Stakeholder Perspective: Health Reform and the Next President

Resident scholar Joseph Antos comments on the different between the basics of the presidential candidate health care plans. Antos describes the likelihood of sweeping versus more conservative, incremental reforms, in light of the ramifications of the current financial crisis. However, he remains optimistic about the possibility of progress within in the next four years.

Wilson H. Taylor
Scholar Joseph
Antos

Senators Barack Obama and John McCain offer sharply different visions of health sector reform, but they share the same general policy objectives. Both presidential andidates support expanding government subsidies to increase the number of people who have health insurance. Both candidates argue that health insurance must become more affordable. Both candidates embrace changes, such as expanded use of health information technology and improved management of high-cost patients, which could improve efficiency in healthcare delivery. Both candidates avoid admitting that their visions can only be had at a price--requiring higher taxes to finance subsidies, substantial new investments to implement health system improvements, and changes in the way healthcare is practiced. This is the stuff of political campaigns, long on promises and short on implementation.

The differences between the candidates are worth examining. Senator Obama emphasizes business as usual, albeit with larger subsidies and more regulations. His two "big" ideas--organizing the nongroup insurance market along the lines of the Federal Employees Health Benefits program and requiring employers to contribute to worker health benefits or pay a new tax ("play or pay")--focus on expanding coverage. At least in the near term, affordability means higher subsidies, not lower cost.

Decisions made over the next four years will lay the foundation for major reforms in the future.

The centerpiece of Senator McCain's reform is replacing the current income tax exclusion with a flat tax credit, which would eliminate the bias in favor of more expensive coverage. The tax proposal would make purchases in the nongroup market more attractive, but it does not spell the end of employer coverage. The McCain proposal would reshape federal subsidies to dampen the growth of health spending.

Which strategy would be more effective in reaching the goals shared by both candidates? Unfortunately, we may never know. Prospects for major health reform have declined sharply with the unprecedented disruption of financial markets whose potential impact is only beginning to be realized. Faced with a nearly $500-billion budget deficit and demands for federal investments in energy, education, infrastructure development, and defense, the next president will have little ability to mount a major health reform.

Incremental reforms are possible but they will largely be financed by reducing other health outlays. Congressional attention will focus first on extending (and probably expanding) the State Children's Health Insurance Program. By the end of 2009, Congress must also find a face-saving way to delay a scheduled 20 percent reduction in Medicare physician fees. Those two priorities will cut into the money left to be redirected to reform.

We are likely to see the imposition of "best price" discounts on Medicare Part D drugs purchased by dual-eligibles, and payments to Medicare Advantage plans will be reduced. Congress will intensify its interest in "follow-on" biologics, but safety concerns (heightened by recent reports of tainted milk products from China and possible contamination of generic drugs produced by Ranbaxy) have deflated interest in drug importation as a way to reduce the cost of pharmaceuticals.

Although health reform will not take center stage next year, progress will be possible. Decisions made over the next four years will lay the foundation for major reforms in the future. The next president can make a difference in healthcare, although the credit (or blame) might well go to his successor.

Joseph Antos is a Wilson H. Taylor Scholar in Health Care and Retirement Policy at AEI.

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