Saturday, June 14, 2008

Health care prices got you down? Vote for McCain

The main candidates of the Presidential election, Barack Obama and John McCain, are vocalizing their plans regarding fundamental issues such as the economy, climate change, immigration, Wars, and health care. Listening to the candidates on the radio or reading the issues on their websites is often confusing. In regards to health care, here is the bottom line: McCain’s plan costs less and stimulates competition, while Obama’s plan costs more and reduces competition.

Listed below are the health care plans listed on each candidates official website.

Obama - Obama will make available a new national health plan to all Americans, including the self-employed and small businesses, to buy affordable health coverage that is similar to the plan available to members of Congress.

· The text goes on to use the following words: Guaranteed eligibility, Comprehensive benefits, Affordable premiums, Subsidies, reined in health costs, and Quality and efficiency.

McCain - While still having the option of employer-based coverage, every family will receive a direct refundable tax credit - effectively cash - of $2,500 for individuals and $5,000 for families to offset the cost of insurance.

McCain’s plan costs less and stimulates competition. This is a good plan for two reasons.

First, the expected costs are fairly straight forward and easy to understand. The program is not a complete overhaul of the current health care system and its associated costs are more or less fixed. The plan will cost the government (tax-payers, really) the tax credit $5,000/family * number of families in the U.S. (roughly speaking).

Second, by transferring the subsidy payments (the tax incentives) from the firm where they currently are to the household or individual, health care costs will fall and competition will rise. The current health care system subsidizes firms to supply health insurance to workers. Each worker, regardless of his/her health or age, has access to the same insurance at the same cost. Simply put, younger or healthier individuals pay the same as older or less health individuals. The insurance companies charge higher rates per person because they cannot screen potential insurers on an individual basis. Under McCain’s plan, the subsidy is transferred from the firm to the worker, and each individual will look for insurance based on his/her needs. The American population will be searching for insurance with the best price that fits individual requirements, and the insurance companies will be forced to act more competitively. Insurance costs will fall, and each person will get the health care that they need.

McCain’s plan, of course, is not without its caveats. Certainly, individuals with a pre-existing health condition will be forced to pay higher insurance premiums than individuals without a pre-existing health condition. Therefore, the credit will need to be higher for those with a pre-existing health condition. That kind of detail can be hammered with relative ease.

Obama’s plan costs more and reduces competition. This is a poor plan..

First, the plan is difficult to understand, having many layers in need of attention. Obama promotes universal health, while at the same time, the government will regulate the private insurance industry for those who want to stick with private insurance, will insure all children, expand the eligibility of Medicaid, and allow for flexibility across states. I look at this hodgepodge of a list and am confused.

Second, the expected costs are not clear. The universal health care plan will likely cost more than any projected cost. In Massachusetts, the projected costs in July 2007 for its universal health care system fell short of the actual costs in 2008, resulting in a budget deficit that must be covered. American tax-payers will pay in full the excess costs of the universal health care.

Third, costs will be higher because the system is highly regulated by the government. It is impossible for any one individual or group, i.e., Congress, to regulate an industry with efficiency (hit the right price). Only shifts in supply (new technical development) and demand (customers looking around) can determine the proper price of health care. In the end, Congress will meet behind closed doors and attempt to decide the proper price, cost, and rules and regulations associated with universal health care. It will likely undershoot the target and the American tax-payer will be paying something higher than the efficient (best) price. Further, the government will decide the procedures and technologies allowed under the program according to the population’s needs. Those of us who are different from the average will be again over-insured or under-insured.

I highlight the following words from Obama’s web page: subsidies, reined in health costs, and quality and efficiency.

· Subsidies cannot reign in health costs, and regulation is highly unlikely to yield the best quality and efficiency.

Insurance is certainly important and a key issue in determining quality of life. Those who are insured are better off; the expected lifespan of an individual with insurance is higher than an individual without insurance. Insurance is good, but the plan that costs less is the best plan for the American tax-payers. That is McCain’s plan.

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