Sunday, November 2, 2008

Health Care plan assesment for Nov 4

This is a breakdown of the current health insurance system, as well as the system presented as part of the Obama and McCain health care plans.

In the interest of full disclosure, I am an agent in the Mid-Atlantic region.
Further - It is my opinion that if the European plan were offered here, the sale of supplemental and replacement plans will be an economic windfall for health agents, as it has overseas.

I have tried to provide a reasonably unbiased review of the stated and posted plan of each candidate, pulled off of the candidate's own web site, and with nothing else added, with one exception. That exception was in a concern for the tax that has been stated will occur on health insurance offered by businesses.

To evaluate each candidate's promises and the impact, an understanding of what exists is appropriate

Current system

1) Employer provided
- employer pays all or part of the employee premiums, and sometimes pays for the spouse and children as well
- employer cost is usually between 350 - 1100 per month per person
this cost is a tax deductible expense for the employer, and any benefit plan under IRS section 125 offers additional payroll tax reductions. Employer expenses for health plans is usually subtracted from the profit before calculations of corporate taxes
- premium cost is usually a factor of the average age of the organization, and the history of incurred medical costs, called experience rating
- normally 75% or more employee participation is mandatory to have group coverage
- coverage is usually through the provider network of physicians
upside:
- no pre-existing coverage issues, anyone is accepted
- coverage until recently was offered with no deductibles to meet and minor co-pay costs
- no lifetime maximum per individual
downside:
- out of network care costs can go to 100% employee expense
- employers often change insurance companies to reduce premiums, this involves changing the provider network, and can result in having to change established Dr / Patient relationships
- the system encourages age discrimination by the employer, as younger workers reduce the average insurance age
- the employee cost share can become prohibitive, resulting in younger and health employees opting out, and going to individual coverage, leaving increased group costs for older and unwell employees
- unhealthy and older employees are tied to the employer for health care coverage, very much like the last centuries' "being indebted to the company store"
- when the employee is terminated / laid off / otherwise no longer employed, the employee and family usually have the option to accept COBRA - which is the coverage provided by the employer, at the full employer cost plus 4% admin fee
once COBRA ends, or if COBRA is not selected, the employee and family may purchase individual coverage on the open market, in many cases subject to underwriting and pre-existing medical condition exclusions or rate adjustments

2) Self purchased
- insured pays all of the premiums for self, spouse and children.
- cost is usually between 150 - 400 per month for an individual, family coverage cost is between 350 and 1100 per month
- the lesser premium cost is usually coupled with a deductible of some manner
upside:
- this cost is a tax deductible expense along with other medical costs on schedule A
- for the self employed, all medical, dental, LTC ins. and out of pocket expenses are a tax write off on schedule C per IRS Section 105, so it can be subtracted from profit before calculations of corporate taxes, and in the case of a husband and wife sole proprietorship or "C" corporation
- coverage costs are age adjusted, but adjustments for health issues are normally not allowed by state laws
- since this is the individual's coverage, the individual has no ties to an employer for health care coverage, allowing job mobility
- lifetime maximums of 5 to 8 million per person are available, although lesser levels are more commonly selected due to consumer ignorance of implications
- established lifetime Dr / Patient relationships are possible
downside:
- usually medically underwritten, and premiums can be adjusted at issuance based on health issues or coverage can be declined
- policies vary and can be confusing, to the point that some people may find coverage insufficient for their needs, or gaps can exist that do not cover brand name drugs or services

3) Federal, State or Local Government provided
- taxpayer pays all or a large part of the employee premiums, and sometimes pays for the spouse and children as well
- cost is usually between 400 - 1300 per month per person
- premium cost is usually a contractual amount, vaugly a factor of the average age of the organization, and the history of incurred medical costs, called experience rating
- coverage is usually through the provider network of physicians
upside:
- no pre-existing coverage issues, anyone is accepted
- coverage has no deductibles to meet and very minor co-pay costs
- no lifetime maximum per individual
downside:
- out of network costs can be shocking to the insured
- the employee and family have no clear understanding of actual coverage or service costs, resulting in a large financial surprise when they leave the government position
- unhealthy and older employees are tied to the employer for health care coverage, very much like the last centuries' "being indebted to the company store"
- when the employee is terminated / laid off / otherwise no longer employed, the employee and family usually have the option to accept COBRA - which is the coverage provided by the employer, at the full employer cost plus 4% admin fee
once COBRA ends, or if COBRA is not selected, the employee and family may purchase individual coverage on the open market, in many cases subject to underwriting and pre-existing medical condition exclusions or rate adjustments

4) Low income, CHiP and State High Risk Plans
- State pays all or part of the person' premiums, based on household income
- State underwrites the cost of covering the medically unwell
- individual cost is usually between 350 - 1100 per month per person, based on plan choice and deductibles selected
upside:
- no pre-existing coverage issues, anyone is accepted
- coverage until recently was offered with no deductibles to meet and minor co-pay costs
- this cost is a tax deductible expense along with other medical costs on schedule A
- for the self employed, all medical, dental, LTC ins. and out of pocket expenses are a tax write off on schedule C per IRS Section 105, so it can be subtracted from profit before calculations of corporate taxes, and in the case of a husband and wife sole proprietorship or "C" corporation, reduce the self employment tax as well
- coverage costs are age adjusted, but adjustments for health issues are normally not allowed by state laws
- since this is the individual's coverage, the individual has no ties to an employer for health care coverage
downside:
- premium costs are usually higher than a medically underwritten policy
- lifetime coverage level can cap at 1 to 2 million, which can be insufficient for the individual


5) over 65 or severely medically challenged
Medicare part A (paid for by government)
and parts B and D, are usually paid out of the recipient's social security check
medicare advantage programs can combine the systems and provide an inclusive coverage package, forming an 80 /20 cost sharing for the consumer
upside:
- no pre-existing coverage issues, anyone is accepted
- coverage is offered with minor co-pay costs
open enrollment is every Oct 15 thru Dec 31, with an additional plan adjustment period the first months of each year
downside
- the schedule for medical procedure payments is set by the Federal Government, and many qualified physicians decline to treat people with limited payment systems and Medicare
- without assistance, many over 65 do select plans which are insufficient for their needs, or fail to purchase part D, and so are penalized for not having the coverage when they enroll later, or do not have coverage when they need prescriptions
- plans can change every 6 months, so a viable plan can alter to the detriment of the insured

6) Uninsured
there are about 45 million who currently do not have coverage
22 million are here illegally, and they can not purchase coverage
it is estimated that another 10 million have ot been able to find coverage due to medical issues
the balance find the costs unacceptable, and choose to allocate funds for other purposes

European Systems:
Most operate on the same basic principal. Taxpayers fund the government sponsored plan, which pays 70 - 80% of the cost of care inside the plan offered by the country. The resident pays the remaining 20 - 30 % of the care costs. If a person can afford it, and they want a better level of care, they apply for a voucher, opt out of the government plan, and purchase a policy on the open market.
What this does is create a clear class system, much like is occurring with our similar, medicare system. Those who can afford to, opt out, and get better and quicker care, or even come to the US for care.



Obama's proposal
http://www.barackobama.com/issues/healthcare/

  • Require insurance companies to cover pre-existing conditions so all Americans regardless of their health status or history can get comprehensive benefits at fair and stable premiums. This exists in some states already, and comparable policy premiums are 10 -15 % higher. Fair and stable premiums artificially established by the Federal Government will require the Federal Government to re-insure the risk - it may be counter productive since the taxpayer becomes the financial entity responsible for covering the major cost of the financial risk. Without any controls in place, you and I will pay for the person who lives an unhealthy lifestyle, and the health risks they take. That also removes any incentive for the company to encourage the individual to adjust their lifestyle to minimize their personal health risks. In effect - the smoker who drinks a quart of booze per day and eats McFat burgers every day is put on the same economic level as someone who acts responsibly about their health
  • Create a new Small Business Health Tax Credit to help small businesses provide affordable health insurance to their employees. This will be a reduction in taxes paid in - if it is above and beyond the already existing effect of the Section 125 provisions, it will reduce employer taxes and decrease revenue for the government, a small employer tax cut if you will.
  • Lower costs for businesses by covering a portion of the catastrophic health costs they pay in return for lower premiums for employees. This will require the Federal Government to re-insure the risk - it may be counter productive since the taxpayer becomes the financial entity responsible for covering the major cost of the financial risk. Without any controls in place, you and I will pay for the person who lives an unhealthy lifestyle, and the health risks they take. That also removes any incentive for the company to encourage the individual to adjust their lifestyle to minimize their personal health risks.
  • Prevent insurers from overcharging doctors for their malpractice insurance and invest in proven strategies to reduce preventable medical errors. This will require tort reform, or caps on victim compensation - Obama did this to the sexual harassment laws in Il, reducing the amount an individual can collect from an employer. Premiums will not drop until the settlement is capped. We saw the impact of this in MD when the labor and Delivery malpractice costs were affecting the ability of Dr's to pay for coverage. Since no one can force an insurance company to cover a Dr, the private insurance companies recourse is to decline to issue coverage, since the stockholders (you and I and our 401K) will see this as an unsound risk. the next step will be that the Federal Government becomes the insurance company, and you and I become the persons accountable for paying the judgments and taking the financial risk
  • Make employer contributions more fair by requiring large employers that do not offer coverage or make a meaningful contribution to the cost of quality health coverage for their employees to contribute a percentage of payroll toward the costs of their employees health care. This is the Federal Government telling the business how to run their business. No longer will workforce supply and demand control the benefits offered, now the Government will tell the employer what they can and can not offer. This will ultimately drive more industry off shore, since the costs to provide goods and services will include increased Federally mandated coverage levels. This practice is already in place for Federal and State contracts of all kinds. The costs the Federal and State governments pay for services are considerably higher than for the same service purchased by the private sector, and we, the taxpayer, pay for the coverage levels mandated by the Government in everything the Government purchases.
  • Establish a National Health Insurance Exchange with a range of private insurance options as well as a new public plan based on benefits available to members of Congress that will allow individuals and small businesses to buy affordable health coverage. The congressional plan costs the taxpayer about 1200 per month per covered person. Given that most people d not have that level of income, the only way a private individual can afford the plan is with extensive Government subsidies, which the taxpayer will be paying for. Even assuming the average age of this coverage plan drops, and the rates reduce accordingly, covering 20 million plus uninsured and under insured people will still cost the taxpayer about $10,000 of the $12,000 per year premium per person, (this is Obama's own statement of premiums) or $20,000,000,000.00. If the plan is better and cheaper than the existing coverage the individual already has, it is very probable the coverage level will jump to 100 million plus people, which will cost the taxpayers an additional $100,000,000,000.00 per year as they subsidize the costs. (I'd take it as well, since it's better than any plan I can buy or sell) Interestingly enough, the GAO already reports the existing Federal, State and Local health care plans are underfunded and will go deficit spending, BROKE, by 2015 - see page 8 and 13 of http://www.kslegislature.org/postaudit/GAO.pdf
  • Ensure everyone who needs it will receive a tax credit for their premiums. This will reduce taxable income, income taxes paid in, and reduce tax revenue to the Government, increasing the deficit.

Reduce Costs and Save a Typical American Family up to $2,500 as reforms phase in:

The average individual family policy I write in MD is less than 6500 per year

  • Lower drug costs by allowing the importation of safe medicines from other developed countries, increasing the use of generic drugs in public programs and taking on drug companies that block cheaper generic medicines from the market. To do this, patent laws will need to be changed, so that companies will lose rights to ownership and development. The incentive to create and develop drugs and procedures and technology will disappear, and the US is one of the last countries on the forefront of medical development.
  • Require hospitals to collect and report health care cost and quality data. There is an increased risk for identity theft and privacy being compromised. Personal data will be widely available - anyone following the news has seen where laptop and data base files are being breached and compromised. the more data is electronically available, the more data can be and is accessed by individuals who have malicious intent. Google "government laptop losses" for an education on how bad it already is.
  • Reduce the costs of catastrophic illnesses for employers and their employees. This will require the Federal Government to re-insure the risk - it may be counter productive since the taxpayer becomes the financial entity responsible for covering the major cost of the financial risk. Without any controls in place, you and I will pay for the person who lives an unhealthy lifestyle, and the health risks they take. That also removes any incentive for the company to encourage the individual to adjust their lifestyle to minimize their personal health risks.
  • Reform the insurance market to increase competition by taking on anticompetitive activity that drives up prices without improving quality of care. Interesting idea - except there are currently many companies that compete in the individual and group sectors. MD has 6 major group providers and their offerings are dictated by the consumers, and the state laws and mandates. To do this, other insurance companies will have to be created, state regulatory laws will have to be challenged or removed, and the Government will need to subsidize companies to enter into and compete in a mature market.

The Obama-Biden plan will promote public health. It will require coverage of preventive services, including cancer screenings, and increase state and local preparedness for terrorist attacks and natural disasters. Adding preventative and early detection services will not add to many policy costs, as most are already covering those costs. It is a logical move. What is being missed is that over 50% of the population in this country already has it, thru their Federal, State and Local Government and Learning institution health care package. Also, most major employers have hugely beneficial preventative health focused plans already. individuals with HSA plans even have some, as most HSA plans allow certain early detection and testing without having to meet the deductible.

I am having a math problem with this one, only because there are no incentives in the Obama plan for healthy actions by the individual.

McCain's proposal
http://www.johnmccain.com/Issues/JobsforAmerica/healthcare.htm



Cheaper Drugs: John McCain will look to bring greater affordability and competition to our drug markets through safe re-importation of drugs and faster introduction of generic drugs. Will require the Federal testing and approval system FDA, to be streamlined.

Chronic Disease: Chronic conditions account for three-quarters of the nation's annual health care bill. By emphasizing prevention, early intervention, healthy habits, new treatment models, new public health infrastructure and the use of information technology, we can significantly reduce these costs. We should dedicate more federal research to treating and curing chronic disease. There will be a financial impact on the taxpayer, to find the research, but there are already existing Federal funding programs in place on many diseases.

Coordinated Care: Coordinated care - with providers collaborating to produce the best health care for the patient - offers better outcomes at lower cost. We should pay a single bill for high-quality care which will make every single provider accountable and responsive to the patients' needs. Accountability and responsibility w
ill have an additional effect, in that malpractice may go down - reducing the multiple bills to a patient eliminates the confusion and double billing. however, the current delivery system has each provider as a separate entity, a separate company so to speak. To have one bill, there would need to be a structure to assimilate all bills into one, much like a general contractor manages sub-contractors.

Greater Access And Convenience: Families place a high value on quickly getting simple care. Government should promote greater access through walk-in clinics in retail outlets. Local care provided by easily accessed providers is a model that existed when we had the general practitioner of old, the town Doctor. This deliver system is one already in use for pharmaceuticals, and seems to work well.

Information Technology: John McCain will promote the rapid deployment of 21st century information systems and technology to improve patient safety, enhance quality and lower costs.
Communication of new practices and methods would be enhanced doing this. If it applies to patient records, there is an increased risk for identity theft and privacy being compromised. Personal data will be widely available - anyone following the news has seen where laptop and data base files are being breached and compromised. the more data is electronically available, the more data can be and is accessed by individuals who have malicious intent. Google "government laptop losses" for an education on how bad it already is.


Medicaid And Medicare: John McCain will reform the payment systems in Medicaid and Medicare to compensate providers for diagnosis, prevention and care coordination. Medicaid and Medicare should not pay for preventable medical errors or mismanagement. We also need to implement a zero tolerance policy towards Medicare and Medicaid fraud that is increasingly stripping away resources from the sick and the elderly. A good idea all around - some insurers are already refusing to pay for the results of medical mistakes. An increased focus on prevention will as a minimum keep the costs the same to the taxpayer, but provide early detection and improve quality of life.

Smoking: John McCain will promote the availability of smoking cessation programs. Most smokers would love to quit but find it hard to do so. Working with businesses and insurance companies to promote availability, we can improve lives and reduce associated chronic diseases through smoking cessation programs. The New England Journal of Medicine ran an article after a review of lifetime medical costs for smokers and non-smokers. The overall result was that smokers die sooner and incur less lifetime medical costs than non-smokers. Given that, this may have a negative economic impact on Medicare costs, and a negative impact on programs funded by the tobacco taxes.

Tort Reform: John McCain will lead the fight for medical liability reform that eliminates lawsuits directed at doctors who follow clinical guidelines and adhere to proven safety protocols. Every patient should have access to legal remedies in cases of bad medical practice but that should not be an open invitation to endless, frivolous lawsuits that drive up health care costs for everyone and make the practice of medicine unaffordable for good doctors everywhere. Currently, even though the Doctor can do everything right, he/she can still be sued, and in many cases the settlement is out of court since trial costs are excessive. This process, if done right, will allow peer reviews to determine if the proper procedure was performed. the risk is that the peer review process could be corrupted by professional interests.

Transparency: John McCain believes we must make information on treatment options and doctor records more public, and require greater transparency regarding medical outcomes, quality of care, costs and prices. We must also facilitate the development of national standards for measuring and evaluating treatments and outcomes. Given that most people have no concept of the actual medical costs, the public being aware can affect the amount of frivolous testing occurring. The risk is that new tests, new procedures may take overly long to be approved and accepted.
Reforms To Make Health Insurance Innovative, Portable And Affordable
Health Care Costs: John McCain will reform health care making it easier for individuals and families to obtain insurance. Americans are working harder and longer, yet the amount workers take home in their paychecks is not keeping pace because of rising health care costs. An important part of his plan is to use competition to improve the quality of health insurance with greater variety to match people's needs, lower prices, and promote portability. Families should be able to purchase health insurance nationwide, across state lines. This process already occurs in large, multi state companies, where the plan may be based in SC while the employee works in MD or DE. Currently, the cost of a policy varies due to profit, claims. state mandates and insurance overhead costs. Allowing sales across state lines will weaken state regulation and put the consumer at greater risk of no state representation, or having to go to the policy state for assistance. This may be an unacceptable option for the consumer.

Making the Tax Subsidy Fair: By making the tax code more equitable and transparent, John McCain will give every family a refundable tax credit - cash towards insurance - of $5,000 (Individuals receive $2,500). Every family in America, regardless of the source of their insurance or how much they make will get the same help. Families will be able to stay with their current plan, or choose the insurance provider that suits them best and have the money sent directly to the insurance provider. This portion is a plus for the consumer as there is no difference for the insured based on employer or employment.

Making Insurance More Portable: Americans need insurance that follows them from job to job. Too many job decisions today are controlled by a fear of losing health care. Americans want insurance that is still there if they retire early and does not change if they take a few years off to raise the children. John McCain will lead the reform for portable insurance. This is a solution to a real problem - if I can not keep my insurance in effect, I am at risk of not being able to acquire a replacement policy due to pre-existing issues.


since there has been much talk about taxes on benefits, I searched also for this, and found Mc;Cain's speech on health care, see:
http://www.johnmccain.com/Informing/News/Speeches/2c3cfa3a-748e-4121-84db-28995cf367da.htm

from that speech:

"Americans need new choices beyond those offered in employment-based coverage. Americans want a system built so that wherever you go and wherever you work, your health plan is goes with you. And there is a very straightforward way to achieve this.

Under current law, the federal government gives a tax benefit when employers provide health-insurance coverage to American workers and their families. This benefit doesn't cover the total cost of the health plan, and in reality each worker and family absorbs the rest of the cost in lower wages and diminished benefits. But it provides essential support for insurance coverage. Many workers are perfectly content with this arrangement, and under my reform plan they would be able to keep that coverage. Their employer-provided health plans would be largely untouched and unchanged. "

Only if this benefit would no longer be a tax reduction for a business would it have the effect of reducing the amount of coverage a business would pay for.

To do that, it would require a change to the tax code (not likely) and such a change would only affect about 25 - 30% of the employed. Here is why:

Since the government pays no taxes to it's self, changing where those benefits fall on the balance sheet would have no impact on government workers. Those that are self employed, and those in the the public service sector, like Public Schools, Police and Fire, State and local municipalities and services, would also not see any changes to coverage. Add to that the 6% unemployed ( just under 30 million), the 45 million uninsured, plus those on Welfare programs, those who are retired or on Medicare and out of 360 million in the US, it's safe to say over 7o% of the population will see no impact of such a change.

"But for every American who wanted it, another option would be available: Every year, they would receive a tax credit directly, with the same cash value of the credits for employees in big companies, in a small business, or self-employed. You simply choose the insurance provider that suits you best. By mail or online, you would then inform the government of your selection. And the money to help pay for your health care would be sent straight to that insurance provider. The health plan you chose would be as good as any that an employer could choose for you. It would be yours and your family's health-care plan, and yours to keep. "

This would encourage the healthy uninsured to get coverage, since they could not get the credit without the insurance.

"The value of that credit -- 2,500 dollars for individuals, 5,000 dollars for families -- would also be enhanced by the greater competition this reform would help create among insurance companies. Millions of Americans would be making their own health-care choices again. Insurance companies could no longer take your business for granted, offering narrow plans with escalating costs. It would help change the whole dynamic of the current system, putting individuals and families back in charge, and forcing companies to respond with better service at lower cost.

It would help extend the advantages of staying with doctors and providers of your choice. When Americans speak of "our doctor," it will mean something again, because they won't have to change from one doctor or one network to the next every time they change employers. They'll have a medical "home" again, dealing with doctors who know and care about them.

These reforms will take time, and critics argue that when my proposed tax credit becomes available it would encourage people to purchase health insurance on the current individual market, while significant weaknesses in the market remain. They worry that Americans with pre-existing conditions could still be denied insurance. Congress took the important step of providing some protection against the exclusion of pre-existing conditions in the Health Insurance Portability and Accountability Act in 1996. I supported that legislation, and nothing in my reforms will change the fact that if you remain employed and insured you will build protection against the cost of treating any pre-existing condition.

Even so, those without prior group coverage and those with pre-existing conditions do have the most difficulty on the individual market, and we need to make sure they get the high-quality coverage they need. I will work tirelessly to address the problem. But I won't create another entitlement program that Washington will let get out of control. Nor will I saddle states with another unfunded mandate. The states have been very active in experimenting with ways to cover the "uninsurables." The State of North Carolina, for example, has an agreement with Blue Cross to act as insurer of "last resort." Over thirty states have some form of "high-risk" pool, and over twenty states have plans that limit premiums charged to people suffering an illness and who have been denied insurance."




for another opinion, see:
http://healthpolicyandmarket.blogspot.com/2008/03/detailed-analysis-of-barack-obamas.html

1 comment:

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