With the 2008 presidential election well under way, health care reform has jumped to the top of the nation's domestic policy priorities. The reasons are clear and numerous. The number of Americans without health insurance has continued to climb: 47 million people were uninsured in 2006, an increase of 8.6 million from 2000. In addition, an estimated 16 million nonelderly adults are underinsured as a result of high out-of-pocket health costs relative to income. And although employer-provided health insurance remains the predominant form of coverage for U.S. workers and their families, rapid growth in health care costs and premiums has weakened the ability of many firms to offer comprehensive coverage and for many families to afford it. Employers—particularly small companies—are passing more costs to their employees or eliminating coverage altogether.
The Commonwealth Fund Commission on a High Performance Health System released a report in October 2007 that examined how our current health insurance system impedes a high performance health system overall. The report, A Roadmap to Health Insurance for All: Principles for Reform, then outlined a set of key principles to help guide policymakers in reforming the health insurance system and to help the public ask the right questions when evaluating the health care reform proposals of their elected representatives and political candidates.
Eight presidential candidates--Senator Hillary Clinton (D–N.Y.), former senator John Edwards (D–N.C.), former New York City mayor Rudolph Giuliani (R), former Arkansas governor Mike Huckabee (R), Representative Dennis Kucinich (D–Ohio), Senator John McCain (R–Ariz.), Senator Barack Obama (D–Ill.), and former Massachusetts governor Mitt Romney (R)--have proposed plans for the future direction of the health insurance system in the United States that range from simple ideas and philosophies to more concrete strategies for reform. They have also put forth ideas to improve quality and efficiency, and to control costs. To inform the public discussion about possible paths to reform, this report describes the candidates' proposals, examines key differences in their vision of a future health insurance system, and evaluates the proposals against the set of key principles laid out in the Roadmap report.
Proposals of the 2008 Presidential Candidates
Three Distinct Approaches to Health Care Reform
The health care reform proposals of the eight presidential candidates offer fundamentally different visions of the future of health insurance in the United States and fall into three distinct categories: 1) strategies that emphasize tax incentives for obtaining insurance through the individual market; 2) proposals that build on existing private and public group insurance with shared responsibility for financing coverage; and 3) proposals that aim to cover everyone through publicly sponsored insurance programs like Medicare.
Tax Incentives for Individual Market Insurance. Four Republican presidential candidates—former New York City mayor Rudolph Giuliani, former Arkansas governor Mike Huckabee, Senator John McCain (R-Ariz.), and former Massachusetts governor Mitt Romney-l;have proposed to increase insurance coverage through the individual insurance market with new tax incentives and deregulation of state markets (Figure ES-1).
Mixed Private—Public Group Insurance with Shared Responsibility for Financing. Three Democratic presidential candidates, Senator Hillary Clinton (D-N.Y.), former Senator John Edwards (D–N.C.), and Senator Barack Obama (D–Ill.), have proposed plans for universal coverage that would maintain and build on the current mixed private and public insurance system. Most include a new group insurance market arrangement often referred to as "connectors" or "exchanges" that would provide people with a choice of private and public group plans. These proposals include consumer protections, financial support for premiums for lower- and moderate-income households, expansions in state Medicaid and the State Children's Health Insurance Program (SCHIP), and requirements for individuals to purchase coverage and for employers to offer or help pay for coverage. These proposals are similar in structure to the new Massachusetts universal coverage law that includes a private—public group "Insurance Connector." In California, Governor Arnold Schwarzenegger and the state legislature have also proposed such a plan.
Public Insurance. Presidential candidate and Representative Dennis Kucinich (D–Ohio) has proposed a plan for universal coverage in which everyone becomes insured through a public insurance program like Medicare.
Envisioning the Future:
Key Differences in the Candidates Approaches
Overall the candidates' views of a future health insurance system are fundamentally the same within the two parties but fundamentally different between the two parties in the following key areas (Figure ES-2):
- The goal of universal coverage. The candidates differ markedly on the goal of providing coverage to everyone. All the Democratic candidates support universal coverage as a goal. While the Republican candidates discuss expanding access to health insurance coverage, none to date has said that covering everyone is a goal.
- Insurance markets. Both Republican and Democratic candidates, with the exception of Kucinich, envision a health insurance system that continues to be structured around private insurance markets with a supporting role played by public insurance programs. The candidates diverge significantly, however, on the way this system should operate. The Democrats see the health insurance system based primarily on broad private and public group risk pools with regulations that prevent insurers from selecting against individuals with serious health risks, while Republicans see a health insurance system that would rely nearly exclusively on individual insurance markets without consumer protections. The Democratic candidates propose to replace the individual insurance market with new group insurance "exchanges" or "connectors," with a choice of private and public health plans. These markets would be regulated by ground rules designed to ensure that anyone—even older people or those with health problems—can obtain an affordable health plan with a standard set of benefits. In contrast, most of the Republican candidates propose plans to encourage more people to buy individual market insurance through the provision of new tax incentives and changes in the tax code. Most Republican candidates' proposals could have the effect of reducing existing consumer protections that states like New York and New Jersey have put in place, such as requiring insurers to write a policy for anyone who applies and restricting carriers from charging premiums based on health risk or age. None of the Republican candidates has discussed how they would address adverse selection issues and the considerable difficulties that people with higher health risks face in securing affordable coverage.
- The role of employers. Republican and Democratic candidates have fundamentally different views of the role employers will play in the health insurance system. The Democratic proposals would retain and strengthen employers' role in the system by requiring that all large employers offer coverage or pay part of the coverage costs of their employees. This would allow people to keep the coverage they have and maintain the significant financial support provided by employers. In 2005, employers contributed approximately $420 billion—over one-fifth of total U.S. health care expenditures in that yeaR–for premiums for active employees and their dependents. In contrast, most of the Republican candidates propose changes in the tax code that could significantly alter the role employers play. Under current federal law, health benefits that employees receive from their employers are excluded from taxable income. Most of the Republican candidates have proposed eliminating or changing this special tax treatment and replacing it with a new standard income tax deduction that would apply to anyone with private insurance, either employer-based or individual market. This change has the potential to weaken the incentive of some employers, particularly small employers, to continue providing health coverage to their employees if they knew their employees could gain an equivalent tax deduction if they purchased coverage in the individual market. The Republican candidates have not addressed how they would replace any lost employer financing. Clinton is the only Democratic presidential candidate who has proposed changing the tax treatment of employer-based health benefits, suggesting capping the amount of employer contributions that are excluded from taxable income for households earning $250,000 or more to the value of the standard plan offered through the Federal Employees Health Benefits Program (FEHBP).
- Requirements that individuals have coverage. The candidates diverge on whether they would require everyone to have health insurance. Clinton would require coverage at the start of her plan, while Edwards would require that everyone have coverage when his plan was fully implemented. Obama would require coverage only for children, though he would consider an individual mandate for adults if substantial numbers of people do not buy coverage that is deemed affordable. None of the Republican candidates requires that people have health insurance.
- Affordability and enforcement. With the presence of an individual mandate, it will be critical that health plans are affordable and that the mandate is enforceable. Even the ability of the Republican proposals to expand coverage will depend on whether people have access to affordable health plans. Edwards is the only candidate who has stated how he would enforce an individual requirement to have health insurance. With respect to affordability, all the leading Democrats (Clinton, Edwards, and Obama) have said that enrollees would pay a set percentage of their income on premiums, but have not specified the percentage or what would happen if affordable plans are not available. They have also focused exclusively on premiums when determining affordability, despite the fact that out-of-pocket costs can and do comprise a substantial share of family incomes, particularly in low- and moderate-income households. The Republican candidates have suggested subsidies and tax credits to help low- and moderate-income people buy coverage on the individual market but have not specified the amount of the subsidies. McCain has proposed a specific refundable tax credit for everyone that would not vary by income. The Republican candidates have not discussed how they will address the considerable variation in the value of tax credits or subsidies for health coverage purchased in the individual market when premiums can vary substantially based on health risk and age.
- Ease of enrollment. The complexity and fragmentation of the current health insurance system often makes obtaining and retaining insurance difficult. Kucinich's National Health Insurance program would provide the most seamless enrollment of the current proposals. The Democratic candidates that have proposed mixed private—public approaches would fill the gap in the current system with new group insurance "connectors." However, these proposals would not make enrollment easier or more seamless and would retain the complexity in the system. To address this problem, Edwards has proposed requiring proof of insurance at tax filing and upon receipt of health services. Enrolling people through the tax system would help reduce the "churning" in and out of coverage that now characterizes the current system. Neither would the Republican proposals to provide tax incentives for individual market coverage make enrollment easier or more seamless. In theory, by separating coverage from employment, these proposals would make coverage portable, with people able to retain their health plans from job to job. But the candidates have not addressed serious problems in the individual market. Many people, especially those with health risks, have trouble obtaining coverage and staying covered over time, if the terms of their coverage change. Shifting the insurance system away from the relatively greater security of employer group coverage could ultimately exacerbate the complexity of the system, making access to insurance more uncertain and the potential for churning greater.
- Quality and efficiency improvement. Many candidates from both parties have proposed strategies to improve quality and efficiency in the health care system. There is broader agreement—at least on basic concepts—across candidates from both parties on improving quality and efficiency than on the issue of health insurance coverage. The candidates' support for quality and efficiency improvement often amounts to a "laundry list" of features, compared with many of the candidates' more structured proposals regarding the health insurance system. In addition, while the candidates all discuss health care cost growth as a major problem, none has developed a comprehensive strategy for tackling it. If elected, it will be important for a candidate to incorporate these often disparate ideas—quality and efficiency improvement and cost control—into a broader vision of health system improvement.
- Financing. Achieving universal coverage or expanded health insurance coverage will require a significant financial investment by federal and state governments, employers, households, and other stakeholders. Such a shared responsibility among stakeholders should be fair, based on ability to pay. None of the Republican candidates has identified a source of financing. The leading Democratic candidates would either roll back the tax cuts of the past few years or allow them to expire for households with incomes above $200,000 (Edwards) and $250,000 (Clinton and Obama). They have also identified other more minor sources of financing, as well as savings achieved through improved efficiency. The lack of details in their proposals on many key features—the size of the premium subsidies for low- and moderate-income families, the employer contribution, the increase in Medicaid and SCHIP income eligibility standards—means it is unclear whether the amount of identified financing will be sufficient.
Which Proposals Hold the Greatest Promise?
To evaluate these new policies, The Commonwealth Fund Commission on a High Performance Health System identified several key principles to moving the health system toward high performance. They include:
- Provision of equitable and comprehensive insurance for all
- Provision of benefits that cover essential services with appropriate financial protection
- Premiums, deductibles, and out-of-pocket costs are affordable relative to family income
- Health risks should be broadly pooled
- The proposals should be simple to administer with coverage that is automatic and continuous
- Dislocation should be kept to a minimum—people could stay in the coveragethey have if desired
- Financing would need to be adequate, fair, shared across stakeholders.
Measured against these principles, the mixed private—public group insurance with a shared responsibility for financing proposed by the leading Democratic candidates and the public insurance reform proposals put forward by Kucinich have the greatest potential to move the health care system toward high performance (Figure ES-3). Both approaches have the potential to provide everyone with comprehensive and affordable health insurance, achieve greater equity in access to care, realize efficiencies and cost savings in the provision of coverage and delivery of care, and redirect incentives to improve quality. However, from a pragmatic perspective, the mixed public—private approach, which allows the more than 160 million people who now have employer-based health coverage to retain it—and does not require them to enroll in a new program as in the public insurance models—would cause far less dislocation.
The Republican candidates' proposals for reform that rely on tax incentives and voluntary purchase of coverage in an unregulated individual insurance market are, on their own, unlikely to achieve universal coverage. Buying coverage in the individual market will continue to be challenging if tax incentives are not coupled with an individual mandate, minimum benefit standards, regulations against risk selection, and premium and out-of-pocket spending limits as a share of income. Providing incentives for coverage in the individual market without an individual mandate or regulations against risk selection would not pool risks. Insurers would still write individual policies rather than policies for a broad group of people. Moreover, because of the substantially higher administrative costs in the individual market, covering more people this way will only increase U.S. annual spending on insurance administration.