President's Vision for Health Care

Joseph Antos , scholar in Health Care and Retirement Policy at American Enterprise Institute, and Gerald Shea , special assistant to the President for Government Affairs at the AFL-CIO, were online Thursday, Feb. 2, at 1 p.m. ET to discuss the pros and cons of President Bush 's vision for the health care system. The President discussed special savings accounts, liability reform and other aspects of the health care system in his State of the Union speech on Tuesday.

The transcript follows.

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Joseph Antos: President Bush's health proposals are intended to make health care more affordable, accessible, and efficient. His policies would expand the use of health savings accounts (HSAs) tied to the purchase of high-deductible insurance, a position he has favored for several years. New proposals include increasing how much individuals (and their employers) can save in their HSAs, so that all out-of-pocket health spending could receive favorable tax treatment; providing a refundable tax credit to low-income families who purchase HSA insurance; allowing employers to contribute a larger amount to the HSA of an employee with chronic illness (or who has a chronically-ill dependent covered by the HSA insurance); and creating portable HSA insurance policies that employees can take with them when they change jobs. In addition, the President supports improving information on the price and quality of health services, expanding health insurance options for small businesses and individuals, and reforming the liability system. The hope is that such proposals would encourage better decision-making on the part of patients and their physicians, which could begin to slow out-of-control health spending without imposing unacceptable restrictions on access to services and without retarding medical progress.

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Gerald Shea: Working families need strong federal government action to help deal with the health care affordability crisis. Health costs are making it more and more difficult for even insured families to afford care, on top of the crisis facing those without insurance. The AFL-CIO strongly supports a universal, national health care plan based on social insurance. In the interim, we support federal reinsurance for employer-based plans to relieve them from high cost "catastrophic" cases and, an extension of Medicare to cover children and early retirees, and state reform initiatives to require large employers to pay their fair share of health costs.

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Washington, D.C.: Why aren't we talking about universal health coverage in this country?

Gerald Shea: Some of us are, and people around the country are strongly supportive. We need to raise our voices!

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Washington, D.C.: How many of the 46 million people lacking health insurance will be able to afford it with the President's plan?

Gerald Shea: Studies show that the Presidents plan will benefit the wealthy and/or healthy people. It will do little, if anything, to extend coverage to the currently uninsured, or to those people with insurance who can't afford the co-pays and deductibles.

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Valley Forge, Pa.: It seems that his vision, which the President euphemistically calls an "Ownership Society", in truth boils down to a "Bear your Own Risk and Sink or Swim Society" (e.g. HSA's and liability limitations, Soc. Sec. private accounts, etc). Your comments?

Also, does anything in the President's plan address the uninsured who can't afford to purchase health insurance policies, but who are not poor enough to qualify for Medicaid?

Gerald Shea: Your on target. If you liked the President's plan to privatize Social Security or his Medicare drug non-benefit, you'll likely love his HSA proposal.

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Santa Cruz, Calif.: Dear Sirs: Shouldn't any rational person regard President Bush's "vision" for Health Care as a complete nightmare for any average income person, as his notion (and its nothing more than that) that poor folks should save the pennies so as to meet some $100,000 medical bill after their heart attack is pure fantasy. Average folks could save for a lifetime and have about enough in the piggy bank to go to one doctor appointment.

Interesting how it is that Republicans who hate government, like to have government jobs and have THEIR health care taken care of.

Come back from fantasy land.

Gerald Shea: Thank you. Your sharply focused opinion is a relief from the usual palaver we hear in Washington DC.

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Washington, D.C.: I will be starting my residency in OB/GYN this July and I am concerned about the effect that the high cost of malpractice insurance will have on my future practice. What plans does President Bush have to lower these costs and do you think they will work? Thanks.

Gerald Shea: The Presidents plan on malpractice has been primarily to limit the right of individuals to seek redress through the courts, which we believe is wrong-headed.

But the current tort system serves none of us well, and needs major reform. Significant work by balanced organizations has been underway for several years.

To the Administrations credit, significant work has gone into correcting the root cause of malpractice issues, the pandemic of avoidable medical errors. The authoritative Institute of Medicine estimates that 100,000 preventable deaths occur each year in the process of care and that the cost is around $5 billion a year. That's the real problem we have to solve and the federal Health and Human Services officials have been leaders in tacking this issue.

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Silver Spring, Md.: We tried to figure out about Medicare prescription coverage for my mother. It was too complicated. I thanked God that my father was a Federal employee and bestowed good health coverage upon her.

I think the Health Saving Account idea is valid, but I'm an accountant. Do you really expect the masses to be able to manage them? What about when you get old and can't manage your own HSA?

Can't the administration come up with something that doesn't require an accountant to make it work?

Joseph Antos: Health insurance is complicated, regardless of the type of insurance you purchase. That's the nature of third-party payment--the insurer has to act as an inspector and auditor to avoid paying inappropriately. That's a good argument for shifting more of our affordable and expected costs from insurance to our own control through an HSA. HSAs and consumer driven health care is in its infancy; insurers need to develop user-friendly ways for people to access their coverage and understand their options.

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Washington, D.C.: Rising health care premiums are squeezing American families. Will health savings accounts and tax credits do much to provide relief?

Joseph Antos: Under Bush's proposal, new tax breaks would be extended to help people pay for their insurance premiums and for their out-of-pocket expenses. Moreover, he proposes a tax credit for low-income people who buy HSA insurance. That is a start at making insurance affordable, but we must do more. The problem we face is the product of 50 years of mistaken policy, which has reduced our awareness of the costs and the value of health care services.

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Alexandria, Va.: While HSAs may not be an appropriate product for everyone (and they are not only for the wealthy), is a universal system really the way to go? Numerous studies have demonstrated the ineffectiveness of both the British health system and the Canadian system to address problems for individuals with chronic, serous conditions. The systems appear to work well for preventive care and basic treatments but not for more specialized care. Can you comment?

Gerald Shea: Good point. We need to tackle the process of care, not just the financing. Whether you use employer-sponsored and insurance provided care, a single-payer system, or a national health program, e.g., Great Britain, the same propensity for preventable medical errors exists. We need to greatly reduce those errors by building a system of shared health decision-making between patients and clinicians that is based on sound science. Regrettably, our current approach is far from that.

But we also need to bear in mind that a major obstacle to investing in the systems changes needed to address these problems has to do with the enormous amount of money we spend in the US on the private insurance administrative systems - easily over 20% of all health costs - compared with the couple of percentage points spent in social insurance or national insurance systems. The difference could easily fund a revolution in how we make medical decisions.

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Anonymous: I would like to know how Health Savings Accounts can be considered "savings" accounts. Any money that is saved on premium costs would be quickly spent on meeting the high deductibles. For an average person, the amount that they would have to pay out of pocket to meet the high deductible ($1,000 to $5,000) would mean that insurance would never kick in. Why bother having insurance at all, if you're paying full retail for medical costs anyway?

Gerald Shea: HSA's only work for people with lots of money, not for people with average health problems and costs. Or they might work for the young and healthy - that is until or unless they experience serious medical problems.

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Fairfax, Va.: Do either commentator have an opinion of the recent article about health care in the U.S. in The Economist, and The Economist's position that the U.S. might be better off with "socialized medicine"?

Gerald Shea: Sorry, I missed the article. But given that we are spending 150-200 percent more than other industrialized countries, it seems like a simple point of logic. Unfortunately "socialized medicine" is a scare phrase used by some in the country to conjure up visions of an abhorrent system of government.

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Albany, N.Y.: I am trying to manage my elderly parents' health care and I am shocked at the costs of some prescription drugs -- usually the ones running commercials on TV all night. I try to get them generics whenever possible because the savings is huge. But some drugs don't have generics yet. Can't the Administration help make sure there are more generic drugs and that more people know to use them? I think some people don't understand that they are the same. Or is this administration too close with the brand drug makers?

Gerald Shea: The Federal government has been way behind for years in approving and allowing generics. The FDA rules are tilted heavily towards the pharmaceutical companies that want to block generics.

Two other options to lower drug costs would be allowing the Medicare to negotiate drug prices for beneficiaries. This approach has been used for years by the VA with great success. But this was specifically blocked in the 2004 Medicare drug bill that was written and passed solely by the majority party in Congress. Another approach would be to allow importation of safe drugs from other countries with similar drug approval regimens as the US. But this was also blocked.

A last step would be for the US to fund research on the comparative effectiveness of drugs within a drug class. Thanks to Senators Frist, Stabenow and Clinton, a small amount has been approved in the last few federal budgets, but it amounts to just a baby step.

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Philadelphia, Pa.: Some months back, one of the tax reform ideas being kicked about was elimination of the business deduction for employer provided health insurance. It seems this would be a whopper of an incentive for companies to drop health coverage. Is this idea still under consideration or has it been (hopefully) dropped?

Joseph Antos: This is a truly dumb idea that would certainly cause many employers to drop coverage. Health costs paid by employers are business expenses just like wages, rent, utilities, and raw materials, and business expenses should come off the firm's bottom line. There is no sign that this idea is still alive. Instead, there is still some discussion among policy wonks of limiting how much of the employer's contribution to premiums could be excluded from worker's taxable income--but the Bush administration has rejected that one too.

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Dunn Loring, Va.: As someone who's reasonably well off and a person who also owns a Health Savings Account I find it a bit of a scam for the rich to tell you the truth. My catastrophic health insurance makes me pay the first $5,000 a year in health costs but then will pay 100% after that. This allows me to put $5000 a year into an HA for which I'm paid five percent per annum tax-deferred. But here's my bonus--I can use my own money to pay for health costs or withdraw from my five percent tax-free money. Of course, I never touch the HSA. Doesn't this make the plan just another tax-advantaged IRA retirement plan that I can withdraw from when Medicare kicks in? Not to mention that the poor and middle-class are ignoring it just like they ignore other self-directed retirement contributions because they simply cannot afford it.

Joseph Antos: You are correct: a high-income person such as yourself can probably get a greater net return by leaving money in the HSA and paying health costs with other funds. That does not mean that people of more modest means would not benefit from the HSA mechanism. Many of those folks pay with after-tax income--they've paid their income tax and their payroll tax, which means that the average person in this situation is paying a 30% premium for the same services others who have the tax advantages also receive. More moderate income people should take advantage of the tax loopholes, and insurers and employers should give them that opportunity.

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Washington, D.C.: Can you explain what a health savings account is? How would they help cover more Americans or lower costs for insurance?

Joseph Antos: An HSA has 2 components. First, insurance. The insurance is required to have a high deductible, at least $1050 for a single or $2100 for a family, and it has an upper limit on how much people would be expected to pay out of pocket. That limit is $5250 for a single or $10,500 for family coverage. Second, the savings account. This is an account that you own (it does not belong to your employer) into which you may contribute some money on a tax-free basis. The employer can also contribute; the total contribution for most people is limited to the amount of their deductible each year. When you have a medical expense, you can pay that out of your HSA account. When you have paid the deductible amount, then the insurance kicks in. Most high-deductible insurance currently has low or no additional requirements for out-of-pocket spending (for example, the low copayment for a doctor's visit that most people are familiar with). The advantage of this arrangement is lower premiums and tax advantages for out-of-pocket spending that many people do not have with conventional coverage.

Gerald Shea: The problems with HSA's is:

1. There is no published evidence that they can help with health costs.

2. By dumping the responsibility onto individuals, they make reduce some health expenditures, but the effect is indiscriminate, i.e., it would likely be based on income not health need.

3. We all need to make better decisions on health care treatments (not just consumers but our clinicians as well, who, shockingly, can be as much in the dark as us!). But better decision-making is based on better information, not financial manipulation through making individuals pay huge health care bills. Currently there is terrific cooperation going on among purchasers, consumer groups, health providers , state and federal government agencies, to build the infrastructure to do this. But we are years away from a system that will work. By imagining a reality that experts know is years away, HSAs amount to a hoax on people because the premise is faulty.

4.They advantage the already well off, who have enough money to invest in such savings accounts.

5.They will drive up costs in traditional group insurance by drawing off health workers and leaving those with major medical problems in the group plans.

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Washington, D.C.: Earlier statements have thanked the federal government for providing their excellent health care---why can't we all have the same health care benefits our congress and federal employees have---Congress just cut Medicare benefits again yesterday.

Gerald Shea: Amen to that! To say nothing about how Congress has given themselves eight pay raises since the last time they increased the paltry minimum wage for hard working Americans.

Joseph Antos: It makes sense to give everyone insurance choices--that is the great innovation of FEHBP. It does not make sense to promise that they can get the same generous benefits that their congressman gets, because someone has to pay the large premium that implies. In other words, this is a false promise since Congress could not find the trillions of dollars to make it good. A better approach is to give people real choices, but realistic choices--HSA plans, managed care options, and other kinds of insurance with a range of benefits and costs--and let them decide what they want to pay for. Again, subsidize the poor so they aren't left out.

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Orono, Maine: The President's plan is missing a key element: it doesn't address the behaviors - smoking and overeating - that are adding most of the costs to the healthcare system. Simply reforming the liability system or providing more flexibility in saving for an emergency isn't going to solve the problem.

My idea is to take a good Republican market-based approach to this problem: put a surtax on cigarettes and fast food. Use that surtax money to provide block grants to the states that would be used to subsidize the healthcare premiums of low- and moderate-income families.

This plan would get at the root behaviors that are causing costs to escalate, in my view. Higher prices would discourage risky behavior - leading to lower smoking- and obesity-related illnesses and, over time, wringing significant costs from the system. And it accomplishes that goal in a way that takes advantage of basic economic principles.

What do you think of this idea?

Joseph Antos: Sin taxes rarely stop sin, they just make it more expensive. It might make more sense to allow insurers to charge on the basis of past experience, particularly the use of health services closely associated with personal behavior that is truly a matter of individual choice. Experience rating is the norm for auto and homeowners insurance, and the likelihood of early death is accounted for in life insurance premiums as well. People should bear the consequences of their own actions (at least a little), but we don't want to price low-income people out of insurance. That means a subsidy, but it should not be hidden in everyone else's premiums.

Gerald Shea: Such surtaxes are a sensible way to fund health care. We also need to encourage people to be more responsible about their health care. But the kind of rating that Mr Antos suggests is an idea akin to HSAs. That is is puts the cart before the horse. We need a national commitment to quality treatment, purchasing and health care education. Trying to manipulate personal behavior through financial "incentives" won't work, and will only punish people of average to modest income.

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Washington, D.C.: Barring a major upheaval in Washington, we're probably not going to pass universal coverage in the next couple years. What -- besides the president's non-plan of action -- can be done to lower costs and cover more people in the meantime?

Gerald Shea: First, we could modestly expand health care for kids through Medicaid and the state child health programs. Second we could follow the lead of various states and develop a re-insurance fund to cover the cost of high cost "catastrophic" cases - similar to the insurance mechanism we developed to underwrite private property insurance after the 9/11 tragedies. Third we can pass state legislation requiring large employers like Wal-Mart to pay their fair share of health costs rather than dumping them onto state health programs. Fourth, we can continue the work of many to develop quality purchasing mechanisms whereby both public and private payers stop paying for poor and mediocre care and only pay for high quality care.

Joseph Antos: Gerry has some good ideas. We should certainly take steps to pay for good performance and appropriate care, and not pay for what does not work. Medicare could use its vast information on patient care to tell us what works in actual practice, not just what seems to work in the lab. We should also directly address the financing problems for the people who have the highest costs. One approach would give a substantial subsidy to private insurers who cover someone in the top 5% of health spending, but making sure that the insurer still is responsible for enough of that cost to exercise prudent care management. We should also help those who need the help to buy their own insurance. That could mean tax credits or other subsidies to individuals who buy private insurance. Expanding Medicaid with all its complexity, poor service, and micromanagement condemns people to second-class status. On Walmart--I hope they don't move their big distribution center project to Delaware, since I live in Maryland and we need the larger tax base! If one wants to impose taxes, one should do that openly and fairly since health care is a concern to all of us.

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Austin, Tex.: Republicans ascribe a large share of the high cost of health care to "greedy trial lawyers," but how about those "greedy doctors"? Studies have shown that malpractice suits comprise only a fraction of the total cost of health care--how about doctors' salaries? How about tests and procedures they order because they generate money for their practice? Is anyone starting to take a closer look at the costs generated by those actually running the business of health rather than those who are bringing--in most cases very well justified--lawsuits against it?

Gerald Shea: One of the scandals in health care is the self-enhancing generation of profits by clinicians. Most recently this has come in the form of specialty facilities owned by physicians to which they refer their patients. Even some of the most conservative of federal officials recognize that we need to put some controls into place - controls that we thrown out in the eighties de-regulation period.

Joseph Antos: Our insurance system has established incentives for all that greed. Docs get paid if they provide services (and we currently don't do much to distinguish services provided poorly from those that are provided well), and patients have little reason to object to high costs and marginal value because insurance pays for most of it. We need pay for performance and better information (for both docs and patients) on what works and who does a good job. We also need to change the culture of spending fostered by the tax system. That's where Bush is coming from. HSAs are one step in bringing a new understanding to the health system that we desperately need.

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San Diego, Calif.: The interoperability issue of all of these electronic based healthcare initiatives arises over and over. How should the President come at this huge problem, as there are so many healthcare IT companies out there right now luring practices with technology that might not deliver what they could need in a few years?

Gerald Shea: Updated electronic data systems are a key building block for long-term health reform and the President is right to support them. But we'll see how much money he's willing to put into the effort and how well his administration will regulate and monitor its implementation.

Of course, the systems will need to be able to communicate, e.g., your point about interoperability.

Electronic medical records won't solve any health problem on their own. But they will allow us to capture health care data on care efficiently and cheaply. They also should help eliminate medicals errors, although the jury is still out on that.

Joseph Antos: I agree. Health IT is not the magic bullet, although we need to move in this direction. Health care is a knowledge industry but knowledge flows poorly. Leadership on electronic standards and using Medicare's clout as payer to push this along would help.

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Confluence, Pa.: I recently retired and am really concerned about the rapidly rising costs of health care. I think the industry is price gouging like the oil companies. How can you justify cutting my end of health care rather than attacking the drug companies about prices, and setting malpractice lawsuit awards. I don't think I and or my whole family needs to be set for life because a health care provider made a mistake. There should be an award though and maybe jail time or fines for the provider.

Gerald Shea: Good points. The current system is backwards, where problems are swept under the rug and protected from legal discovery. Most medical errors are not even revealed to the patients who suffer them (even though this violates the code of ethics of the American Medical Association.)

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Taunton, Mass.: The President's vision of a national electronic health record doesn't include the important aspect of physician reimbursement, especially for small doctors- the heart of the American healthcare system. The fancy EMRs are great, but how can small doctor practices pay for them when there is virtually no improvement on reimbursement rates. Please, please address this important issue. This inability to pay doctors on time is killing the small doctor practice. Thank you.

Gerald Shea: Thanks. Hello from Fall River, my home town.

I totally agree that small physician offices need funding for EMR's . The costs need to be built into the system, just like very thing else. If we believe EMRs are important, and I do, then we need to fund their creation

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Hendersonville, N.C.: As long as large employers are the gatekeepers for individuals to share health risk in a large pool, how can they compete in a global economy?

Gerald Shea: The erosion of employer-sponsored health care is largely due to competition internationally, e.g., manufacturing in China, and domestically, e.g., Wal-Mart. Employer-sponsored coverage is unsustainable without addressing health costs and getting more public financing involved. Otherwise the number of uninsured will skyrocket in the next few years.

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Providence, R.I.: HR525 - Association Health Plans - what chance do they have of passing through the Senate?

How will they play in the new health care scene?

Joseph Antos: AHPs have kicked around Congress for years, and they are not likely to see passage in an election year. The general principle, that small employers and individuals should be able to take advantage of group purchasing arrangements is sound, but the details are complex. New proposals could solve important technical problems, we'll see. If AHPs were allowed, presumably they would offer HSAs and all of the proposed tax breaks would go with them.

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Washington, D.C.: Have you read the recent article in the Economist which provides many facts needed to make informed decisions about health care reforms.

Currently the public sector pays 45% health care spending (or 60% if tax subsidies are taken into account).

This right-wing newsmagazine ends with the statement, "Mr Bush's health-care philosophy has a certain political appeal. It suggests incremental change rather than a comprehensive solution. It reinforces existing industry trends. And it promises to be pain-free. Unfortunately, it will not work. The Bush agenda may speed the reform of American health care, but only by hastening the day the current system falls apart."

Your comments? Do you feel that a clamor for single-payer from business as the necessary driver to bring about a single-payer system?

Joseph Antos: This is incremental, but at least it's a step in a reasonable direction. Politicians of all stripes are prone to letting big problems go until their terms are up, and those who go for big solutions find that the public is unwilling to go along. We clearly must do more, including taking on the financing crisis of Medicare and Medicaid. Another commission is not the answer.

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Princeton, N.J.: Antos and Bush are sprouting nonsense. If my doctor tells me a need a certain test, I'm not going to argue with him even if I have to pay for it. This is my life (or sight or mobility or ...) we're talking about. We are not buying tile here.

Joseph Antos: You may be buying an unnecessary test that seems to cost you very little (at least in dollar terms), but that actually is more expensive to the overall system. We should all want to be better informed. A good first step is to ask, what difference will the results of the test make in my treatment?

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Rural America: You say "Under Bush's proposal, new tax breaks would be extended to help people pay for their insurance premiums and for their out-of-pocket expenses. Moreover, he proposes a tax credit for low-income people who buy HSA insurance."

Can you be specific as to what my tax-break and tax credit would be as a just above minimum wage earner?

Joseph Antos: Even if you pay no income taxes, the Bush proposal would help. You would be eligible for a tax credit for payroll taxes on the HSA insurance--that's a 15% saving. In addition, you are probably eligible for the low-income refundable tax credit--up to $3000.

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South Orange, N.J.: What are the benefits of Health Savings Accounts for chronically ill people?

Joseph Antos: Those who already have high health costs would have little or no time to save for what they are already spending. In that sense, an HSA may not help finance the care, unless an employer or someone else was willing to contribute to the account--the President has proposed a way to help out those in that situation. However, if we could start out with an HSA, most of us would accumulate substantial savings over time to deal with health costs that typically rise with age. Also, the high-deductible insurance is critical to covering unaffordable costs. Nonetheless, people with the highest costs need additional help and often cannot get insurance. That suggests a direct subsidy to help them.

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