The Folly of McCain-Care

Let’s encourage people to drop their employer insurance and shop for coverage on their own, he said, since that will create a vibrant market in which people can find better bargains. And since some people will still have trouble paying for insurance, let’s give them a tax credit that would help offset the cost.

A big problem with this scheme, as critics like me pointed out, was that it wouldn’t do much for people who were already sick. Insurance companies generally won’t offer coverage directly to people with “pre-existing conditions,” since they represent such bad financial risks. (It turns out people with medical problems need medical care!) So buying insurance on their own really isn’t an option. 

In just the last few weeks, this issue has started to become a political liability for McCain, thanks mostly to Elizabeth Edwards, who--in addition to being a well-known cancer patient--is also a well-known policy wonk. Edwards has given a series of speeches in which she has pointed out that neither she nor McCain himself, who is a three-time melanoma survivor, could buy individual insurance under his plan, since insurers would disqualify both of them for pre-existing conditions. 

McCain bristled at this suggestion, vowing recently to ABC’s George Stephanopoulos that “we’re not leaving anybody behind.” His advisers echoed that sentiment, saying Edwards didn’t fully understand the proposal--and that, in short order, they’d have more to say on the subject.

Apparently that’s what McCain was doing earlier today. In a speech at a Florida cancer hospital, McCain acknowledged that people with pre-existing conditions can’t always buy insurance on their own. But, he says, that doesn’t mean these people will be left to twist in the wind. 

Instead, McCain is offering people like Edwards what he calls a “Guaranteed Access Plan.” But unlike all those awful big-government entitlements the Democrats are promising--you know, the ones that (supposedly) make you wait in long lines and cut off access to high-technology treatments--McCain says his plan will let the states handle the problem by working hand-in-hand with private insurers to offer insurance for people with pre-existing conditions. 

It will be the best of both worlds, McCain promises: Affordable, available insurance, but through private carriers and without the heavy hand of Washington.

It all sounds very lovely--unless you know something about health care policy, in which case it sounds absolutely preposterous. 

More than 30 states already have programs almost exactly like the one McCain just sketched out. They are called “high risk pools,” and the idea is pretty straightforward: Private insurers agree to sell policies directly to individuals, even those with pre-existing medical conditions, as long as the state helps to subsidize the cost.

But the whole reason conservatives like McCain prefer this approach to liberal schemes for universal coverage is that it involves minimal government regulation. As a result, private insurers have enormous leeway in dictating the terms of coverage. And one place they use that leeway is by setting high prices. A few years ago, a Commonwealth Fund study found that, on average, state high-risk pools offered coverage that was two-thirds more expensive than regularly priced coverage. In some states, the high-risk coverage was actually twice as high as regular coverage.

At those prices, you might think the coverage was spectacular. Not so. While private insurers in high-risk pools are willing to accept people with pre-existing conditions, they’re not generally willing to cover expenses related to those pre-existing conditions--at least not right away. Nearly all the plans surveyed had waiting periods of between six months and a year, during which the insurers would not cover care for prior medical problems.

The plans also came with high cost-sharing; that is, beneficiaries were required to pay a sizeable portion of the bill--say, 20 percent--straight out of their pockets every time they received medical service. And, in many cases, the policies had lifetime benefit limits of a million dollars--which is not that hard to hit if you have the kind of serious medical condition that would land you in a high-risk pool in the first place.

To put this in more practical terms, I contacted Karen Pollitz, a research professor at the Georgetown University Health Policy Institute who has done some of the most detailed studies anywhere on high-risk pools and the individual market. Specifically, I asked her to consider what McCain’s plan would--hypothetically--do for the person who has given him the most political grief lately: Elizabeth Edwards. 

It turns out that North Carolina, where Edwards lives, doesn’t actually have a high-risk pool in operation right now. (It hopes to launch one next year.) But neighboring South Carolina does. Pollitz was able to track down published figures with the rates the South Carolina pool would charge a 50-year-old man. (Edwards, a 57-year-old woman, would actually pay more.) And according to those figures, Edwards’ most cost-effective option would be to choose a plan that had monthly premiums of $867 for six months, followed by $693 every month thereafter. 

That plan comes with a $1,500 deductible; in other words, every year Edwards would have to pay $1,500 in medical bills before the insurance kicked in. After that, she’d have to deal with the cost-sharing until she had spent another $3,500 out of her pocket. 

If you do the math, you’ll see that means Edwards would end up paying more than $14,000 a year in insurance and out-of-pocket medical expenses. (At least for now. The rates go up in July.)

But wait--there’s the small matter of her cancer treatment during those first six months, which South Carolina’s pool, like the rest, wouldn’t cover at all. (And, no, those expenses wouldn’t count towards the deductible or out-of-pocket limits, either.) Given the high cost of cancer care--some drugs cost $10,000 a month--Pollitz says that her expenses could easily reach $100,000, although it'd be less if Edwards is no longer getting intensive, cutting-edge treatment.

Edwards, who is wealthy, can afford to pay those bills. But most cancer patients can’t, and as Pollitz notes, “If you have cancer, if you have a tumor growing in you, you can’t just let it grow for six to twelve months while you wait for the pre-existing waiting period to run out.”

The result is that a lot of people with medical problems will end up deciding to forgo insurance altogether, figuring that the insurance will make it harder--not easier--to pay their bills. And those people will almost certainly do what most people without insurance do: Pay out of pocket until they're broke or cut back on their own medical care to save money, even though it could mean worse medical problems (and even higher bills) down the road.

In fairness, one of the reasons these insurance arrangements charge so much money for coverage is that they are serving a population of people with exceptionally high medical bills--i.e., the people who are “high risk.” And states have not traditionally devoted enough money to subsidize them. 

McCain has promised he wouldn’t let that happen--that he’s determined to make sure the insurance is affordable for everybody. But, as many experts have noted, his budget promises are wildly unrealistic: He’s vowed to reduce the deficit, and yet, by all accounts, he’s promised far more in tax cuts than he might possibly generate in accompanying spending reductions. If McCain’s promises to be fiscally responsible are so transparently false, why take promises about his health care initiative on faith--particularly if he’s promising to do something states have tried and repeatedly failed to do  on their own already?

Come to think of it, why should we even believe McCain takes this issue seriously? His Democratic counterparts, Hillary Clinton and Barack Obama, issued detailed policy proposals more than six months ago--with pages of analysis and explanation, right down to the budget dollars. Those details were a sign of commitment and, on a more practical level, their constant hyping of them represent an investment of political capital.

By contrast, even today’s announcement from the McCain campaign--which was supposed to help fill in the many blanks left before--came with only minimal detail and supporting evidence. The actual proposals are still vague, consisting mostly of bland vows to "work with governors" and make sure premiums for people with pre-existing conditions are "reasonable." And while health care is the campaign’s focus this week, it’s never occupied the place in his agenda that it does in the Democrats’.

In a sense, this isn’t surprising. Earlier this year, when I first wrote about the basics of McCain’s health care vision, I asked his economics adviser, Douglas Holtz-Eakin, whether the McCain plan had the same ambition as the Democratic candidates’ plans. Holtz-Eakin, who has a reputation as a straight shooter, gave me a forthright answer: No. “We are not under the illusion that it will get universal coverage,” he said. And that was pretty much the line the campaign seemed to be taking: They might not be covering everybody, but they were helping some people--and doing so in a manner they found preferable to liberal alternatives, which necessarily required the government to become more involved in the deliver of health insurance. It wasn't my view of the world--I think those liberal alternatives have been shown to work very well--but it was an honest and intellectually consistent one.

But with McCain’s vow that “we’re not leaving anybody behind” and the promotion of this “Guaranteed Access Plan,” it seems they’re not so ready to concede ambition after all. Maybe it’s the sting of Edwards’ attacks, which have gotten a lot of media attention. Maybe it’s the poll numbers suggesting that the public thinks health care is major voting issue. Or maybe it’s the fact that McCain, who has always struck me as more decent than most politicians, has genuinely reflected upon the plight of the medically uninsurable.

Whatever the reason, now McCain is talking like he wants to help everybody. Of course, he isn’t ready to give up his market-oriented principles on health insurance; he doesn’t realize that, by its very nature, private insurance operating in a regulatory vacuum is incapable of taking care of the people who need medical attention the most. And that’s why, at the end of the day, his plan for expanding coverage is every bit as inadequate as the critics have said all along.

Jonathan Cohn is a senior editor at The New Republic. He is also a senior fellow at Demos and the author of Sick: The Untold Story of America’s Health Care Crisis--and the People Who Pay the Price.