McCain On Health Care

Here's McCain's speech from yesterday, with markups in red. Clean copy can be found here.

John McCain on Health Care
Des Moines Rotary Lunch October 11, 2007

Thank you for the opportunity to talk today about the American health care system. You don't have to be a candidate for President to discover that worries over the availability and cost of health care trouble the waking hours and disturb the sleep of more Americans than any other single domestic issue. Indeed, outside of the pre-eminent challenge of our time - the threat of Islamic extremists - no issue comes up more frequently in large and small public discussions, in polls, debates and media reports.

So it is surely appropriate that the subject figures prominently in this presidential election. And in our eagerness to appear responsive to this acute public concern, every candidate will feel compelled to offer his or her "solution" to the problem. But will these solutions actually improve our health care system? Or will they merely serve as the candidates' opening ante in what looks to become a bidding war? In our haste will we promise more than we can deliver? Will we misdiagnose the problem and devise a cure that will kill the patient? Will we even ask ourselves that first, most important of questions: what exactly is the problem with the American health care system?

I'm not a huge McCain fan because he produces such absymal legislation but it certainly is nice to see somebody attempting to stave off the feeding frenzy that's about to take place.

The problem, my friends, is not that Americans don't have fine doctors, medical technology and treatments. The state of our medical science is the envy of the world. The problem is not that most Americans lack adequate health insurance.
The vast majority of Americans have private insurance and our government spends
billions each year to provide even more.

The biggest problem with the American health care system is that it costs too much, and the way inflationary pressures are actually built into it. Businesses and families pay more and more every year to get what they often consider to be inadequate attention or poor care. And those who want to buy insurance are often unable to because of the high cost. What more compelling evidence of the problem do we need than to note that General Motors now spends more for health care of its employees and retirees than for the material required to manufacture its products - steel. The price of every GM car includes over $1500 for health care costs compared to Toyota whose total cost for healthcare per car is about $200.

From first principles, I don't think I agree with this. The thing that constantly worries me is whether I'll have access to the care that my family or I need, without it consuming all of our assets. Cost is certainly a factor in that but it's not the only factor. A steady stream of medical advances is important. I'm willing to pay a premium to ensure a healthy R&D system. An insurance system that doesn't deny me or my family coverage based on previous medical history is important. And a system that's as fair to my neighbor as it is to me is important.

Important point about inflation being built into the system.

The growth of costs affects everyone: government overspending, business costs and family budgets. It hurts those who have insurance by making it more expensive to keep. And it hurts those who don't have insurance by making it even harder to attain.

We are approaching a "perfect storm" of problems that if not addressed by the next president, will cause our health care system to implode. Here is what we know: First, we currently spend 2.2 trillion dollars-16 cents of every dollar we spend on health care. By 2015, just seven years from now, that number will nearly double to four trillion dollars. Second, by 2019 Medicare will be broke. We are currently spending more on Medicare than we are collecting in payroll taxes and cashing in the few IOU's left in the trust fund. In the meantime, more and more of our retirees' social security checks will also go to pay for Medicare leaving our seniors with less money for their everyday expenses. Third, by 2017 more money will be going out of social security than is coming in. The next president must act to avert the impending "storm."

For all the grandiose promises made in this campaign, has any candidate
spoken honestly to the American people about the government's role and failings
about individual responsibilities? Has any candidate told the truth about the
future of Medicare? Its costs are growing astronomically faster than its
financing, and leaving its structural flaws unaddressed will hasten its
bankruptcy. Has any candidate warned that we have a personal responsibility to
take better care of ourselves and our children? Yet that is the only way to
prevent many chronic diseases. Has any candidate insisted that genuine and
effective health care reform requires accountability from everyone: drug
companies, insurance companies, doctors, hospitals, the government and patients?
Yet that is the truth upon which any so-called solution must be based.

Democratic presidential candidates are not telling you these truths.
They offer their usual default position: if the government would only pay for
insurance everything would be fine. They promise universal coverage, whatever
its cost, and the massive tax increases, mandates and government regulation that
it imposes.

Forcing responsibility for care back onto the individual is a necessary but insufficient condition. First, uneducated consumers are utterly baffled by the system. Forcing them to manage their own care will be impossible. Similarly, forcing lifestyle and behavioral changes on an uneducated and indifferent public will require the government going into nanny mode. I have no problem with effectively educating children about their health. Intruding beyond that starts to get hinky.

This is partially unfair to the Democratic plans, especially Hillary's. She's making some of the right noises about reforming the insurance system. But McCain is right that nobody is being honest about what uses the feds as a redistribution mechanism will cost. As I've contended before, you have to break the problem into an insurance reform piece that's separate from how you provide funds for those who simply don't have the money to participate in risk-spreading. Nobody wants to do that. I don't think McCain wants to do it either.

I offer a genuinely conservative vision for health care reform, which preserves the most essential value of American lives - freedom. Conservatives believe in the pursuit of personal, political and economic freedom for everyone. We believe that free people may voluntarily unite, but cannot be compelled to do so, and
that the limited government that results best protects our individual freedom.
In health care, we believe in enhancing the freedom of individuals to receive
necessary and desired care. We do not believe in coercion and the use of state
power to mandate care, coverage or costs.

I believe Americans want to be part of a system that offers high quality care; that respects their individual dignity and is available at reasonable cost. Unfortunately, the American health care system as it is currently structured fails this test. It is too expensive. It insults our common sense and dignity with excessive paperwork, disconnected visits with too many specialists, and by elaborately hiding from us any clear idea of what we are getting for our money. We must reform the health care system to make it responsive to the needs of American families. Not the government. Not the insurance companies. Not tort lawyers. Not even the doctors and hospitals.

The next president will have to take on the special interests that thrive in the health care system. Doctors must do a better job of managing our care and keeping us healthy and out of hospitals and nursing homes. We will need alternatives to doctors' offices and emergency rooms. Hospitals must do a better job of taking care of us when we are there, commit far fewer deadly and costly medical errors and generally operate more efficiently. Pharmaceutical companies must worry less about squeezing additional profits from old medicines by copying the last successful drug and insisting on additional patent protections and focus more on new and innovative medicine. Insurance companies should spend more on medical care and less on "administration."

My reforms are built on the pursuit of three goals: paying only for quality medical care, having insurance choices that are diverse and responsive to individual needs, and restoring our sense of personal responsibility.

This "paying for quality care" thing is weird and not what it sounds like, as we'll see below.

These reforms are also built on the most fundamental of medical tenets: do no harm. There is much to be admired about medicine in America, and I want to
protect those qualities. Doctors and other providers want to provide quality
care. Lower costs mean that Medicare premiums don't continue to spiral beyond
our ability to sustain it, and our insurance premiums are stretched farther.
Most importantly, any reform must respect the freedom to keep your care and
insurance just as they are.

The first principal of real reform is that Americans should pay only for quality. Right now, too much of the system is built on getting paid just for providing services, regardless of whether those services are necessary or produce quality care and outcomes. American families should only pay for getting the right care: care that is intended to improve their health.

This "services" vs. "outcomes" argument has been surfacing in several places recently and it's a thorny one. It's also one where either the feds or the insurance industry has complete control over any kind of reform. Pay per patient? It'll encourage doctors to spend less time with their patients. Salaried doctors? Maybe, but who sets the salary? The insurance company? I think my favorite is cutting over to time-based professional fees, like lawyers. You have to leave in the service-based fees for tests but that should be a separate provider in whom the doctor shouldn't have an interest--usually.

American families know quality when they see it, so their dollars should be in their hands. When families are informed about medical choices, they are more
capable of making their own decisions, less likely to choose the most expensive
and often unnecessary options, and are more satisfied with their choices. Health
Savings Accounts are tax-preferred accounts used to pay insurance premiums and
other health costs. They put the family in charge of what they pay for, and
should be expanded and encouraged.

My biggest problem with HSAs is that they try to mimic the "defined benefit" vs. "defined contribution" paradigm that animates pension reform discussions. It doesn't fit very well for health care. Defined contribution plans should be roughly equivalent to defined benefit plans for investments (as long as you're willing to be honest and do the math). With health care, the outcomes are all over the place, based on individual health. The proper model for this is risk-spreading (aka insurance). HSAs are silly for insurance--much easier just to make the insurance deductible or creditable and have done with it.

I am committed to ensuring the finest quality medical care for our veterans. They have earned that consideration and more. They should not have to wait for access to a VA facility that is hours away. We can give them the option to put
the means for financing their care under their control - in an electronic card
or other device - so that if they want they can choose their care in another way
that suits them best.

We cannot let the search for high-quality care be derailed by frivolous lawsuits and excessive damage awards. We must pass medical liability reform, and those reforms should eliminate lawsuits for doctors that follow clinical guidelines and adhere to patient safety protocols. If the Democrats are sincere in their conviction that health care coverage and quality is their first priority, than they will put the needs of patients before the demands of trial lawyers. But they can't have it both ways.

This is classic McCain: Good ideas motivating horrible implementation. Liability reform based on following guidelines so restricts doctors' freedom of action that care will be degraded. (Please note that I'm all for evidence-based treatment. I just don't think you can cookie-cutter medical care enough to make it tort-proof.)

The proper thing to do here is to immunize doctors completely. Then you back this up with an administrative mechanism that hears complaints and compensates genuine negligence. Doctors pay into the compensation fund (no doubt tax dollars will be needed as well). Having the administrative board find against you increases how much you have to pay in. In other words, it's an insurance scheme with a disinterested party judging the payouts.

Research shows that coordinated care - providers collaborating to produce the best health outcome - offers better quality and costs less. We should pay a single bill for high-quality heart care, not an endless series of bills for
pre-surgical tests and visits, hospitalization and surgery, and follow-up tests,
drugs and office visits. Paying for coordinated care means that every single
provider is now united on being responsive to the needs of a single person: the
patient. Health information technology will flourish because the market will
demand it.

This is interesting and I'd like to see it fleshed out. Who does the coordination? Who gets compensated for it? Is this a problem that simply goes away with a secure, shared record system?

Clinics, hospitals, doctors, medical technology producers, drug companies and every other provider of health care must be accountable and their transactions transparent. Families, insurance companies, the government - whoever is paying the bill - must understand exactly what their care costs and the outcome they
received.

Silly. I understand medicine extremely well for a layman and my eyes glaze over wading through the bill for a hospital stay. And how do you compensate--or penalize--for outcomes? Again, I wonder how much time-based fee structures would affect this?

Families place a high value on quickly getting simple care, and have shown a willingness to pay cash to get it. If walk-in clinics in retail outlets are the most convenient, cost-effective way for families to safely meet simple needs why
should government stand in their way? I will not.

If the cheapest way to get high quality care is to use advances in web technology to allow a doctor to practice across state lines, then let them. In disasters like Katrina we saw how stupid and harmful it is to refuse the services of doctors just because they had an out-of-state address. We should have a national market place, and if I'm elected President, we will.

Yup--a good one. But I notice he doesn't talk about easing licensing requires so that techs can do simple procedures and diagnoses without a doctor present. I thought this Arnold Kling piece had some interesting ideas in this area. I would have hoped that McCain was willing to gore the AMA's oxen in this kind of policy statement. Apparently not.

Drugs are an important part of medicine, of course, and are often quite expensive. Here in Iowa the Attorney General is suing seventy-eight drug companies accusing them of inflating drug costs paid by Iowa taxpayers through the Medicaid system. Problems with costs are created when market forces are replaced by government regulated prices. If drug costs reflects value, fine. But if there are ways to bring greater competition to our drug markets by safe
re-importation of drugs, by faster introduction of generic drugs, or by any
other means we should do so. If I'm elected President, we will.

I think I'm in favor or reimportation because it's the most effective way to induce shortages in countries that engage in price controls on drugs. When the world market for a drug is truly flat, the price will come down.

Government programs such as Medicare and Medicaid should lead the way in health care reforms that improve quality and lower costs. Like most of our system, Medicare reimbursement now rewards institutions and clinicians who provide more and more complex services. We need to change the way providers are paid to focus
their attention more on chronic disease and managing their treatment. This is
the most important care and expense for an aging population. And in a system
that rewards quality, Medicare should not pay for preventable medical errors. I
am appreciative of the therapeutic benefits of modern pharmaceuticals. However,
I strongly opposed adding another unfunded entitlement to the fiscal train wreck
that is Medicare by providing all seniors with a costly drug benefit, even
those, like me, who can more than afford to pay for their medicine.

This appears to be content-free.

The second principle of effective reform is to have insurance choices so varied and responsive to individual needs that you could fire your insurance company if you wanted to. Right now, too many of our citizens don't have an insurance policy at all, and those who do are afraid they will lose the one they have - afraid they will get too sick, afraid to stay home and not work full-time, and
afraid their benefits will disappear along with their job.

I believe that everyone should get a tax credit of $2500, $5000 for families, if they have health insurance. It is good tax policy to take away the bias toward giving
workers benefits instead of wages. It is good health policy to reward having
insurance no matter where your policy comes from.

I don't understand this. Do employers lose their tax deduction? Also, why would you do a fixed credit and encourage price-fixing for insurance? Why not just make the credit equal to some percentage of the premium?

To use their money effectively, Americans need more choices. We should give additional help to those who face particularly expensive care. If it is done right and the additional money is there, insurance companies will compete for
these patients - not turn them away. It is a challenge to develop techniques
that allocate the right amount to each of these families. I propose that we try
a time-honored approach and let the states work on whatever method they find
most promising. The federal government can help fund this effort, but in
exchange, states should allow Medicaid and SCHIP funds to be used for private
insurance and develop methods to augment Medicaid and tax credits for more
expensive care.

This almost sounds like he's trying to segregate routine and catastrophic care, which is a terrific idea, IMO. I notice that he's not willing to come out and just flatten the risk pools, however.

Family-based policies translate into broad success when they are paired with greater competition among insurers on a level playing field. You should be able to buy your insurance from any willing provider - the state bureaucracies are no better than national ones. Nationwide insurance markets that ensure broad and
vigorous competition will wring out excess costs, overhead, and bloated executive compensation. Introducing competition into the health insurance market will reduce costs.

Some are already content with the choices and advice offered by their employer. Fine. But Americans should be able to choose who they trust. If a church or professional organization wishes to sponsor insurance for its members, they should be able to do so.

When an American family controls its own health care financing, has a wide variety of low-cost, innovative choices, and receives insurance through a sponsor they trust,
insurance policies will only disappear when the family decides it doesn't serve
them as well as a competitor would.

Sounds like goodness, but it doesn't deal with all the kinks with mandatory coverages. Indeed, this is brings up a major problem with all forms of insurance: You can't figure out what's covered. It is absolutely vital that insurance companies be able to restrict coverage to certain procedures, so that they avoid paying for ineffective treatments. However, there has to be a transparency mechanism that an ordinary mortal can comprehend. This is an amazingly difficult problem.

The final important principle of reform is to rediscover our sense of personal responsibility. We must personally do everything we can to prevent expensive, chronic diseases. Our rights in this country are protected by our personal sense of responsibility for our own well being. Cases of diabetes are going up, not only in the baby boom generation, but among younger Americans obesity, diabetes and high blood pressure are all on the rise. Parents who don't impart to their children a sense of personal responsibility for their health, nutrition and
exercise - vital quality of life information that political correctness has
expelled from our schools - have failed their responsibility. Also, parents are
responsible for ensuring that their children are covered health insurance if, as
is often the case, many options are already available to them.

We can build a health care system that is more responsive to our needs and is delivered to more people at lower cost. The "solution," my friends, isn't a
one-size-fits-all-big government takeover of health care. It resides where every
important social advance has always resided - with the American people
themselves, with well informed American families, making practical decisions to
address their imperatives for better health and more secure prosperity. The
engine of our prosperity and progress has always been our freedom and the sense
of responsibility for and control of our own destiny that freedom requires. The
public's trust in government waxes and wanes. But we have always trusted in
ourselves to meet any challenge that required only our ingenuity and industry to
surmount. Any "solution" that robs us of that essential sense of ourselves is a
cure far worse than the affliction it is meant to treat.

Yeah, yeah, we're all ruggedly self-reliant with 3-sigma IQs. In general, I have a fairly strong bias that stupidity and/or ignorance should carry a pretty high cost and that you deserve what you get. However, exceptions to this are warranted when kids are involved. It's sad that people are going to do dumb things with their healthcare and that they need to be protected from themselves to a certain extent. The trick is to figure out how far that "certain extent" actually extends.