The Candidates' Health Care Plans, Part 3

In The Candidates' Health Care Plans, Part 2 oldstyleliberal looked at the health care proposals of two of the leading Democratic candidates for president, Hillary Rodham Clinton and Barack Obama. Both plans involve augmenting current private insurance plans by setting up a public, government-run insurance program from which individuals and families would be required to obtain health insurance — if, that is, they didn't buy private insurance on their own or get coverage from their employer. This mandate would apply to all uninsured Americans, in the Clinton plan, or to all uninsured children, in the Obama plan; in the Obama proposal, uninsured adults could continue to opt out of private plans and the public plan.

As he said before, oldstyleliberal worries that a "mandatory" health insurance system, government-run, would encroach too much on citizens' freedom of choice to make their own decisions about their own health care and insurance needs. That's why oldstyleliberal, though he is a Democrat, went looking to see what the various Republican candidates have to say about the issue.

This page gives a side-by-side analysis of the proposals made by Rudy Giuliani, John McCain, and Mitt Romney, three of the current leaders in the GOP field.

These three candidates entirely avoid mandates requiring uninsured citizens to buy health insurance. They all want to change federal tax laws, particularly with respect to income taxes, to "incentivize" taxpayers to obtain health insurance privately. States would receive federal subsidies, block grants, or other encouragements to enroll the uninsured in voluntary public plans of their own, craft health reforms, etc. All these plans would expand private health savings accounts (HSAs), which in a more restrictive form have been available under federal law since January 2004, to make them more attractive to Americans as options to, or supplements for, privately purchased or employer-provided health insurance.

Healthy Competition by Cannon and Tanner

All of these moves are intended to shift market power toward patients, away from federal and state governments, away from employers, and away from insurance companies. They are in the spirit of the approach to health care of the Cato Institute, a libertarian think tank. The book Healthy Competition: What's Holding Back Health Care and How to Free It, by Cato's Michael F. Cannon and Michael D. Tanner argues that the woes of the health care system today would diminish, if not vanish, with greater competition among health services providers for the dollars of consumers — i.e., the patients themselves.

On page 14 Cannon and Tanner state, "By hindering the competitive process, government actually makes it more difficult for the medically needy to obtain care." By that they mean that the present federal policy — not taxing employers' outlays in providing health insurance to their workers — blunts the employees' own market power. It keeps the workers, as health services consumers, from going to doctors and hospitals that are not part of the coverage plans/networks their employers sign up for, for example. That limits competition in providing health services, causes prices to be higher than they would otherwise be, and encourages consumers to obtain more services than they really need, since they are insulated from paying most of the fees themselves. It also fails to provide a market-oriented mechanism to weed out health services providers whose quality of care is substandard.

If consumers could bypass the current system and (for instance) set up their own unrestricted, tax-free health savings accounts, they could actively shop for the health services and providers that give them, in their own estimation, the best care for the least money.

At least, that is the theory. It is a theory that makes a lot of sense to oldstyleliberal. But he worries that it is no slam dunk that a fully market-based solution would let the "medically needy" among us be able to afford all of the care they need.


Stripped to bare essentials, the current health care financing system, imperfect as it is, is intended to allow American health care costs to be paid for by someone else — someone other than the person receiving the health care.

A couple of years ago when oldstyleliberal had to have heart surgery, the total tab, before his insurer adjusted the amounts originally charged by the service providers, was over $70,000. After adjustments of around $24,000, the tab was reduced to approximately $44,000, of which yours truly paid only a little under $3,900 out of pocket. The insurance covered over $40,000.

Translation: premiums paid in by other people in the same Blue Cross-Blue Shield insurance pool kept oldstyleliberal from having to shell out more than $40,000 of his own money.

Looked at another way, oldstyleliberal recouped (very roughly) 25 years worth of his own earlier premiums that he had paid into the health insurance system over time. But if he had not put that much into the kitty over the years, his benefits would have remained the same. It's more accurate to think of his expenses as having been picked up by other current premium payers.

Each one of those payers, if they live long enough and have enough of their own medical woes, can expect to see the favor returned someday. Still, it's a crap shoot whether any one person or any one family will ever recoup their accumulated premiums. Some people will put more money into the system than they take out, while others will take out more than they put in. The latter will go to their grave having had some portion of their lifetime medical expenses paid for by someone other than themselves.

Depending on how far market-based health care reforms are taken, it is entirely possible that few Americans will continue to have health insurance that pools their financial risk with that of many, many other people, so as to allow the medical expenses of Peter to be paid for, sometimes, by Paul.

According to this Wikipedia article about health savings accounts, for instance, increased reliance on of HSAs could cause "people who live healthy lives [to] leave insurance plans while people who chose to live unhealthily [would] avoid HSAs." Then the medically needy might find that the insurance plan they have (if any) ceases to be affordable, as canny lower-risk individuals switch to so-called "large HSAs" and leave behind those whose medical bills are chronically high. With payouts per person, on average, going higher, the insurance companies would be forced to raise premiums. Those who couldn't afford the steeper premiums and who lack HSAs might find themselves frozen out of the system entirely.


So it looks as if there is a tough choice to be made by voters. Do they want a health care reform package that sets up mandates to join a new, government-run insurance plan, if only as a last resort, in lieu of private insurance? If so, then one of the Democratic plans should fill the bill. But such a program would probably further distort today's health-services markets by blunting the market power of the individuals being served, further decoupling their choices as consumers from their own pocketbook exigencies, and increasing even further the market power of impersonal bureaucracies to make choices on their behalf.

Or, do voters want a system that allows people to shop more directly for their own medical services on the basis of quality and cost? That would put the burden on all of us to be canny consumers of "products" that — when we are sick, fearful, and in need of them the most, we don't like to think of as being in the same bargain-hunting category as computers and cleaning services.

(Cannon and Tanner talk of Americans who, needing heart surgery, chose to have it done in India where success rates were just as high but costs were much lower. But how many of us would even consider that possibility? oldstyleliberal, when he had a heart operation, would never have considered such an option, even if it had occurred to him at the time to do so.)


It is certainly possible to mix and match initiatives from today's two main styles of health reform proposals. There could be, for instance, a mandatory public health insurance plan set up for the currently uninsured, as long as they didn't set up "large HSAs" instead. Whether such a hybrid approach would make things better or simply cancel out one another's strong points is something oldstyleliberal would not care to speculate on. That's surely a job for Congress, which will have to pass upon the proposals of whatever candidate, from whichever party, takes the oath of office as president in January 2009.