McCain’s Health Care Plan Emphasizes Competition

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McCain’s Health Care Plan Emphasizes Competition

by Sean Hackbarth

Syringe

Spiraling health care costs are largely due to third-party payments. A consumer has less incentive to economize health care spending if they know an insurance company is paying the costs. Hunting for a deal on yearly physicals or open heart surgery becomes pointless if the patient isn’t covering the bill. Because of wage controls from World War II American health care suffered under the weight of the misplaced incentives of employer-supplied health insurance. Any reform needs to push decision-making and the incentives for cost-saving towards those who have the best information: consumers.

Compare the health care industry to consumer electronics. In the latter new technology is initially expensive. DVD players weren’t cheap when they first came out. Eventually the price came down to where more than movie-philes could afford them. Those lower prices are due to consumer electronics competing vigorously to earn the dollars of a price-sensitive public. We wouldn’t have seen such price decreases if consumers had Blue Cross/Blue Shield do the buying.

Here’s what McCain’s health care plan isn’t: No government take over; no socialized medicine; no additional mandates. It’s not HillaryCare or the Obama Health Service.

As he said in his speech today more government involvement isn’t the answer:

We will replace the inefficiency, irrationality, and uncontrolled costs of the current system with the inefficiency, irrationality, and uncontrolled costs of a government monopoly. We’ll have all the problems, and more, of private health care — rigid rules, long waits and lack of choices, and risk degrading its great strengths and advantages including the innovation and life-saving technology that make American medicine the most advanced in the world.

McCain wants more emphasis to be put on paying for good outcomes and effective treatments instead of procedures for procedures’ sake.

McCain proposes a refundable tax credit for individuals and families to shop around for health insurance–$2500 for individuals and $5000 for a family. That policy wouldn’t be tied to an employer so the loss of a job or finding a new one wouldn’t cause an interruption in coverage.

To make the best of the tax credits as a cost-controller it is tied to a HSA. If individuals and families find a policy less than the tax credit the savings can go into a HSA. We move towards a point where consumers see and feel the costs of the health services they’re using. That should change peoples’ incentives and hopefully lower costs.

McCain also wants barriers removed for insurance companies so they can compete across state lines. In a conference call today, McCain adviser Carly Fiorina said we shouldn’t underestimate the effects of increased insurance supplier competition.

For the hard-to-insure and those denied coverage for pre-existing conditions McCain wants to work with the states to develop individual programs. Part of it would be treating chronic medical conditions so they wouldn’t need more expensive hospital or emergency room treatments.

McCain took time to talk about dealing with chronic diseases:

Chronic conditions — such as cancer, heart disease, high blood pressure, diabetes and asthma — account for three-quarters of the nation’s annual health-care bill. In so many cases this suffering could be averted by early testing and screening, as in the case of colon and breast cancers. Diabetes and heart disease rates are also increasing today with rise of obesity in the United States, even among children and teenagers. We need to create a “next generation” of chronic disease prevention, early intervention, new treatment models and public health infrastructure. We need to use technology to share information on “best practices” in health care so every physician is up-to-date. We need to adopt new treatment programs and fi nancial incentives to adopt “health habits” for those with the most common conditions such as diabetes and obesity that will improve their quality of life and reduce the costs of their treatment.

Watch your diet, walk thirty or so minutes a day, and take a few other simple precautions, and you won’t have to worry about these afflictions. But many of us never quite get around to it, and the wake-up call doesn’t come until the ambulance arrives or we’re facing a tough diagnosis.

We can make tremendous improvements in the cost of treating chronic disease by using modern information technology to collect information on the practice patterns, costs and effectiveness of physicians. By simply documenting and disseminating information on best practices we can eliminate those costly practices that don’t yield corresponding value. By reforming payment systems to focus on payments for best practice and quality outcomes, we will accelerate this important change.

This gets into the creepy realm of employers and possibly the government monitoring personal behaviors like what you eat and how much exercise you get. Many people won’t mind especially if it comes with more affordable health care, but many won’t like their employer or government acting like a parent.

Other elements McCain mentioned:

Price transparency.
Information technology to streamline billing.
Walk-in clinics in convenient locations.

For McCain his plan is about encouraging competition and getting the incentives right so costs come down. It’s not universal coverage, but no system could provide that unless it was socialized or mandated.

Like President Bush did with education in 2000 McCain is taking on an issue that isn’t in the Republican playbook. Health care can’t be ignored. Costs continue to rise with Americans worried about their employer continuing coverage or fearful of running head first into financial catastrophe. The last Republican to seriously take on health care was Newt Gingrich promoting health savings accounts (HSA). Yet HSAs have been slow to be part of the American health care landscape. McCain doesn’t want to be seen as “out of touch” on an important issue in voters’ minds. For conservatives Bush’s No Child Left Behind ended up being a mixed bag. McCain’s plan might also be mixed but is the best plan at stopping a government takeover of health care.

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