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“Health Care Already Is a Real Economic Problem”

“Health Care Already Is a Real Economic Problem”

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Sara R. Collins is assistant vice president for the Program on the Future of Health Insurance at The Commonwealth Fund and author of the recent report “The 2008 Presidential Candidates’ Health Reform Proposals: Choices For America”. talked to the economist about universal coverage, Americanism and two very different approaches. Ms Collins, the financial crisis is causing many problems and US economy appears to be on the brink to recession. Will that situation hamper future health reforms?

Sara Collins: Affordable health care already is a real economic problem for families. And it is likely going to get worse. As the economy sinks into recession, more people are expected to lose their jobs and their insurance. So this issue really will need to be addressed. If necessary, we can implement reform one step at a time. According to the US Census Bureau about one of six Americans was uninsured in 2007. Except for last year, the number has always been rising in this millennium. Both Barack Obama and John McCain have proposed health reform plans to tackle the problem. What are they about?

Collins: Obama builds on the strengths in the existing system - large employer coverage and public insurance programmes like Medicaid and SCHIP - and he tries to aim for universal coverage. McCain’s proposal is based on the expanding coverage through the individual market - the weakest part of our health system today. What does that mean in detail?

Collins: Obama wants to introduce what he calls a National Health Insurance Exchange, which would largely replace the individual insurance market. This exchange would set up quality standards and regulations for the private insurance market. Through regulations like community rating and guaranteed issue, premiums would not depend on the health conditions of individual persons. Thus, people with health risks could find premiums that are reasonably priced and with standardised benefits. Obama would offer through the Exchange a choice of private or a new public health insurance plan. People with low incomes would be eligible for premium subsidies. People who are not covered by employers and are not eligible for public insurance programmes, people who are self-employed, and small employers could buy a plan through the exchange. Obama would require large companies to offer insurance to their employees or make a payment into the health system to cover their workers and he would use tax revenues from households with an income of 250,000 US dollars or more. And what about McCain’s plans?

Collins: McCain proposes a market based approach with a shift to the individual market. He wants to eliminate the existing income tax exemptions for premium contributions from companies who offer insurance to their employees and replace it with tax credits to individuals and families. These tax credits could be applied either to employer-provided coverage or to purchase health plans on the individual market. However, today more than 60 percent of US citizens under age 65 get their insurance through their employer, only about seven percent get it on the individual market. Also, the premiums are higher on the individual market, especially for people in poor health. People with health risks may only get contracts that do not include their condition or maybe even no policy at all. McCain’s approach would allow people to buy coverage across state lines which means that there would ultimately be fewer consumer protections in individual insurance market in turn worsening the existing problems. His proposal does not address the individual health market’s main problems. Ill people or those at risk of falling ill will still be disadvantaged. To speak in numbers: McCain’s plan is estimated to cover two out of 67 million uninsured people in ten years, Obama’s is estimated to cover 34 out of 67 million at the end of the same period. Obama’s plan resembles the health reform enacted in Massachusetts. In June 2008, the Boston Globe reported that the number of uninsured people in Massachusetts decreased by nearly 50 percent in 2007 due to the reform. However, the costs were significantly higher than expected. With this example in mind, many Republicans argue that Obama’s plan is too expensive...

Collins: The Massachusetts example is similar to but not the same as Obama’s plan, for example Massachusetts requires everyone to have health insurance, Obama would only require children to have coverage. The Tax Policy Center estimates that Obama’s proposal will cost 86 billion dollars in the first year. Thus, it is less expensive than McCain’s plan which according to the Tax Policy Center is estimated to cost 185 billion dollars in the first year. McCain’s proposal seems to be more “American” since it leaves the decision about health insurance up to the people and because it is based on free market competition. State regulations in favour of safety as compared to individual freedom and free market development – what do you think is more attractive for the majority of the American people today?

Collins: I think it is not true to call McCain’s proposal more American than Obama’s. McCain’s proposal, by shifting people away from the employer based system to the individual market in fact would ultimately move the health system in a very different direction from where we are today. Obama’s plan essentially builds on the strongest risk pools in the current system - large employer based coverage and public insurance programmes - and addresses the problems individuals and small businesses face in the individual and small group insurance markets. It is built on the past experience of American health policy. The public has tended to show a preference for employer coverage. And has supported the idea of financing responsibility to be shared between individuals, employers and the government as was shown by a survey the Commonwealth Fund conducted last year: Two thirds of adults across political parties favoured a shared responsibility for financing universal coverage. Is there a completely different health care reform thinkable which would probably be better than the two proposed and possibly ends with universal coverage?

Collins: There has been a convergence around the notion of a mixed private-public approach to achieving universal coverage. I think Obama’s proposal to build on and expand the strongest parts of the current system while repairing its weakest aspects where people are prone to lose coverage is likely the least disruptive way towards universal coverage.

The interview was conducted by Anke Barth.


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Additional Information

The US health care system relies upon a mix of private and public health insurance. Stimulated by tax incentives, most people are insured by their employer. According to the Commonwealth Fund, around twelve percent are insured by Medicare, a social programme for people over 65 and disabled people. Another 13 percent are covered by Medicaid, a social programme for people living under the poverty line, and the State Children’s Health Insurance Program (SCHIP) that provides funds to insure low-income children whose families are not eligible for Medicaid.

Of those not being covered by any of these possibilities, around five percent purchase a health plan on the individual insurance market. That means they buy a plan from any insurance company on the private market with an individually underwritten contract. As these contracts are not regulated or standardised in most states, included benefits and the premium can differ from contract to contract by health status, age, and gender. Altogether, the U.S. Census Bureau published, around 46 million out of 300 million of U.S. people were uninsured in 2007.