Candidates’ plans to bring little reform, don’t address costs, analysts say

CBS MarketWatch.com

LOS ANGELES, CA — Those who hope the 2008 presidential election will finally bring about drastic health-care reform may well end up finding it’s a case of politics and business as usual, experts say.

It’s still early in the race to the White House, but right now there doesn’t appear to be much in the way of strong shifts on the horizon for what many consider the nation’s highest domestic priority if current experts point out that even if the intentions of such candidates as Hillary Clinton, Barack Obama, John Edwards et al to enact their reforms are sincere, there are numerous roadblocks to accomplishing that. Congress, naturally, is usually the biggest hurdle to cross, as Clinton discovered in the early 1990s
when pressing for reform during her husband’s presidency.

There’s also the prospect, albeit it’s looking like a remote one, of a Republican hanging on to the White House. Candidates on that side of the aisle generally are in favor of letting free market forces determine the fate of health care, with few exceptions.

Further, some states are addressing the issue themselves, so candidates may be tempted to let local officials deal with the political fallout. Even though Republican presidential hopefuls are reluctant to tackle the issue, a couple of GOP governors who have led the charge – one of whom is vying to be the nation’s chief executive.

Massachusetts residents have until the end of the year to get themselves insured or they face tax penalties. Candidates and industry watchers will pay close attention to see whether the plan initiated by Republican presidential hopeful Mitt Romney — the former Massachusetts governor who is now distancing himself from the initiative — can work.

In California, Republican Gov. Arnold Schwarzenegger is proposing mandatory health-care coverage for all. Under a $14 billion plan that has yet to be approved by the state Legislature, Schwarzenegger wants to use hospital and employer taxes and extra federal dollars as well as sell off management of the state’s lottery system to pay for it.

Outlines, not blueprints

But the most critical hurdle to meaningful reform may be the candidates themselves. Without more specifics from even the most detailed plans, it remains unclear exactly what the candidates have in mind.

“Plan may be too big a word for them,” said Drew Altman, president of the health-care policy group Kaiser Family Foundation, of the candidates’ proposals. “They’re more outlines.”

No official from any of the candidates’ camps would discuss their health-care options, though they are featured on their web sites, and have been discussed in debates.

More detail comes from the Democratic side, where documents total some 56 pages, compared with seven for Republicans. Congressman Duncan Hunter, R-Calif., doesn’t mention health care at all in the “issues” section of his web site.

“It is not in the Karl Rove playbook to talk about it,” Altman said.

Two prominent Democratic candidates, Clinton and Obama, offer the most detail with 16 and 15 pages, respectively. Others in the party, however, can at least claim more detail than any Republican. Still, none of the proposals are specific enough to some industry watchers.

“Some candidates have more detailed plans. But all of them have gaps in their proposals,” said Sarah Collins, assistant vice president at the Commonwealth Fund, a non-profit health care research foundation.

Finding ways to deny

Clinton, who calls for mandatory coverage, says insurers spend too much money finding ways to exclude patients or deny coverage. If everyone has to participate, she says, that will reduce the cost for all. Patients who can’t afford premiums will have to sign up, but would get tax credits based on income, a plan designed to make insurance affordable.

Obama doesn’t call for mandatory coverage but requires all employers to provide coverage, as does Clinton.

Edwards’ plan more closely resembles Clinton’s in that he requires all U.S. residents to get coverage. He also introduces universal health care into the mix — a term dreaded by some. Among the major candidates, Edwards is the only one to mention it, though fellow Democrats Christopher Dodd and Dennis Kucinich use the term as well.

But Collins says the prospect of forcing everyone to pool together to spread the cost won’t necessarily reduce the cost of risk.

“Putting a lot of people into [a pool] isn’t going to change that dynamic,” she said.

Most Democrats are in favor of making the same health-care options available to members of Congress be put out there for public consumption. Some call for a Medicare-like option to be available for those who can’t afford it.

On the Republican side, the most specific detail comes from former New York Mayor Rudy Giuliani. Giuliani, like some of his Democratic counterparts, calls for tax credits going to those who obtain health insurance. He also calls for public-private partnerships in addressing such questions as investing in information technology, but he takes pains to make sure the alliances are not “overbearing.”

Contributions

Whether or not it wants true reform, the health-care industry is giving to presidential candidates in record numbers, particularly Democrats, according to data from the Center for Responsive Politics.

Health care has poured in $41.4 million to all 2008 campaigns by the end of this year’s third quarter. Among the various subcategories, contributions from health services and HMOs are up 53% while and pharmaceuticals and health products are up 47%. Health professionals and insurers’ contributions are up 23%.

Roughly 54% of the current total health-care slice, or $22.5 million, has gone to Democrats. That represents the first time the majority of health-care money has gone to Democrats since 1992.

Clinton is the top fundraiser in a combination of contributions from health care and accident insurers — which includes major health carriers — taking in a combined $1.81 million through the third quarter. Clinton, though, is far ahead of rivals in overall fundraising with $91 million and ranks in the middle of the
pack when it comes to the ratio of industry contribution to overall total.

Obama is second in overall health care/insurance money with $1.45 million, the center’s data shows. Clinton’s cut of all health-care/insurer dollars among the candidates is 23.2%, while Obama’s is 18.7%.

Among other major candidates, Romney took in $1.09 million while Giuliani got $1.08 million. John McCain garnered $613,230 and Edwards got $438,726. Fred Thompson took in $177,975 from the industry.

The heart of the matter

Do these numbers really mean politics as usual will translate into health care as usual? It doesn’t look good, analysts say. The heart of the matter is rising costs, which the candidates hope will be cut as a by-product of their reforms. But they don’t really address that question head-on via price controls.

Analysts say Democrats fret Republicans will seize it and accuse them of tampering with free-market forces.

“Price controls are a dirty word right now,” said the Kaiser Family Foundation’s Altman.

Insurers insist that greater transparency in medical costs is necessary to keep a lid on prices. If they were able to get a handle on what doctors and hospitals were actually charging, they could control costs better.

The Foundation for Taxpayers’ Flanagan points out, however, that the double-digit rate increases by health insurers far exceeds the inflationary rate for doctors and hospitals, which has been estimated at 4% to 6% a year.

Flanagan adds that insurers’ overhead is out of whack, pointing out it runs roughly 20% to 25%, while overhead under the Medicare program is roughly 3%. And it will only get tougher to clamp down on runaway costs as merger activity is leaving the market with fewer insurers, Flanagan says.

He warns of an “Enron effect” taking place, particularly if mandatory coverage is enacted.

“It gives more control to the insurance industry, which has no incentive to improve care,” Flanagan said.
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Russ Britt is the Los Angeles bureau chief for MarketWatch. Email: [email protected]