McCain’s Tax Credit Still Keeps Health Insurance Out Of Reach For Millions Of Families»

This is part two in a series of blog posts explaining the findings of John McCain’s Radical Prescription for Health Care, a new paper from the Center for American Progress Action Fund. For more, check out part one.

John McCain’s health care plan would create a new health insurance tax credit worth $2,500 tax credit for individuals and a $5,000 credit for families.

But according to a new study, the one-size-fits-all tax credit fails to make insurance affordable for millions. It falls far short of covering premium costs for low income families and it ignores the higher premiums faced by individuals with existing illnesses, who are approaching middle age, or who live in states with higher medical costs.

For millions of families, it’s a five foot rope for a ten foot hole.

A $5,000 tax credit for a low income family is not enough to cover the average price of an insurance policy costing around $14,000. Many poor or near poor families would fail to use the credit at all because they wouldn’t be able to make up the difference in premium costs.

Additionally, older Americans, and those with pre-existing conditions, face much higher premiums in the private market, but John McCain’s credit does nothing to address this.

In fact, an analysis of CBO premium data finds that McCain’s credit would cover only a third of the premiums for individuals who need insurance the most:

McCain’s $5,000 and $2,500 tax credits seem like a simple proposal: but it’s also simplistic and insufficient for the vast majority of Americans. It’s one-size-fits-nobody.

In Controversy Over Medicare Pay Cuts, Conservatives Side With Insurance Industry»

Last week, the White House and its allies in the Senate, voted down a proposal that would have made “cuts to the private Medicare Advantage program” in order to finance the deferment of a 10.6% physician fee cut for doctors who treat Medicare patients.

Writing an editorial in the Wall Street Journal, Scott Gottlieb, a former policy adviser at the Centers for Medicare and Medicaid Services, laid out the conservative argument and baselessly suggested that the private insurance plans that participate in Medicare Advantage provide better care than traditional Medicare and should not be cut:

Private insurers employ thousands of doctors, nurses and pharmacists, many experts in new technologies….private plans spend roughly four times more than Medicare on “consumer services, provider support, and marketing,” which includes money spent answering the telephone to adjudicate individual issues. Smaller health plans use one clinician for every 10,000 beneficiaries. Medicare would need 4,500 clinicians to keep pace.”

But as Robert Laszewski of Health Care and Marketplace Review points out, while Medicare Advantage plans “are paid 13% more than traditional Medicare pays for similar seniors,” there is no evidence to suggest that they deliver “a better cost/quality result” than traditional Medicare programs.

As AARP CEO William D. Novelli explained, “overpayments to Medicare Advantage raise costs for beneficiaries in the traditional program.” This is because Medicare premiums increase with Medicare costs, and overpayments by Medicare “drive premiums higher than they otherwise would be.” As a result, the millions of seniors enrolled in traditional Medicare “are charged higher premiums each month to help subsidize the cost of these overpayments.”

Insurance companies pocket the extra dollars. In fact, according to a Government Accountability Report (GAO) released just last week, private plans participating in Medicare Advantage earned greater profits and spent less on benefits:

Because organizations spent less revenue on medical expenses than projected, they earned higher average profits than projected. On average, MA organizations’ self-reported actual profit margin was 5.1 percent of total revenue, which is approximately $1.14 billion more in profits in 2005 than MA organizations projected…Nearly two-thirds of beneficiaries were enrolled in health benefit plans offered by MA organizations for which the percentage of revenue dedicated to profits was greater than projected and the percentage of revenue dedicated to expenditures (medical and non-medical combined) was lower than projected.

Thus, rather than bringing Medicare Advantage payments back to parity with fee for service, and using the savings to prevent the scheduled physician fee cuts, conservatives sided with the insurance lobby.

NEW STUDY: McCain’s Health Care Plan Raises Taxes On Millions Of Middle-Class Families»

This is part one in a series of blog posts explaining the findings of John McCain’s Radical Prescription for Health Care, a new paper from the Center for American Progress Action Fund. For more, check back here tomorrow and the day after.

John McCain has a radical plan to change the way Americans get their health care: eliminate the tax break for employer-based health coverage and replace it with a $2,500 tax credit for individuals and $5,000 for families. It’s one piece of his Bush-like plan to push people into the deeply flawed individual market.

Reforming the tax treatment of health insurance, done right, could be an important part of health reform. Here’s the problem: McCain’s plan would raise taxes on millions of families, falling mainly on the middle-class, while failing to make insurance affordable for many others, especially low-income families and people with pre-existing conditions.

A central flaw in McCain’s plan: his new tax credit grows at the rate of inflation (about 2 percent a year) rather than the rate of health care costs (about 7 percent a year — which the current tax benefit matches). In 2009, McCain’s credit will cover 36% of the costs of an average family premium, by 2018 it would only cover 24%. This means that most families who get health insurance through work will see a dramatic increase in taxes.

Read the full analysis here.

This chart shows the tax effects on a couple earning $40,000 and paying $14,000 in premiums each year (the average premium cost in 2009 as predicted by CBO growth rates).

In 2009, McCain’s plan would cut their taxes by $50, but by 2013, as the value of the credit erodes, this family’s taxes would increase more than $1,100. By 2018, they will be paying over $2,800 more.

It’s unlikely that Sen. McCain really wants you to be paying higher taxes. He is after a different target: a radically different health care system, where families pay more of their own costs and choose among deregulated insurance companies. But few families facing a hefty tax increase will consider themselves better off.

UPDATE: Jonathan Cohn at The New Republic has more.

McCain’s Health Care Plan Would ‘Undermine Preventive Services’»

Today, the Center for American Progress Action Fund hosted ‘McCain University,’ an all-day symposium on Sen. John McCain’s (R-AZ) policy proposals. At a panel discussion about McCain’s health care reform, Karen Davenport, Director of Health Policy at the Center for American Progress Action Fund, underlined an important inconsistency within the senator’s plan:

On the surface, McCain shares a lot of ideas with progressives on how can we change health care costs. He gives lip service to improving chronic disease management…and he talks about improving the use of preventive services…but his plan, with its reliance on the individual market and the high deductible policies that proliferate in this market would actually undermine preventative services and good chronic care management. [It] discourages the kind of smart consumers of health care who seek preventive care…and discouraging that kind of good consumerism may actually increase health care spending.

Indeed, on his campaign website, McCain expresses concern for the high costs of chronic care and suggests that his reform would emphasize “prevention”:

Chronic conditions account for three-quarters of the nation’s annual health care bill. By emphasizing prevention, early intervention, healthy habits, new treatment models, new public health infrastructure and the use of information technology, we can reduce health care costs. We should dedicate more federal research to caring and curing chronic disease.

But as Davenport points out, McCain’s overall health reform philosophy encourages Americans to use less care to bring down health care costs. On June 23, 2008, during a town hall meeting, McCain suggested, “if that money [for health care] is coming out of your pocket, you would be more careful about it.”

Thus McCain wants it both ways: he discourages Americans from investing in preventive care, while simultaneously suggesting that “we have a personal responsibility to take better care of ourselves and our children” since “that is the only way to prevent many chronic diseases.”

Vitter - The Only Senator Opposing Removal Of HIV Travel Ban»

The Atlantic’s Andrew Sullivan is reporting that Sen. David Vitter (R-LA), a former client of the DC Madam, “is the only Senator opposing the removal of the HIV travel and immigration ban” from the Senate version of a bill extending PEPFAR, the international health initiative dedicated to combating HIV/AIDS around the world. On Wednesday, in an editorial in the Washington times, Sens. John Kerry (D-MA) and Gordon Smith (R-OR) penned an editorial underlining the importance of lifting the travel restriction:

Today, HIV is the only medical condition that renders people inadmissible to the United States. In fact, we are just one of 12 countries that prohibit, almost without exception, HIV-positive non-citizens from entering the country (China has recently overturned its ban). This policy places the United States in the same company as Sudan, Russia, Libya and Saudi Arabia.

Vitter is happy to keep such company. In fact, the Senator, who himself engaged in behavior that could have placed him and his wife in danger of contracting HIV, has promoted policies that increase the likelihood that people will become infected with HIV:

- Voted in support of the “prostitution pledge” in PEPFAR which creates obstacles to reaching and serving sex workers.

- Attempted to amend PEPFAR “to reinsert the 33 percent abstinence-only earmark.”

Vitter has a long history of promoting failed abstinence-only policies and supporting legislation that undermines people’s sexual health and equal rights. Recently, Vitter, along with fellow disgraced Sen. Larry Craig (R-ID), signed up to co-sponsor S.J. Res. 43, the Marriage Protection Amendment. If passed, the bill would amend the Constitution to declare that marriage “shall consist only of the union of a man and a woman.”

McCain’s High-Risk Pools — A Gift To The Insurance Industry»

Yesterday, during Sen. John McCain’s (R-AZ) “tele-townhall meeting,” Debbie, a woman who was laid off her job and subsequently denied health insurance in the individual market because she was taking “blood pressure medication,” asked McCain if his health reform plan would “reform the insurance business” and help her find coverage.

McCain conceded that Americans with pre-existing conditions would have a hard time finding coverage in the unregulated market but reassured Debbie that she could find coverage in government subsidized high-risk pools:

We have to develop - the state of FL is starting to develop them – government approved plans. Which is the legislatures and the governors and the federal government join together with the Federal government making a very significant contribution so that they can establish risk pools and others and make sure that every American is able to get – particularly with somebody like you – that basically can’t get insurance, can get affordable and available insurance and the government is going to have to weigh in physically and financially to see that you get the ability and the health insurance that you need…These are tough times and a lot of people facing the same challenge you are, Debbie. I’m committed to fixing it.

Watch It:

Moreover, experts estimate that McCain’s “very significant contribution” to high risk pools is not significant at all. In fact, according to most experts, McCain’s proposal to boost funding by $7 to $10 billion is “nowhere near enough, [to cover the uninsured] particularly given the large number of people with pre-existing conditions who would need this help if employers send their workers out to the open market.”

Thus, Americans like Debbie would have to pay outrageous premiums and deductibles for health insurance because high risk pools, unlike general risk pools, don’t spread risks and costs across a mixed pool population of healthy and sick people. She would pay more for insurance because, under McCain’s plan, her pre-existing condition would force her into a pool that cannot offset the costs of treating her condition.

In some ways, McCain is right. He would “reform the insurance business.” But rather than increasing access to health care, McCain’s plan to subsidize high risk pools would only release insurance companies from covering sicker people.

Nagourney: McCain’s Health Care Proposal ‘Is In Many Ways Similar To What Bush Has Proposed’»

During an appearance on MSNBC today, veteran New York Times reporter Adam Nagourney suggested that Sen. John McCain’s (R-AZ) health care proposal represented an extension of President Bush’s failed health-care reforms:

I think politically the issue that John McCain has to be careful about is that Democrats will be able to use his proposal on health care as another way of presenting him as Bush III because his proposal is in many ways similar to what President Bush has proposed.

Indeed, the Wonk Room has long argued that McCain’s plan, like Bush’s failed initiative, pushes Americans into the individual and insurance market-place and places 158 million Americans who currently receive their health insurance through an employer, in jeopardy. Today, Elizabeth Edwards, a Senior Fellow at the Center for American Progress, outlined the dangers of McCain’s approach:

Senator McCain’s never been in the individual market, he doesn’t know how difficult it is, in fact how impossible it is, if you happen to be one of the unlucky Americans who has a preexisting condition. He does, Senator McCain does. I do. Among the people who are employed right now and getting their insurance that way, fifty six million of them do, and they’re going to find it incredibly expensive, if it’s available at all, for those people who have preexisting conditions.

Watch It:

Well, I like what we did in Massachusetts, for Massachusetts…but John McCain has endorsed the plan of letting each state craft their plans to get people insured and to make sure that issues like preexisting condition are covered. We did it in our way.

Fortunately, most Americans support universal health insurance and reject Bush’s and McCain’s radcial health care policies.

Elizabeth Edwards On The Inequitable Individual Market»

Our guest blogger is Elizabeth Edwards, a Senior Fellow at the Center for American Progress Action Fund and wife of former Presidential candidate John Edwards.

David Lazarus, in Sunday’s Los Angeles Times, brought us a fresh reminder of the challenges posed by preexisting conditions by raising a new one – being a woman.

Senator John McCain’s health plan is based on the idea that everyone should be on their own to buy their health insurance on the individual market. And it’s an approach fundamentally at odds with the point of health insurance: that we share risks. People with preexisting conditions, like McCain and myself, would pay much more for health insurance under his health plan, if we could get coverage at all.

Insurance companies have all sorts of characteristics they look at in order to increase premiums, such as preexisting conditions, occupation, age, and residence. But I hadn’t realized that the McCain plan would enable insurers to “rate-up” my insurance bill for not only my status as a breast cancer patient, but also my gender.

The ability to become pregnant has long been understood as an excuse to charge women more for health insurance (because, of course, men have nothing to do with that particular health condition). But what makes the Lazarus column interesting is that he tells us that insurers are charging women higher premiums even if pregnancy benefits are excluded. Blue Shield of California (Blue Shield) is now charging woman more in the individual market because:

“Our egghead actuaries crunched the numbers based on all the data we have about healthcare,” explained Tom Epstein, a Blue Shield spokesman. “This is what they found.”

That women get sicker than men?

“It’s all about the statistics,” Epstein said.

That doesn’t really inspire a sense of fairness. Doctors recommend that women have mammograms and other preventative screenings. Is Blue Shield really trying to discourage health screenings? Do they think that women are more accident prone? Whatever their reasoning, one thing is clear – they don’t want to enroll too many women:

“We don’t want to get a disproportionate share of high-risk people,” added Epstein.

As Lazarus noted, “by ‘high risk people,’ what he means is ‘women.’”

Blue Shield, a not-for-profit company, says they are just following the trend of for-profit insurers in California (at least two competitors already adjust premiums based on gender). Blue Shield exists in a competitive market that rewards insurers for doing the wrong things. In that sense, it isn’t fair to pick on Blue Shield in particular, especially since Blue Shield’s CEO speaks constructively on health reform.

The point is that the insurers have given us just another example about how the individual market is fundamentally broken. Embracing it as the solution to our health crisis – as the McCain plan proposes to – will only make matters worse.

Requirements In Global AIDS Initiative Cost Lives»

This morning, the Religious Coalition for Reproductive Choice called on Congress to remove “language restricting the participation of family planning organizations” from the President’s Emergency Plan for Aids Relief or PEPFAR, an international health initiative dedicated to combating HIV/AIDS around the world:

The Religious Coalition for Reproductive Choice and our partners in the interfaith community are urging the Senate to hear the voices of people of faith…we want PEPFAR to be reauthorized and we welcome the increased funds — but we want language restricting the participation of family planning organizations to be removed.

Competing House and Senate versions of the bill to expand PEPFAR both seek to boost funding to $50 billion over the next five years. While the House version allows “groups to use PEPFAR funding for HIV testing and education in family planning clinics,” the bill expands the global gag rule, and does not extend PEPFAR funding “for contraception.”

Under the House legislation, family-planning services that accept funding through PEPFAR would be restricted in two ways. First, PEPFAR funding would impose a gag-rule to prohibit family planning initiatives from using their own funds for performing or promoting abortion. Secondly, PEPFAR-funded programs would not be allowed to use PEPFAR funds on family planning services.

Both versions also replace the current earmark requiring 33% of prevention funds to be spent on abstinence only programs with a provision that obliges “the Global AIDS Coordinator [to] report to Congress if less than 50% of funding to prevent sexual transmission of HIV is spent on abstinence and fidelity programs.” Read the rest of this entry »