Health insurance officials are carefully watching what the upcoming presidential election between Sen. Barack Obama, D-Ill., and Sen. John McCain, R-Ariz., will mean for their industry.
Both candidates have put out healthcare plans, although health issues have taken a backseat in the headlines because of the Iraq war, the slowing American economy, the meltdown of the mortgage industry and rising gas prices.
McCain’s health reform proposal is based on a free-market consumer-based system. He has said that it is possible to attain universal coverage without a tax increase.
McCain’s coverage expansion proposals include providing tax credits for buying insurance, along with eliminating tax deductibility of employer-sponsored health insurance.
Obama’s platform requires that all children have health insurance and has aimed for universal coverage. His coverage expansion plans include requiring businesses to either provide insurance or contribute to the costs, with the smallest businesses exempted, as well as creating a purchasing pool with competing private plans and one public plan like Medicare.
There are some similarities,both camps would make health insurance portable from job to job, although McCain has said he would also add state lines to portability.
A poll released last month by the Adaptive Business Leaders Organization, an Orange-based industry group, showed that 56.5% of the group’s executive members believed that Obama would be a better president as far as the healthcare industry is concerned. In a statement, the group said how the candidates chose to “fix” healthcare would touch all players because 2009 healthcare spending is projected at $2.5 trillion, or 16% of the gross domestic product.
Moving to the California state level, the ongoing budget stalemate has eclipsed health reform and other concerns.
Before the budget took center stage, moderate Republican Gov. Arnold Schwarzenegger and two Democratic legislative leaders floated plans.
The Schwarzenegger proposal included a requirement that all people carry health insurance. That requirement, called the “individual mandate,” was something that businesses tended to look upon favorably because of concerns it would be hard to make healthcare affordable unless everyone is required to have it. The governor’s plan also included a 4% tax on gross hospital revenues.
Schwarzenegger’s proposal was announced in January 2007 but never made it out of a Senate committee in spite of support from business, labor groups, hospitals and insurers.
But Herb Schultz, Schwarzenegger’s senior healthcare policy adviser, said in published reports that the governor’s health plan was alive and kicking, and he hoped to have some building blocks of the proposal in place later this year.
Healthcare reform proposals backed by former Assembly Speaker Fabian N & #250; & #324;ez and former Senate President Don Perata did not have an individual mandate. Instead, the Democrats wanted an employer mandate that required businesses to either provide healthcare coverage or pay into a state pool. Those proposals were also held up in committee.
Meanwhile, Senate Bill 840, which would create a publicly funded single-payer system, passed the Assembly’s appropriations committee but is now on hold pending resolution of the state budget. The same bill was passed in 2006, but Schwarzenegger vetoed it because he felt “socialized medicine is not the solution to our state’s healthcare problems.”
That proposal’s advocates, including the California Nurses Association, a labor union that is vocally critical of corporate participation in healthcare matters, believe SB 840 will pass in the Legislature again and set up another showdown with Schwarzenegger.
The Business Journal’s Vita Reed asked several players to discuss how health insurers and health plans could fare under a McCain or Obama administration.
She also asked them to talk about what they expect in California after the budget stalemate is resolved.
Following are their edited comments.
What kind of impact would a Democrat versus a Republican in power have on Capitol Hill?
Clearly, both the presidential and congressional elections could have a significant impact in public policy. I think you got kind of the first installment of a new direction with the override of (President Bush’s) veto on the Medicare bill in late July.
Clearly, the Democratic Congress, which is likely to be larger after the election, is skep-tical of paying Medicare Advantage plans more per capita than it costs for regular, fee-for-service, traditional Medicare. And regardless of who’s president, the Congress is likely to continue to squeeze Medicare Advantage funding. In the past, both candidates for president have expressed skepticism about paying the private plans more than traditional Medicare, so that could happen regardless of who wins.
I think we also expect, regardless of who wins, for (the State Children’s Health Insurance Program) to be expanded,the bill that’s been passed by Congress twice this year and vetoed by President Bush is certain to be passed again and signed by whoever’s president, probably.
So in terms of public programs, those are two that are likely to change.
Do you think Obama will institute a plan similar to Sen. Hillary Clinton’s proposed plan?
Sen. Obama has indicated he will seek to achieve universal coverage in his first term. He’s laid out a framework for that, but the framework will be dependent upon what direction Congress wants to go.
I think you would expect a major initiative by the Obama administration to achieve universal coverage working with Congress, and that could be good for health plans or it could not be good for health plans, (depending upon) not just the role of health plans, but also how it’s financed, what kind of cost containment there is, what incentives there are for provider payments and whether there is true universal coverage or guaranteed issue without a mandate to buy. (The latter) would be very concerning.
But the Obama plan is similar to the Schwarzenegger and N & #250; & #324;ez plan that was proposed to California, and we supported that. The big thing missing from the Obama plan that was in the Schwarzenegger plan was the individual mandate for everyone.
We are comfortable with the general direction of the Obama proposal, provided there was a comprehensive (individual) mandate.
So what about McCain?
McCain’s healthcare plan is very similar to traditional Bush/congressional Republican ideas. That program will not be passed by the Democratic Congress, so if McCain is president, he will have to compromise with the Democrats; the Democrats will have to compromise with him.
I think you’ll see less coverage expansion, but I expect there will be actions that could have a significant impact on the healthcare market.
The elections don’t matter much at the state level because very few seats are truly competitive and the overall party balance isn’t likely to change.
What we do see in the state right now is a plethora of bills that reform healthcare that don’t cost any money basically, and the governor unveiled language on many issues that were included in his comprehensive reform proposal, some of which are the subject of bills that are currently moving through the Legislature.
What bills do you think will pass this year?
There will be a number of bills passed this year that reform healthcare.
The health plans in general are working on all of them; there are some things we like and there are some things we don’t like, but I think you’ll see a number of bills passed on issues (such as) rescission, which is when somebody’s coverage is revoked because they misrepresented their health history on their application.
There will be bills on rescission; there will be bills on a medical loss ratio, on standardized products. There might be a high-risk pool bill; there might be balance-billing legislation.
So there are lots of bills active in Sacramento right now, many of which are likely to be pass and be signed. A lot of them were in the governor’s plan last year.
What are the main things healthcare players want to see from the new president’s healthcare plan?
There’s broad agreement that each campaign has their healthcare platform that’s quite public today and that pieces of those platforms might form the healthcare reform process in the new Congress and the new presidency.
What’s important to note, though, is that there are some common themes that Aetna as a company and even the health insurance industry have been voicing for quite a while. I mean the simple things, the “low-hanging fruit,” if you will, things like health infor-mation technology, moving in a direction that gets us a measure of return on that IT investment that a company like Aetna has made.
A piece of that already occurred,you did have a move toward e-prescribing in the recently passed Medicare bill.
What are the most important things to your company?
Again, the idea is that there will be certain themes,quality improvement, some level of cost-containment, technology, some way to improve access, looking at the tax system. Meaning, in our view as a company, we believe that absolutely everyone should be covered (and) everyone should be required to have coverage.
We are one of the few companies out there that has for years, now, said very clearly that in order to get everyone covered, you have to have an individual requirement.
By the same token, you must have incentives to get people covered, to encourage people to go purchase that coverage and you must have help for those who need it. One of the things we’ll see next year, hopefully, regardless of who’s in the White House, is an examination of the public programs are they getting to the people they’re supposed to help?
The State Children’s Health Insurance Program debate that raged on for about a year over the last Congress was all about, “well, we can cover so many more people if we put more money into it.” Well, there are about 6 million kids out there that can be covered if (the program) is done absolutely at the optimal level. You have to look at it in terms of targeted solutions that can get to certain pockets of the uninsured.
At the same time, you can’t just do access on its own. You have to do access and affordability, meaning the cost of care, and the quality of care all at the same time because just saying, “OK, health insurance companies must cover everybody” doesn’t get to the underlying healthcare costs.
How will healthcare issues rank on the Capitol Hill budgets?
It’s difficult to predict from my viewpoint right now if healthcare will be the first issue out of the gate in the new Congress. But let’s remember that healthcare security is intertwined with economic security; is intertwined with job security. For those reasons, we believe that healthcare must be worked on sooner rather than later.
(The war and gas prices) are cyclical issues that come and go with campaigns, (but) one thing that hasn’t changed is that people need healthcare coverage.
There are several million people, depending on which pocket you look at, that can be covered either through existing government programs, through a slight expansion of government programs or through the development of incentives to get people into the marketplace in a public-private system.
We expect to be very engaged in the debate. Ron Williams (Aetna chief executive) has already been in Washington; we have a lot of things that are happening in the states. We meet with everyone that we can at the highest and senior leadership level to assure them that we are here to partner with them on this pathway to getting their citizens covered.
People will have different set of priorities on whether you move more toward a government, a public-private or a purely private (health reform plan). I think the consensus that’s been building in Washington and outside of the campaigns, the policy consensus that is being built over the last year and a half to two years is one of a public-private solution.
What are politicians identifying as the main issues with healthcare?
Just like our doctors giving a good medical evaluation, our political leaders are diagnosing the causes of a healthcare system that is clearly not well.
Whether it’s our future president or our state leaders, we can be certain that our leaders will be seeking to cover the 6.6 million Californians who lack healthcare coverage,as they should. We hope they focus on the root cause of the problem rather than looking for Band-Aids and unproven remedies.
By 2017, the federal government estimates consumer spending on healthcare will nearly double, and medical costs will consume al-most $1 out of every $5 in the nation’s economy.
Most of these out-of-control costs are di-rectly attributable to doctors, hospitals, prescription drugs and other medical services. Indeed, 87 cents out of every $1 spent on health insurance go to these providers and these services.
In just eight years, the average charge for a hospital stay involving an X-ray shot up 200%. In the U.S., prescription drugs cost 30% to 50% more than in Europe. American doctors earn two to three times more than physicians in other industrialized countries.
Californians also pay more for doctor visits, hospital stays and other medical services because the government doesn’t pay providers enough to cover the cost of treating Medicare and Medi-Cal patients. Physicians and hospitals then charge their other patients more to make up for the income lost on Medicare and Medi-Cal.
How do you propose curbing these costs?
To keep healthcare affordable and expand coverage to the state’s 6.6 million uninsured, these costs must be controlled. Hospitals and physicians together account for nearly three-fourths of the increased expense, so they should be the priority. Just a few examples:
n Promote care that evidence shows is effective, and eliminate ineffective and wasteful tests and procedures.
n Cut expensive and life-threatening healthcare-acquired infections,which cost $3.1 billion in California alone,by following the lead of 19 other states and requiring the state’s hospitals to disclose infection rates.
n Reduce medical errors by using e-prescribing and routine screening of prescription records to lower expensive complications and the 44,000 to 98,000 deaths caused each year by preventable medical errors.
n Lower costs by changing existing state rules to encourage the expansion of the less expensive walk-in retail health clinics that operate during convenient “retail hours” so, for example, a mom can have her child’s strep throat treated in the evening after work, instead of waiting to see the doctor the next day and missing work.
California’s health plans are working to improve the quality of care and to combat rising healthcare costs through the use of new, more affordable products and other tools. We cannot do it alone, and our state leaders can’t do it with cosmetic changes that appear to be fixing the problem when they’re not.
The diagnosis and the cure are clear. The rapidly rising cost of medical care threatens the health of Californians and the state’s eco-nomy. Acting now to rein in these costs will give more Californians access to the care they need and the promise of a healthier tomorrow.
