PUBLIC HEALTH
April 7, 2008

Proposals for Containing Health Care Costs

Presidential candidates Obama, McCain and Clinton agree on one thing: our health care system is too expensive and getting more expensive all the time. And because they remember "Harry and Louise," all three are promising reform that delivers all of us more, better care at lower cost. You remember Harry and Louise; they were the stars of a series of TV ads paid for by the insurance industry in 1993 that helped sink the Clintons' first health care reform initiative by suggesting that the middle class would have to sacrifice in order to pay for health care for the poor and uninsured.

This year, all three candidates have proposed ways to contain health care costs; this is a slightly more critical issue for the Democrats because they, unlike John McCain, have proposed ideas — such as extending health insurance to most or all of the nation's uninsured — that will increase health care spending in the short run.

Would McCain's brand of competition really deliver better health care, cheaper? And would Obama's and Clinton's alleged cost savings come close to paying the real costs of universal — or near universal — health care coverage and other improvements? Expert opinion differs.

Obama: Seeking Cost Transparency and Caps on Insurers' Profits
Barack Obama supports the concept of disease management for people with chronic health problems that require ongoing care — such as heart disease, diabetes, hypertension or obesity. The idea behind disease management is to reduce costs by preventing or minimizing the effects of disease, rather than simply waiting for a health crisis before engaging the health care system. For example, a health care team might help a person to control their diabetes and prevent cardiovascular disease by encouraging them to address lifestyle risk factors such as smoking, obesity and lack of exercise and offering them a program to do so.

Senator Obama also advocates "full transparency about quality and costs," along with strengthened antitrust laws to help lower malpractice insurance premiums for doctors, and electronic medical records as ways to reduce the cost of health care. In addition, he has proposed limiting allegedly exorbitant insurance company profits by forcing insurers to pay out a set portion of their premiums to consumers. In order to lower drug costs, Obama proposes allowing Americans to buy medicines from abroad and repealing the law that forbids the federal government from negotiating drug prices.

McCain: Make Providers Compete
John McCain has said, "The biggest problem with the American health care system is that it costs too much, and the way inflationary pressures are actually built into it." He sees this bringing on a coming fiscal crisis that threatens both our health care system and our viability in the international economy. For example, he points out that the price of a Toyota contains $200 for workers' health care coverage, while GM automobiles' pricetags include $1500 for health care costs. Unless we as a nation find another way to pay for health care, McCain argues, our ability to compete with foreign car makers, or any foreign manufacturers, will be crippled.

McCain's answer to rising costs is more competition. He proposes increased competition between providers and among alternative treatments, giving states the flexibility to experiment with Medicaid regulations, building "genuine national markets" by allowing providers to practice nationwide. Along with Obama and Clinton, Senator McCain supports conversion to electronic medical records. He believes in tort reform to reduce "frivolous lawsuits and excessive damage awards." He is a little vague on how his proposals will control rising drug costs. McCain stresses "personal responsibility" and free−market competition over the Democratic plans, which he criticizes as "big government" and "anti−choice."

Clinton: A 7−Step Strategy
Hillary Clinton has put forth what she calls a "7−step strategy for lowering spiraling costs by 1/3 over time." This entails focusing on prevention, shifting from a paper−based to a computer−based medical records system, managing chronic illnesses such as diabetes and heart disease which account for over 75 percent of health care spending, ending the "over−utilization" of certain medical interventions, and limiting insurance, drug, and malpractice costs.

Senator Clinton claims that her proposals would lower national health spending by $120 billion dollars a year and that these savings could be reinvested in the system to help cover the 45 million uninsured.

Health care cost containment is a front−burner issue for both parties and for candidates of all ideological stripes. Because the cost of employer−provided health coverage is hurting corporate America, employers "are more interested in reform today than at any time since the Clinton effort" in the early 1990s, says Robert S. Galvin, director of health care at General Electric, which provides health benefits for nearly half a million workers. Of course, people who are self−employed therefore and self−insured feel the need to contain or cut costs just as urgently.

Would McCain's brand of competition really deliver better health care, cheaper? And would Obama's and Clinton's alleged cost savings come close to paying the real costs of universal — or near universal — health care coverage and other improvements? Expert opinion differs. According to Dallas L. Salisbury, president and CEO of the Employee Benefit Research Institute and a member of The Commonwealth Fund Commission on a High Performance Health System, "Presidential candidates have been long on rhetoric and short on specifics in their call for health care cost control. Republicans mainly suggest that moving to an individually based system where individuals have to pay more will bring a market solution: lower spending. Yet, if most spending is tied to chronic disease — as the data firmly show — deductibles at the levels required for health saving account tax preferences will achieve little total system savings. Democrats mainly suggest universal coverage, better information, and new payment approaches. Again, given the high proportion of total spending attributable to chronic conditions, these changes may improve efficiency and outcomes, but they will not come close to solving the health care cost spiral."

Thanks to the legacy of Harry and Louise, however, one thing is certain: no presidential candidate will openly advocate either the status quo or taking away any existing service or benefit.

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