Candidates’ advisors clash on health care

BY LINDA LEE

Senior advisors to Senators John McCain and Barack Obama clashed on their two candidates’ visions for health care in the United States last Thursday. Obama’s plan was presented by David Cutler, a professor at Harvard’s Economics Department and the Kennedy School of Government. McCain’s plan was presented by Tomas Philipson, a professor at the University of Chicago.

The two advisors were joined by panelists James Rebitzer, professor and chair of Economics Department at the Weatherhead School of Management at Case Western Reserve University, and Anup Malani, a law professor at the University of Chicago and the director of the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School for the 2008-2009 academic year. Allison Hoffman, Academic Fellow at the Petrie-Flom Center, moderated.

Both senators’ plans assert affordability and accessibility to be major goals. Tax credits are common to the plans, with Obama’s plan advocating income-based tax credits and McCain’s plan proposing a set $5,000 credit for families and $2,500 for individuals.

However, the two candidates differ on the means by which they believe these two goals can be achieved. Obama hopes to implement a federal health insurance exchange for individuals and small firms to purchase insurance – because larger groups are able to negotiate lower prices, these exchanges would put people into groups and thus allow for lower health insurance costs than they would bear alone.

In contrast, McCain’s plan would hope to solve the problem of the uninsured by relying on the free market. According to Philipson, the federalization under Obama’s plan would “create a European-style health care system in the United States” and reduce innovation by stifling the market. Philipson also made a case of higher administrative fees, citing Medicare’s 3% administrative costs and 10% cost of fraud. Administrative costs are undertaken to reduce spending, Philipson stated, and Medicare’s 10% cost of fraud could be reduced by increasing monitoring.

Panelist Rebitzer later questioned how, considering that administrative costs are higher for employer plans than in government systems, privatizing all health insurance would be beneficial. Philipson defended McCain’s plan stating that many of Medicare’s administrative costs, such as its billing which he says is outsourced, may not be properly figured into its costs.

One major reform proposed by McCain would open healthcare insurance to interstate competition, allowing the purchase of insurance from out-of-state insurers who are not bound by regulations in their state. Cutler described this part of McCain’s plan as “red herring” because it “eliminate[s] basic protections that don’t actually cost that much,” citing breast cancer screening and mental health coverage as examples. It would also be infeasible, he said, to travel to other states to obtain health care.

Another point of disagreement was the insurance of children. While Obama’s plan would mandate insurance for kids, McCain’s plan would not. Philipson criticized Obama’s plan as “extremely paternalistic” and an option that would “make the uninsured poorer” by forcing spending on insurance over other necessities.

Both Cutler and Philipson acknowledged that neither senators’ plans consider the impact of the economic bailout package that was proposed after their health care plans were created.

On the issue of medical technology, especially its high cost, both advisors seemed to agree that technology, per se, was not the problem. Philipson stated that the spending on new technology is actually valuable. However, Cutler stated that the high costs are driven by excessive evaluative testing, not by technology itself.

Finally, Malani raised questions about guaranteed access plans (GAP) under McCain’s plan, in which the government would act as the insurer of last resort, and about government reinsurance of employer plans under Obama’s plan. In neither case were the debaters able to provide concrete details or cost estimates.

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