The Obama Prescription

At the Core of the Democrat's Plan: Partnering Government and Private Insurers

By David Cutler, David Blumenthal and Rahul Rajkumar

The U.S. has the best medical technology in the world. Diseases that were once life threatening are now curable; conditions that once devastated are now treatable. But if we measure the success of our health care system by its ability to protect us from the financial ruin that often results from serious illness, to allow everyone to compete in our economy on a level playing field, and to keep American businesses competitive in the world economy, then our health care system doesn’t reflect our values as a nation.

First, unlike almost any other wealthy nation, the benefits of our health care system aren’t available to everyone. At least 47 million Americans, about one in six of us, including nine million children, have no health insurance. The more we probe, the worse this problem seems to become: If you’re a child without health insurance, you are less likely to receive medical attention for recurrent ear infections or for asthma; if you’re having a heart attack and you have no insurance, you are less likely to receive a life-saving coronary artery stent; and if you’re an uninsured trauma victim, you are less likely to be admitted to the hospital and are 37 percent more likely to die of your injuries.

According to one estimate, more than 18,000 Americans die each year because they lack access to quality health care. What is more, in our workplace-based insurance system, 156 million of us are just a pink slip away from joining the ranks of the uninsured.

Second, health care costs are skyrocketing. Health insurance premiums have risen four times faster than wages in the past six years, and more than half of all personal bankruptcies are caused by medical expenses. Moreover, nearly 11 million insured Americans spent more than a quarter of their salary on health care last year. According to a survey by the AFL-CIO, one-third of college graduates reported that they or a family member skipped medical care because of the cost.

Third, too many Americans go without high-value preventive services, like cancer screenings and immunizations—and providers are not adequately reimbursed for managing chronic illnesses, like diabetes or heart disease. Only four cents out of every health care dollar is spent on prevention and public health.

In order to allow all Americans to share in the promise of modern medicine, we have to tackle these three interrelated problems. Sen. Barack Obama’s health care plan would cover everyone, extract more value from our health care dollar and redouble our efforts to promote public health—and it would reduce the costs of health care by up to $2,500 for every American family. Here’s how Sen. Obama proposes to do this:

The Obama plan will guarantee coverage for every American through shared responsibility between employers, private insurers and government. The plan both builds on and improves our current insurance system. Those who like the insurance that they have will keep what they have. But for those who do not have insurance or are underinsured, his plan will make available new public and private insurance options that offer the same benefits that are available to members of Congress. The plans will accept all comers, will be portable, and will charge stable and affordable premiums.

The Obama plan will expand Medicaid and S-CHIP, the public programs that already exist for low-income Americans and for children. For individuals who do not qualify for these programs but still cannot afford insurance, the plan will provide subsidies that people can use to purchase an insurance plan of their choice. Employers that do not provide coverage or make a meaningful contribution to the cost of health insurance for their employees will be required to contribute toward the cost of the new plan.

Sen. Obama’s plan will make it easier for Americans to navigate the health insurance market and to buy insurance by creating a national health insurance exchange—a watchdog for the private insurance market. To participate, insurers will have to meet certain minimum standards: they will have to charge fair premiums and they may not exclude people with preexisting conditions. The exchange will provide clear information and compare the various plans in a straightforward manner so that people can make informed decisions about their choices. Sen. Obama’s plan will also reduce the cost of health care—not by shifting more of the burden onto individuals, but by making our health care system more safe and efficient and then passing these savings on to ordinary Americans.

An Obama administration will invest $10 billion dollars a year for the next five years to create a national state-of-the-art health information system—an investment that could lead to substantial health care savings. A national health information system is the key to unlocking other savings: cutting wasteful administrative expenses, which now consume up to 15 percent of our health care dollar; integrating care for chronic disease; and aligning reimbursement with the provision of high quality care.

We know that at least 30 percent of Medicare spending, and perhaps as much as 50 percent of all medical spending, is not providing any care of value. It doesn’t contribute to making us live longer or healthier lives. The Obama plan would create a national institute for comparative effectiveness to help doctors better understand what therapies work and what therapies don’t work, so we can get more value for the dollars that we spend. Sen. Obama’s plan will cut costs by promoting a rational policy on prescription drug use: allowing drug reimportation from developed countries, increasing the use of generic drugs and allowing the government to negotiate down the price of drugs purchased under Medicare.

We also know that the top 5 percent of people with the greatest health care expenses spend half of our health care dollars. For small businesses, this means that having a single employee with a catastrophic illness can make an entire firm uninsurable. The Obama plan would address this by offering federal reinsurance to employers to make sure that catastrophic illnesses do not make employer plans unaffordable. The insurance exchanges will also help to smooth costs across firms.

Finally, the Obama plan will make major new investments in preventive and public health services. We know that the best way to reduce costs and improve health is to prevent illnesses from occurring or getting worse. Millions of Americans suffer and die needlessly from preventable and treatable diseases such as obesity, diabetes, heart disease, asthma and HIV/AIDS, all of which can be delayed in onset if not prevented entirely. We must also renew our commitment to traditional public health functions: ensuring that our water is safe to drink, that our air is safe to breathe, that our food is safe to eat, and that we are prepared to respond to both natural and man-made disasters. President Obama will make sure that individuals and families, school systems, employers, the medical and public health workforce, and federal and state and local governments work together effectively to promote all of these public health priorities.

These measures will work synergistically and, taken as a whole, we believe that they will lead to an overall savings of $200 billion, or $2,500 per family. They will make our health care system safer, lead to higher quality care, and contribute to covering the uninsured.

We have described what our plan will do. Equally important, however, is what Barack Obama’s health care plan will not do. It will not result in “socialized medicine.” It will not eliminate private insurance or result in the government telling doctors how to practice medicine. To the contrary, it will restore to ordinary Americans a sense of control over their own health care. Rather than forcing Americans to pay ever higher insurance premiums for HMO care, it will cut costs by $2,500 per family and allow patients to choose doctors they know and trust. It will not create health savings accounts or reward insurance companies that rely on high deductibles and co-payments, measures that shift the cost of health care onto the shoulders of ordinary American families and leave them even less protected against the cost of illness. Most of all, Sen. Obama’s plan does not seek a radical overhaul of our health care system. It is both feasible and practical, and it aims to preserve the parts of our health care system that work and to improve the parts that don’t work.

Sen. Obama’s health care plan will cover everyone, cut costs for American families and modernize our healthcare system. Our nation cannot afford another four years of inaction on health care.

David Cutler is the Otto Eckstein Professor of Applied Economics in Harvard’s department of economics and Kennedy School of Government. As a health care policy specialist, he has advised the presidential campaigns of Bill Bradley, John Kerry and Barack Obama.

David Blumenthal is senior health adviser to Sen. Obama’s presidential campaign. He is also director of the Institute for Health Policy at Massachusetts General Hospital/Partners Health Care System, and Samuel O. Thier Professor of Medicine and Professor of Health Policy at Harvard Medical School.

Rahul Rajkumar is a resident at Brigham & Women’s Hospital in Boston, with degrees in history, law and medicine. He is also a Soros fellow.