit his options, such that the end result might be more similarities between his and McCain’s plans than differences between them.

Richard Dolinar, MD, is Senior Fellow in Healthcare Policy at the Heartland Institute, Chicago, a Clinical Endocrinologist in Private Practice, Phoenix, Ariz.