Copyright © 2001 The Seattle Times Company
Editorials & Opinion: Tuesday, January 23, 2001
Guest columnist

Gore vs. Bush on health:
System has become captive to political ideologies

By Kathleen O'Connor
Special to The Seattle Times

If there is one clear choice in this election, it is health care. At stake is the future direction of American health care.

Republican candidate George W. Bush relies on medical savings accounts at the commercial, Medicare and long-term care levels. Democratic candidate Al Gore leverages existing programs to expand coverage.

Here's how their proposals work and what they would mean.

Bush's proposals

Bush wants individuals to make health-care decisions. He would let all employers offer annual tax credits of $1,000 per individual and $2,000 per family to cover up to 90 percent of their health-insurance costs via medical savings accounts (MSAs).

MSAs work like 401(k) retirement accounts. Money in the form of a "defined contribution" from an employer is deposited annually in a restricted account. Employees would pay a hefty penalty if they used the money for anything other than health care.

MSAs let employers give employees the premium money they would have paid, so the employee makes health plan and coverage purchasing decisions. The employer gets the best of both worlds--employees assume responsibility for their health-care costs and coverage, yet employers keep their pre-tax deductions for employee health care.

Bush wants to overhaul Medicare to make it similar to the Federal Employee Health Benefit Plan in which employees have a wide range of options from which to choose. This would move Medicare to an MSA or "premium support" model and expand the choices that seniors would have for the Medicare market, as well as expand Medicare+Choice program options.

He proposes giving block-grant money to states so they have the option of covering prescription-drug costs while his Medicare overhaul is under way. No federal prescription-drug program would exist under his proposal until the overhaul is completed in 2004. He also wants to create a commercial prescription-drug option seniors could buy.

He wants to make the cost of long-term care insurance fully tax deductible, have a personal tax exemption for home caregivers and let medical savings accounts be used for long-term care services as well as medical services.

Results

Relying on MSAs for commercial insurance will require major legislative changes because rules for health insurance are regulated at the federal level for those large employers that self-insure (called ERISA for the Employee Retirement Income Security Act) and within the individual state for those employers who have to buy commercial insurance. Here, Microsoft, Weyerhaeuser and Boeing are ERISA companies. Roberto's Hair Salon, Fremont Dock and Hale's Ales and many dot-coms have to buy health-insurance packages subject to state rules and regulations, not federal.

For Bush's plan to work, legislation would have to be changed at the federal level and within each and every state in the nation. Major questions on MSAs remain unanswered. If employers give the premium money to the employee, will it be taxed, which it is not now? If so, who gets taxed? Employer or employee? If individuals assume responsibility for their own health-care purchasing, will they be subject to an individual health screening that does not now apply to them within their employer-based group product? Where do employees get catastrophic coverage or re-insurance?

Bush's proposals for tax credits and expanding options for small business owners through multi-state associations are workable. He is to be credited for expanding tax credits to caregivers and for deducting long-term care insurance as well. But, Gore proposes something similar.

Bush's proposal for a separate prescription benefit option for seniors will not work. Why? Because only the most seriously ill people would want it and would actually use it, which ironically makes it too expensive for most people to buy or the government to pay for. Even the insurance industry has no interest.

Bush has moved the current problem of prescription drug coverage from the federal to the state level, by allocating block grants to pay for prescription drugs for seniors whose drugs cost more than $6,000 per year. This means each state would have to staff up for a new program and Medicare would have to create an entirely new bureaucracy to manage something temporary.

His Medicare+Choice expansion will increase costs because more choices mean more administrative complexity in managing all the different rules, regulations, deductibles, co-payment, premium sharing, coverage options and claim forms. More choices mean more administrative costs.

Bush's approach would fundamentally re-structure the health-care marketplace, move it away from an insurance-based model because MSAs are basically not insurance products. MSAs also offer the real danger of taking the healthiest and wealthiest out of the commercial insurance market and leave only the most infirm, which would increase costs for those least able to afford it.

Gore's proposals

Gore proposes covering people one category at a time. He would expand small-businesses' options by promoting purchasing cooperatives, such as are now available here in the Employers Health Care Purchasing Co-op, among others. These co-ops offer big business benefits at more affordable rates. He also proposes a 25 percent tax credit for each employee and a 25 percent tax credit for individuals between the ages of 55 and 65 so they can buy into Medicare. Bush has almost similar proposals.

Gore wants to expand the CHIP (Children's Health Insurance Program), raise the eligibility level to $41,000 for a family of four and cover their parents. Like Bush, he would reduce its regulations.

In Medicare, he would add a non-deductible prescription-drug benefit with a premium of 50 percent of the drug-benefit costs and an annual maximum of $2,000 which increases to $5,000 by 2008. It will cover one half of prescription drug costs up to $5,000 annually and includes catastrophic protection. Seniors with incomes under $11,000 per year would have no premiums or co-payments.

He proposes a $3,000 tax credit for volunteer caregivers of an elderly parent or spouse, which is similar to what Bush proposes.

Gore also proposes covering mental-health services for children, which Bush does not address, and wants to expand state Medicaid services to make it easier for states to cover home and community-based services. Bush would let MSAs handle that.

Results

Gore's health-care proposals are the most comprehensive, least intrusive and require no major legislative or regulatory changes, except for Medicare prescription drugs, which is a struggle for everyone. Gore offers a way to expand coverage and leaves the MSA pilot project intact while some operational questions can be answered. Gore's plans are founded on the employer-based model through which 70 percent of all Americans have insurance.

That's the choice.

The fact remains, however, we spend more on health care than anyone else in the economic Group of Seven industrialized countries. We have worse outcomes in terms of life expectancy and the death rates of infants and mothers. And, 42 million people are uninsured.

We have let health policy become captive to our political ideologies of MSAs, personal responsibility, managed care, single payer, or whatever. Our ideologies have trapped us into fruitless debates of what is right or wrong vs. what we want, what will work and how to get there.

Instead of holding health policy hostage to elections, we could actually build on some work that has already been done. The President could re-structure the Medicare Commission (Thomas Breaux-Commission) and expand its mission to look at the entire system, not just Medicare.

Instead of relying solely on Congress, the dialogue could include others such as Families USA and Health Insurance Association of America which have been in preliminary conversations. If these two often ideologically opposd groups can take steps toward common ground, then Congress and the President should be able to do the same. It does not take rocket science to create a system, it takes broad participation and political will. And, a vision of what a system of care should do.

Kathleen O'Connor is a health-care industry analyst, consultant and writer based in Seattle, and publisher of The O'Connor Report.

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