Election no big deal for health industries

By Don Johnson

McCain to talk about healthcare costs this week ...

Health industry executives have few reasons to worry about the so called health care reforms, or health insurance industry reforms, being proposed by the presidential candidates.

Sen. John McCain, the presumptive GOP presidential nominee, is focusing his attention on heath care cost containment this week, but a report in yesterday’s Wall Street Journal shows that he doesn’t understand the problems any better than Senators Clinton and Obama. Americans need regulatory changes (no laws are “reforms") that make health insurance something consumers can use to protect themselves against catastrophic losses and let individuals buy their policies directly from insurers instead of buying policies selected by their employers. And consumers should pay for their primary care and preventive care services out of their pockets, or, at the least, buy unbundled insurance for those services instead of buying bundled insurance that is unaffordable for so many.

The real question is how much could a President McCain do about health insurance costs with a Congress controlled by Democrats, and would he pay much attention to the problem if it were clear that Congress would mark his proposals dead on arrival?

Fortunately, the presidential candidates’ wild and undeliverable promises of comprehensive health insurance reforms and universal health insurance are being questioned by Congressional Democrats as well as by the policy wonks quoted by the wsj.com. No wonder health industry executives aren’t worried about who’s elected in the fall. They apparently have decided it won’t make a difference for them or their stocks.

The impact and concluding graphs from wsj.com and some of my comments follow (click on headline):

Some of Sen. McCain’s other ideas are more controversial. He would change the tax treatment of health benefits so that people wouldn’t need to go through an employer to get a tax break on their premiums. That could promote competition based on price, whereas most employees today have no idea how much their insurance costs.

The idea is opposed by many Democrats for fear that older, unhealthy people will be pushed into buying insurance on their own and won’t be able to get it or to afford it.

The answer to that problem is simple. Community rating would make health insurance more affordable for older and sicker people, but that idea is opposed because it would make insurance a bit more expensive for younger people. Community medical risk rating with age rate bands could make community rating more acceptable. Individual and small group medical risk rating must be regulated out of existence. In addition, each insurer should be required to create metropolitan, state or regional risk pools for all of their insureds, which would effectively implement a form of community risk rating and eliminate individual risk rating.

Sen. McCain would also allow people to buy insurance across state lines, creating a national market where competition based on price could occur. Democrats also oppose that because the same state regulations that can increase the price are also needed, they believe, to protect consumers.

This is a political problem. Insurers pour millions of dollars, if not billions, into the campaign coffers of Congressional candidates and state legislators. Taking the states out of the health insurance regulation business would cost the politicians both money and power. They aren’t about to give up either.

Implementing even proven, bipartisan solutions can be difficult.

Mr. Reischauer, who serves on a Medicare advisory panel, pointed to a demonstration project that showed competitive bidding for durable medical equipment, such as oxygen tanks or wheelchairs, lowered Medicare costs without compromising quality. But he said spreading that practice to the rest of the country is meeting resistance in Congress because some equipment makers will lose business.

Sen. McCain is proposing bundled payments for providing care to Medicare patients with chronic conditions, with the doctors and hospitals involved forced to divide up the money on their own. That would allow reimbursement for cheap but effective activities such as talking with a patient about how to manage his or her condition and would discourage extra visits and procedures that are now paid a la carte. Sens. Clinton and Obama have similar ideas.

But this kind of change can be threatening to health-care providers, said Gail Wilensky, who ran the Medicare program under former President Bush and is now advising Sen. McCain. “It’s a big power shift as to where the money goes and how it is divided up.”

It’s all about money and power. The hidden earmarks are the laws politicians enact to to protect the weak, inefficient and technologically lagging businesses from their stronger competitors and changing markets and regulations.

Even if the candidates’ cost-cutting agenda were implemented, Ms. Wilensky said, it’s unclear how successful it would be at lowering costs, or even at slowing the increases.

“The real answer is we don’t know,” she said. But if these ideas don’t work, she said, the alternatives are largely disturbing: price controls, stifled innovation and stemming the spread of new technology. “It gets real ugly real fast.”

Ugly sells. Look at the Clinton and Obama health schemes, which promise more than they can ever deliver.

Donald E. L. Johnson has been blogging since early 2003 at www.businessword.com on health care policy, economics and stocks and writing about them since 1976.