Prescription for Change?
IPR policy briefing dissects candidates’ healthcare plans

Winter, 2008, Volume 30, Number 1

From left: Sherry Glied, Therese McGuire, and Kate Baicker share thoughts on the candidates’ healthcare plans.

Healthcare has been a key concern of voters and a contentious topic of discussion on the campaign trail, with at least one Democratic presidential candidate having declared her intent to be the “healthcare president.” Despite all of the airtime devoted to the topic, however, little has been revealed about how the candidates’ plans would actually alter America’s healthcare system.

“We brought together three of the nation’s leading healthcare scholars, including two former members of the President’s Council of Economic Advisers, to cut through the rhetoric on this pressing campaign topic,” said IPR Faculty Fellow Therese McGuire, ConAgra Research Professor of Strategic Management at Kellogg, who organized the Dec. 10 IPR policy briefing on “Prescription for Change? What the Presidential Candidates Are Saying—and Not Saying—About Their Healthcare Plans.”

The Democrats: All-for-One Universal Coverage
“You can’t be a Democratic candidate without having a health plan,” said Sherry Glied, a professor at Columbia’s Mailman Public School of Health. And that’s just it: “They all have pretty much the same one.” Glied was a senior economist for the President’s Council of Economic Advisers from 1992 to 1993 under presidents George H. W. Bush and Bill Clinton, and a participant in President Clinton’s Healthcare Task Force.

Glied explained that Hillary Clinton, John Edwards, and Barack Obama are advocating very similar mixed coverage plans that include Medicaid, Medicare, and a purchasing umbrella for those not covered by employers or the government. To differentiate him or herself from the pack, each candidate emphasizes a different aspect of their plan: Clinton emphasizes coverage choices; Edwards, employer responsibility; and Obama, the high cost of healthcare.

The Democrats’ primary concern is how close they can come to universal coverage, Glied explained, which explains their fixation on mandates. This is what was behind the November sparring match between Clinton and Obama over the number of people covered by each of their plans. Obama’s plan would only require insurance for children, while Clinton’s and Edwards’ plans would mandate insurance for both adults and children.

“It’s easy to say ‘mandate,’” Glied said. “But nobody actually wants to spell out what a mandate means.” There will be an issue of how to enforce these mandates, she continued.

After universal healthcare coverage, cost runs a distant second, she noted. All of the Democratic candidates have declared their intent to roll back the Bush tax cuts and force U.S. insurance companies to spend their “fair share” of healthcare premiums to adequately cover their clients. But the cost estimates the candidates are providing are “PFA,” “completely plucked from the air,” she said wryly. “The actual differences will emerge as the legislation gets crafted and real cost estimates are developed.”

“In healthcare, it’s not a question of how you finance the plan in Year 1, it’s a question of how you finance the plan 10 years from now ... and the candidates won’t spell that out until after the election, when the Congressional Budget Office forces them to,” Glied said. “The canidates’ plans are just out there to stake out territory and say this is who I am.”

The Republicans: Less Government, More Market Solutions
On the Republican side, the candidates’ healthcare plans are even sketchier, but the leading Republican candidates do agree on several issues, especially “big government is bad,” and “pie in diners is good,” said Katherine Baicker, a professor at Harvard University’s School of Public Health. Baicker was a member of President’s Council of Economic Advisers under George W. Bush from 2005 to 2007.

Pitting themselves against big government also means that the Republicans are against mandates, raising taxes, expanding public programs, and most importantly a single-payer system, which largely lines up with popular opinion, Baicker said. “But being against big government still means being in favor of preserving Medicare as we know it today,” Baicker smiled.

Some of the major areas of divergence among the Republican plans are how they would be financed, where most insurance would be purchased (through employers versus on the individual market), and the treatment of insured versus out-of-pocket care, Baicker pointed out.

Rudy Giuliani would seek a tax deduction ($15,000 for families and $7,500 for individuals) for those who do not have employer-sponsored insurance. Yet it would provide a new benefit without dropping other benefits or implementing tax cuts, which Baicker said would make it an expensive policy and one that contributed to the erosion of employment-based insurance.

Mitt Romney’s proposal, which stands apart from what he implemented as governor of Massachusetts, would allow people to purchase healthcare with pre-tax dollars. This would drive people to consume more healthcare relative to other goods, Baicker said, but would eliminate the tax preference that drives people to more expensive insurance plans.

John McCain, whom Baicker singled out as having the most detailed healthcare proposals of the Republicans, would offer a self-financing, flat-tax credit ($5,000 for families and $2,500 for individuals). He has proposed some other “really sensible” changes such as pay-for-performance and longer-term insurance.

Finally, the formerly hefty Mike Huckabee’s healthcare plan is slim on detail, with an emphasis on promoting healthier lifestyles so that Americans are “paying for health and not healthcare,” she noted.

Despite the differences, the Republican plans share common ground: “If you are against big government, you are usually for the free market,” Baicker said. “There’s a big reliance on the market to provide competition that will bring costs down and drive value up. There’s a lot of good there, but there’s also some over-reliance.”

	David Dranove points out that implementing electronic medical records can lower costs, improve quality, and expand access.

What They Don’t Say—But You Should Know
Despite all of their talk about healthcare and their plans, the candidates have “gone silent” on long-standing issues of cost containment, entitlement, and the role of technology, according to IPR Faculty Associate David Dranove, Walter J. McNerney Distinguished Professor of Health Industry Management at the Kellogg School of Management.

Cost containment comes down to either cutting prices or quantity, Dranove said. “And the candidates should tell us which one of those two they are planning to control.”

Dranove gave the example of consumer-directed health plans that use financial incentives and transparent information to help consumers better manage their healthcare consumption and supposedly lower costs. While these plans are “the darling of Republican Party candidates,” they are unlikely to have any impact, he said, because they target healthy, well-educated individuals. He estimated if the entire nation switched to such health plans this would only save $50 to $100 billion per year. “That sounds like a lot of money until we realize it’s just 3 percent of healthcare spending,” he said.

Next, Dranove attacked the issue of entitlement. “No one is promising a $300,000 house to homeless families,” he reminded the audience. “But many candidates are promising equal access to the world’s most expensive and advanced healthcare system.” Leveling the healthcare playing field is a very expensive proposition, and if we are not going to have a level playing field, it will involve rationing, he said. But no one is forthcoming on what the rationing would look like.

Finally, technological change is the most important long-term driver of cost and quality, with many promising medical innovations waiting in the wings from pharmacogenomics, to growing new organs. Yet most of the changes in how healthcare is financed will have huge consequences for the development and spread of these new medical technologies. So he said it’s important to know whether candidates are “Luddites,” who believe that people are better off with older, cheaper—and often less effective—medical technology or those who are willing to implement the latest technology.

Dranove called on the candidates to support the implementation of electronic medical records in the decades-long quest to lower costs, improve quality, and expand access. He punctuated the point by listing the all of delivery systems that have fallen short because of outdated information systems. “These are the kinds of information systems that any business in the ‘07 economy would be hard pressed to function without,” he said.

Though expensive, medical innovation has proved to be “one the best investments that this nation or any other nation has made,” Dranove said.

The policy briefing was co-sponsored with the Union League Club of Chicago and funded by a grant from the Joyce Foundation. To view a video of the policy briefing, go to www.northwestern.edu/ipr/events/briefingDec07.html.