Summary of the Democratic Presidential Health Care Proposals
The starting points: Medicare covers seniors and the disabled, is paid for by the federal government and covers very little long term care, no dental or vision care. Medicare comprises four parts: Part A for hospital care, Part B for doctors, Part D for prescription drugs and Part C that combines them all through private insurers (HMOs and PPOs). Just over 5.6 million Californians are enrolled.
Medi-Cal covers the poor; it is paid for by the federal and state governments; it covers a full range of long term care, most dental care and vision care only for children. Almost all subscribers are enrolled in local managed care plans (HMOs). Over 13 million Californians are enrolled.
Employment-based coverage covers about ½ of all Californians; it is paid for by employers and employees assisted by a very large tax subsidy (pre-tax purchasing). Most enrollees are in HMOs; the rest in PPOs. Large and medium sized employers are required to offer coverage to their full time employees, small employers are not so required.
Covered California (Exchanges) cover the uninsured and private individually insured above Medi-Cal levels; individuals pay a share of premiums based on their incomes and the federal government pays a very large share of the premiums, copays and deductibles for those who cannot afford the full cost. Individuals pick their plan, their doctor and their level of coverage. Individuals not otherwise covered by Medicare, Medi-Cal, their employers or the VA are required to enroll in coverage, if affordable. About 1.5 million are enrolled.
The undocumented uninsured (about 1.5 million Californians) are only eligible for emergency care and prenatal care through Medi-Cal if they are low income, but are otherwise ineligible for federally financed coverage. California has just begun to offer full scope Medi-Cal for low income undocumented children (about 170,000 may be eligible). This will be through local HMOs.
Presidential candidate Bernie Sanders proposes Medicare for All. It would cover every American resident regardless of income or immigration status. It would cover all services, including long-term care, dental care, vision care and hearing aids. Like Medicare, all provider reimbursement rates would be set by the federal government. This is in line with many other countries. Private insurance would disappear except as supplemental coverage (similar to Medicare supplemental coverage). Private hospitals and doctors would continue to be the bulwark of care.
It would be financed as follows: 6.2% payroll tax for all employers, 2.2% payroll tax for all employees, 8.4% self-employment tax, increases in federal income tax rates for those making over $250,o00 annually, taxing capital gains as regular work income, limiting tax deductions for those making over $250,000 annually, and progressive estate taxes on those inheriting estate distributions over $3.5 million.
This would mean the end of employment-based coverage, individual private insurance, Medicaid (Medi-Cal) and Covered California. It would mean the end of HMOs, PPOs, EPOs, IPAs, Exchanges, refundable tax credits, pre tax purchasing, FSAs, HRAs and all the other myriad ways in which we now organize and finance the payment of health coverage. The roles and financing of the state and local Departments of Health and the state regulatory agencies dealing with insurance would largely disappear as would the roles of insurance brokers and agents.
Presidential candidate Hillary Clinton would build on the existing structure of the Affordable Care Act (ACA) and make existing coverage and care more affordable. She would offer refundable tax credits of up to $5,000 for individuals whose premiums and copays exceed 5% of their income, reduce and cap premium contributions (e.g. no more than 8.5% of family income) in the Exchanges, fix the family glitch (i.e. the option for more affordable family coverage through employers), offer additional federal assistance to those twenty states (primarily in the South) who have not yet expanded Medicaid. She would allow immigrants to purchase in the Exchanges. She would support the public option – allowing individuals who wish to enroll in Medicare before 65 to do so. She would seek to reduce the rise in prescription drug pricing and copays and deductibles by allowing Medicare to negotiate prices and permit importation of Canadian drugs. She would support expansions in telemedicine to facilitate patient physician access and communication. She would increase outreach funding to help people enroll in the program of their choice. Finally she would support Planned Parenthood, family planning and abortion coverage.
This set of proposals would continue employment-based coverage, individual private insurance, Medicaid (Medi-Cal), Exchanges, refundable tax credits, tax deductibility, pre-tax purchasing, insurance reforms and the individual mandate. The roles of the state, employers, counties, insurers and their state regulators would continue.
What are the essential differences? Under the Sanders proposal, there is a huge financing hurdle that has to be solved. In essence, the federal government must pay for health care services now being paid by employers, individuals and the state and local governments. Their estimate is $1.3 trillion annually. I think the cost is significantly higher as it has to replace employer spending, individual spending and state and local government spending as well.
It appears that under the Sanders proposal, copays, deductibles and other patient out of pocket expenditures are eliminated. Under the Sanders proposal, long term care, dental and vision are covered as well. These are important but expensive elements.
Under the Sanders proposal, reimbursement rates are tightly regulated by the federal government. This has the potential to slow the rate of growth in health spending.
Under the Sanders proposal, private insurance is eliminated. There are real savings in administrative costs from this feature. But this also eliminates the dynamic progress of competition and stifles the shift towards better-integrated delivery systems because Medicare is primarily a fee for service system.
The Clinton proposals seek to attack some of the most egregious affordability problems that have emerged as the ACA has been implemented. For example, copays and deductibles and prescription drug prices have all been soaring recently and need to be addressed. The combined impacts of premiums and out of pocket in the Exchanges are unaffordable for some, leading them to remain uninsured or commit unaffordable shares of family income to health expenditures. The proposals do not fundamentally revise the delivery and payment systems, but rather leaves this to the states and to private insurance initiatives. There are no new limits on the narrow networks or the HMOs, to which some object while others laud.
Some very poor states primarily in the South have not implemented the Medicaid expansion, and thus large shares of their population continue to remain uninsured. The Clinton plan offers 100% federal match for 3 years, phasing down over 6 years to a 90/10 match. It is likely that some states will continue their political recalcitrance no matter the federal offer; it may be better to simply enroll their lowest income uninsured in Medicare if the states do not act within another year.
The Clinton plan offers the opportunity to immigrants to participate in the Exchanges, but at full cost to the subscriber. This will not offer any meaningful coverage to undocumented in California who are mostly very low income and cannot afford the premiums.
Likelihood of enactment: The Sanders proposal while attractive has no chance of passage in the foreseeable future. The Clinton proposals while incremental and difficult to pass in a Republican controlled House do stand some chance of passage once partisan passions on Obamacare have cooled.
My personal preference: The Garamendi plan in California, the Wyden Bennett plan in Congress. These proposals would cover everyone with a choice of health plan. The individual would pay for the extra (incremental) cost above the lower cost plans. This approach is similar to the Exchanges (Covered California) where individuals pay 100% of the cost in excess of the second lowest cost silver plan available in their county and to Medicare Part C and to the multiple choice offerings of some large employers.