Obama vs. McCain

This article is based on stated positions, conversations with health policy advisors and the Senate records of Sens. John McCain and Barack Obama. Much of it speaks in general terms with details not yet spelled out — and unlikely to be — until the new president’s first budget is submitted in February 2009.

While recent presidential budgets have been declared dead on arrival, the next president’s proposed federal budget will be submitted during what is likely to be a brief honeymoon period and, as a result, will be important in establishing the new administration’s priorities.

Sen. Obama has already stated publicly that, if elected, he plans to address health care reform within the first hundred days of his administration; Sen. McCain has not yet announced a timetable for health reform.

The makeup of the Congress and in particular the Senate will determine how much of any proposed new programs can be enacted. A filibuster-proof Senate would greatly increase the odds of broad action, yet Republicans are expected to stay within the narrow minority margin in the upcoming November election.

With a Democratic-controlled Congress, some say revamping federal health policy might be marginally easier during an Obama presidency because of the so-called “cooperation factor” between the congressional majority and the new administration.

Neither Obama nor McCain, however, has articulated any specific or formal position regarding the immediate issues most critical to our industry, such as the competitive bidding program. These issues are far more detailed than campaigns usually address. Following are the larger health policy issues that have been communicated by the two presidential candidates.

Key Advisors

Presidential advisors, especially the chief of staff, domestic policy advisor and director of the Office of Management and Budget, will be critical. Key players are categorized here as either “high-level health advisors” (big picture surrogates and potential HHS appointees) or “details” advisors (staff who are well-versed in policy minutiae, including current Senate health staff).

• Health Reform

  Obama high-level health advisors: Former Sen. Tom Daschle; David Cutler (Harvard Kennedy School economics professor, member of Council of Economic Advisors under President Clinton); David Blumenthal, MD (ex-advisor to Sen. Ted Kennedy, Director of the Institute of Health Policy at Mass General Hospital); and Stu Altman (Dean of the Brandeis University School for Social Policy & Management). Obama “details” advisors: Chris Jennings (chief architect of the Clinton ’93 health plan, former senior official at HHS; Jane Loewenson (HHS official under Donna Shalala, former Daschle staffer); and Senate health assistant Dora Hughes.
• McCain high-level health advisors: Doug Holtz-Eakin (former Congressional Budget Office director, chief economist for the Bush Council of Economic Advisors); and Regina Herzlinger (Harvard Business School professor, proponent of consumer-driven health care). McCain “details” advisors: Tom Miller (AEI fellow, former health economist for the Congressional Joint Economic Committee); Gregg Bloche (professor at Georgetown University Law Center); and Senate health assistant Talal Mir.

Though their approaches vary, both candidates have stated publicly their intentions to broaden coverage for some portion of the nation’s 47 million uninsured.

McCain opposes any federal mandates on individuals to buy health insurance or on employers to provide health insurance coverage. He also supports reduced regulations on the insurance industry in order to foster more competitive markets for the purchase of health care coverage.

Obama believes that his plan will save a typical American family up to $2,500 a year on medical expenditures by providing affordable, comprehensive, portable health coverage for every American, via a new public insurance program and creation of a National Health Insurance Exchange to help Americans and businesses that want to purchase private health insurance directly.

To paint with a broad brush, Obama prefers more government regulation and universal coverage via expanding programs like SCHIP (the State Children’s Health Insurance Program) and creating fallbacks, such as a potential Medicare buy-in mechanism for all Americans. However, it is anticipated that some Democrats may want to highlight people ages 55-64 to help the Medicare Trust Fund situation by adding healthier people.

McCain supports a limited increase in regulation (insurance market and prescription drug reforms) and the creation of tax incentives to support expanded private coverage without a defined benefit package. The McCain plan also emphasizes the need to reign in health care spending nationally via cost controls and revising federal payment systems.

Plan Costs

The Obama plan has been assessed at $50-60 billion annually, when fully phased in. At press time there were no estimates of the potential cost of the McCain plan.

Overview

• Current Public Program Modifications McCain increases efforts to enroll already eligible individuals and allows use of SCHIP and Medicaid funds for private insurance. Obama expands eligibility for Medicaid/SCHIP to an unspecified level.
• New Sources of Health Insurance McCain advocates for regulatory changes that would allow insurance companies to sell insurance across states. Obama creates the National Health Insurance Exchange; would establish a public insurance program that parallels the Federal Employees Health Benefits Program (FEHBP) and a reinsurance pool for catastrophic costs.
• Coverage Requirements and Responsibilities McCain provides states with flexibility to develop mandates or coverage requirements, and believes parents have a responsibility to obtain coverage for children. Obama mandates that all employers provide coverage except for start-ups and very small businesses, mandates that all children obtain coverage and reimburses a portion of premium costs to employers when reimbursement is used to lower premiums for employees. Young people up to age 25 would be permitted to continue coverage through their parents’ plans.
• New Tax Incentives or Penalties McCain would eliminate the income tax exclusion for health care tax benefits provided by employers and replace it with a refundable tax credit of $2,500 for individuals and $5,000 for families when health insurance is purchased. He also increases tax-exempt contribution levels for health savings accounts. Obama creates an unspecified penalty for employers that do not provide coverage and similarly penalizes parents who do not obtain coverage for children. A percentage of this revenue would be put into a federal trust fund to subsidize insurance purchase for those who otherwise couldn’t afford coverage.
• Low-Income Subsidies McCain provides no income-specific tax exclusions, only $2,500 tax credit for individuals and $5,000 for families. Obama provides an unspecified income-based subsidy for health premiums on coverage purchased in the National Health Insurance Exchange or new public program.

Entitlement Reforms

Obama and McCain agree on the need for overall budget reforms but both fall short on detail.

It is likely that Congress will appoint a commission to evaluate and propose potential reforms to limit entitlement growth. This may be the most important issue for the health industry, as the Medicare Trust Fund, which pays for hospital care, is projected to be insolvent in 10 years.

One cost-cutting approach considered by Republicans included a proposal in the FY 2009 budget to reduce health providers’ Medicare payments by 0.4 percent annually until fiscal stability could be restored to the Medicare Trust Funds. The $178 billion in proposed Medicare cuts were swiftly rejected by Democrats in both the House and the Senate, but the notion of of Medicare payment cuts (or freezes) as short-term policy is not an afterthought for Congress.

An Obama approach to entitlement reform is more likely to increase taxes to bolster Medicare and Social Security Trust Funds. Technical corrections to the Medicare drug benefit would increase subsidies for low-income seniors, fill the doughnut hole and eliminate Medicare Advantage overpayment.

Means testing is on the table for both candidates, especially for the drug benefit. Obama has hinted that he expects to move his health care reform package via a reconciliation process (requiring only 50 votes for passage in the Senate).

McCain has suggested Medicare consider bundling physician and hospital payments into episodes of care. Quote: “We should pay a single bill for high-quality disease care, not an endless series of bills for pre-surgical tests and visits, hospitalization and surgery, and follow-up tests, drugs and office visits.”

Obama wants to redesign our health care system dramatically to reduce inefficiency and waste and improve health care quality. Quote: “The nation faces epidemics of obesity and chronic diseases … Our health care system has become a disease care system, and the time for change is well overdue.”

Both candidates believe government programs such as Medicare and Medicaid should lead the way in health care reforms that improve quality and lower costs.

Who Is Better for Health Policy?

While macro-level policies have been stated, few details on payment have been mentioned by either candidate. For the most part, congressional action will drive the micro-agenda items of most concern to the health care industry at large, such as prescription drug reimportation, comparative effectiveness, changes to Medicare Part D and health information technology.

Where McCain and Obama Agree

• Reimportation: Both McCain and Obama support the reimportation of prescription drugs from other countries. Obama’s plan allows for reimportation of safe drugs when prices are lower than in the United States.
• Future of Medicare Advantage: Both candidates support elimination of the excessive subsidies to Medicare Advantage plans and would pay them the same amount it would cost to treat the same patients under regular Medicare.
• Federal Drug Price Negotiation: Both candidates favor direct negotiations between Medicare and drug companies to secure deeper discounts on drugs under the Medicare Part D program.
• Generics: Both candidates support the faster introduction of generic drugs into the health care marketplace, particularly within government programs. Obama would also work to prohibit large drug companies from keeping generic competition out of the market. Both Obama and McCain have also indicated support for legislation allowing the FDA to establish a faster pathway to generic biologics.
• Health Information Technology: Both embrace electronic health information systems to help reduce costs and pay for their proposals. McCain would establish a secure, national medical record, while Obama has pledged $10 billion annually for five years to establish phase-in requirements for implementation and adoption of standards-based electronic health information systems nationally.
• Chronic Care Coordination: McCain promotes personal responsibility to treat chronic disease and addresses three areas of prevention in terms of public health initiatives to change behavior, incentives to encourage screenings and a payment mechanism that rewards outcomes and patient compliance. Obama requires coverage of preventive services, including screenings and smoking cessation.
• Pay for Performance: Both candidates are interested in efforts to more closely base Medicare payments on performance. McCain and Obama will look to shift more spending to preventive care — greater emphasis on keeping people well than on treating them once they’re sick. One component of these efforts might be requiring hospitals and providers to collect and publicly report measures of health care costs and quality, including data on preventable medical errors, nurse staffing ratios, hospital-acquired infections and disparities in care and costs.
• Tobacco Regulation: Both Obama and McCain support legislation that would provide for FDA regulation of the tobacco industry.

Where McCain and Obama Differ

• Comparative Effectiveness: Obama supports comparative effectiveness research, which would weigh different treatments against each other. Specifically, he supports an independent institute to guide reviews and research on comparative effectiveness drugs, devices and procedures to improve medical decision making.
• Medicare Reimbursement: McCain would eliminate Medicare reimbursement for preventable errors and restructure Medicare payment toward a more comprehensive coordinated care model.
• Tort Reform: McCain would establish caps on noneconomic damages in malpractice cases, while Obama would strengthen antitrust laws on malpractice insurers and likely regulate rate increases.

A specialist in health care legislation, regulations and government relations, Cara C. Bachenheimer is vice president, government relations, for Invacare Corp., Elyria, Ohio. Bachenheimer previously worked at the law firm of Epstein, Becker & Green in Washington, D.C., and at the American Association for Homecare and the Health Industry Distributors Association. You can reach her by phone at 440/329-6226 or by e-mail at [email protected].