|
The
big threat to growth in the next decade is not oil or food prices, but
the rising cost of health care. The doubling of health insurance
premiums since 2000 makes employers choose between cutting benefits and
hiring fewer workers.
Rising
health costs push total employment costs up and wages and benefits down.
The result is lost profits and lost wages, in addition to pointless
risk, insecurity and a flood of personal bankruptcies.
Sustained
growth thus requires successful health-care reform. Barack Obama and
John McCain propose to lead us in opposite directions -- and the Obama
direction is far superior.
Sen.
Obama's proposal will modernize our current system of employer- and
government-provided health care, keeping what works well, and making the
investments now that will lead to a more efficient medical system. He
does this in five ways:
-
Learning.
One-third of medical costs go for services at best ineffective and at
worst harmful. Fifty billion dollars will jump-start the long-overdue
information revolution in health care to identify the best providers,
treatments and patient management strategies.
-
Rewarding.
Doctors and hospitals today are paid for performing procedures, not for
helping patients. Insurers make money by dumping sick patients, not by
keeping people healthy. Mr. Obama proposes to base Medicare and Medicaid
reimbursements to hospitals and doctors on patient outcomes (lower
cholesterol readings, made and kept follow-up appointments) in a
coordinated effort to focus the entire payment system around better
health, not just more care.
-
Pooling.
The Obama plan would give individuals and small firms the option of
joining large insurance pools. With large patient pools, a few people
incurring high medical costs will not topple the entire system, so
insurers would no longer need to waste time, money and resources weeding
out the healthy from the sick, and businesses and individuals would no
longer have to subject themselves to that costly and stressful process.
-
Preventing. In today's health-care market, less than one dollar
in 25 goes for prevention, even though preventive services -- regular
screenings and healthy lifestyle information -- are among the most
cost-effective medical services around. Guaranteeing access to
preventive services will improve health and in many cases save money.
-
Covering.
Controlling long-run health-care costs requires removing the hidden
expenses of the uninsured. The reforms described above will lower
premiums by $2,500 for the typical family, allowing millions previously
priced out of the market to afford insurance.
In
addition, tax credits for those still unable to afford private coverage,
and the option to buy in to the federal government's benefits system,
will ensure that all individuals have access to an affordable, portable
alternative at a price they can afford.
Given
the current inefficiencies in our system, the impact of the Obama plan
will be profound. Besides the $2,500 savings in medical costs for the
typical family, according to our research annual business-sector costs
will fall by about $140 billion. Our figures suggest that decreasing
employer costs by this amount will result in the expansion of
employer-provided health insurance to 10 million previously uninsured
people.
We
know these savings are attainable: other countries have them today. We
spend 40% more than other countries such as Canada and Switzerland on
health care -- nearly $1 trillion -- but our health outcomes are no
better.
The
lower cost of benefits will allow employers to hire some 90,000 low-wage
workers currently without jobs because they are currently priced out of
the market. It also would pull one and a half million more workers out
of low-wage low-benefit and into high-wage high-benefit jobs. Workers
currently locked into jobs because they fear losing their health
benefits would be able to move to entrepreneurial jobs, or simply work
part time.
In
contrast, Sen. McCain, who constantly repeats his no-new-taxes promise
on the campaign trail, proposes a big tax hike as the solution to our
health-care crisis. His plan would raise taxes on workers who receive
health benefits, with the idea of encouraging their employers to drop
coverage.
A
study conducted by University of Michigan economist Tom Buchmueller and
colleagues published in the journal Health Affairs suggests that the
McCain tax hike will lead employers to drop coverage for over 20 million
Americans.
What
would happen to these people? Mr. McCain will give them a small tax
credit, $5,000 for a family and $2,500 for an individual, and tell them
to navigate the individual insurance market on their own.
For
middle- and lower-income people, the credits are way too small. They are
less than half the cost of policies today ($12,000 on average for a
family), and are far below the 75% that most employers offering coverage
contribute. Further, their value would erode over time, as the credit
increases less rapidly than average premiums.
Those
already sick are completely out of luck, as individual insurers are free
to deny coverage due to pre-existing conditions. Mr. McCain has proposed
a high-risk pool for the very sick, but has not put forward the money to
make it work.
Even
for those healthy enough to gain coverage in the individual insurance
market, the screening, marketing and individual underwriting that
insurers do to separate healthy from sick boosts premiums by 17%
relative to employer-provided insurance, well beyond the help offered by
the McCain tax credit.
The
immediate consequences of the McCain plan are even worse. The McCain
plan is a big tax increase on employers and workers. With the economy in
recession, that's the last thing America's businesses need.
Finally,
Mr. McCain does nothing to bend the curve of rising health-care costs
downward. He does not fund investments in learning, rewarding and
preventing. Eliminating state coverage requirements will slash
preventive service availability.
The
high cost-sharing plans he envisions will similarly discourage
preventive care. And as he does nothing about the hidden costs of the
uncovered -- expensive ER visits, recurring conditions resulting from
inadequate follow-up care.
Everyone
agrees our health-care financing system must change. But only one
candidate, Barack Obama, has real change we can believe in.
Mr.
Cutler is professor of economics at Harvard and an adviser to Barack
Obama's presidential campaign. Mr. DeLong is professor of economics at
University of California, Berkeley. Ms. Marciarille is adjunct law
professor at McGeorge School of Law.
And
add your comments to the
Opinion Journal
forum.
|