Globalisation and health care: Operating Profit.

Why put up with expensive, run-of-the-mill health care at home when you can be treated just as well abroad?

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ROBIN COOK knows how to spot the latest scare in medicine. Mr Cook, a Harvard-trained doctor, is author of over a dozen medical thrillers, including “Coma” and “Outbreak”, which have anticipated pandemics, anthrax attacks and the black market in organs. “Foreign Body”, published this month, is about the next big thing: medical tourism.

Central to the plot is the story of Maria Hernandez, a working-class American woman who travels to Delhi to get a hip replacement she could not afford back home. Alas, she and other medical tourists die in mysterious circumstances. Contrast Ms Hernandez’s fate with that of another American health tourist, Robin Steele. Mr Steele, a real patient, recently went to India’s Wockhardt hospital chain for a heart operation. Not only is he in fine shape, but he also enjoyed a holiday afterwards and saved several thousand dollars to boot.

Mrs Hernandez’s tragedy may sell books, but Mr Steele’s good health is more typical. The future of health care, long one of the most local of all businesses, promises to be increasingly global. Over the next few years the world is likely to see a lot more investment, medical staff and patients crossing borders—bringing economic benefits and greater access to care as they do so. Even a modest surge in global medical tourism could prove a powerful catalyst for government bureaucracies and sclerotic American health-maintenance organisations to think afresh about what they do. It may even introduce competition to private health care in America and elsewhere.

Globalisation is not new to medicine. The outsourcing of record-keeping and the remote transcription of doctors’ notes and X-ray analysis are becoming common. Jagdish Bhagwati, an economist at Columbia University, thinks that the offshoring of, for instance, customer service and claims-processing could save America alone $70 billion-75 billion a year. In recent years leading American hospitals such as the Mayo Clinic and Johns Hopkins have set up offshoots in the Middle East and Asia.

Some wealthy patients have always travelled for fancy medical care. Denis Cortese, head of the Mayo Clinic, in rural Minnesota, observes that “we have been global for a hundred years.” A few years ago Britons fed up with waiting for elective surgery started heading overseas to get joints replaced or cosmetic surgery—sometimes at government expense. Recently, shorter queues in the National Health Service and restrictions on reimbursements have undermined this trend.

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However, globe-trotting patients only ever occupied a niche. What is getting people excited today is the promise of a boom in mass medical tourism, as a much bigger group of middle-class Americans prepares to take the plunge. A report published last month by Deloitte, a consultancy, predicts that the number of Americans travelling abroad for treatment will soar from 750,000 last year to 6m by 2010 and reach 10m by 2012 (see chart). Its authors reckon that this exodus will be worth $21 billion a year to developing countries in four years’ time. Europe’s state-funded systems still give patients every reason to stay at home, but even there, private patients may start to travel more as it becomes cheaper and easier to get treated abroad.

Pills and pils
Asian hospital chains stand to be the biggest winners, as their rising stars, such as Singapore’s Parkway Health, look for foreign patients. Thailand’s modern Bumrungrad hospital in Bangkok already sees tens of thousands of Americans a year. It has just opened a new extension, designed to handle 6,000 foreign patients, which it claims makes it the world’s biggest private clinic. The surge of American patients flocking to India’s Wockhardt hospitals has convinced Vishal Bali, the chain’s boss, that medical travel is now “truly reaching an inflection point.”

Not everyone is as gushing. Paul Mango, the chief author of a report by McKinsey, a management consultancy, disputes wild-eyed claims that millions of patients are already travelling abroad. Yet even he predicts that the future for medical travel is bright, and that in the long run it may even “largely dispel the idea that health care is a purely local service.”

Regina Herzlinger, of Harvard Business School, broadly agrees: “The medical travel market is a bit over-hyped today, but economics dictates why it will become huge over time: if a supplier has very high prices and erratic quality, it creates an opening for nimbler rivals.” That supplier is America’s health-care system, a $2.4 trillion colossus in desperate need of reform.
This prospect of an American-led boom in global medical travel raises two questions. Why is it happening now? And what will be the effect on the health-care systems of poor and rich countries?

Impatients
Until recently, few Americans went abroad for medical treatment. Over the past decade, however, that has begun to change. Americans seeking medical care are increasingly making trips far from home, often at their own expense—not just short hops to Caracas for a nip and tuck or dashes across the frontera for cheap Mexican pills. As Mr Steele’s testimonial suggests, they are now travelling across the world for knee and heart surgery, hysterectomies and shoulder angioplasties.

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One motive is to save money. America’s health inflation has consistently outpaced economic growth, making it the most expensive health market in the world. The average price at good facilities abroad for a range of common medical procedures is, by Deloitte’s reckoning, barely 15% of the price a patient would have to pay in the United States (see table).

But costs have long been much higher in America than in poor countries, so this alone does not explain the new exodus. Two other factors are now at work. One is that the quality at the best hospitals in Asia and Latin America is now at least as good as it is at many hospitals in rich countries. The second, more worrying, factor is that America’s already imperfect insurance safety net is fraying.

Over 45m Americans are uninsured, and many millions more are severely underinsured. Such people may find it cheaper to fly abroad and pay for an operation out of their own pockets than to find the money for deductibles or “co-payments” charged for the same procedure at home. Arnold Milstein of Mercer, a consultancy, calls them America’s “medical refugees”.

Big business may soon join this wave. Epstein, Becker & Green, an American law firm, says that in the past year big employers have become interested in promoting medical travel among the employees they insure. Many are struggling to cope with soaring health costs and some, they report, are willing to take radical steps to save money.

Hannaford, a grocery chain based in New England, now offers its 27,000 employees the option of getting a number of medical procedures done in Singapore rather than America—at a saving to the employee of $2,500-3,000 in co-payments and deductibles. Blue Ridge Paper Products, a firm in North Carolina that makes milk cartons, also offered employees the option of medical travel, but a backlash from a union has put a stop to the plan. Despite that setback, the general rise in corporate interest is such that in June the American Medical Association, the chief lobbying group for the country’s doctors, issued (surprisingly supportive) guidelines for foreign medical travel.

That has emboldened insurance firms, which had thus far been cautious. A few are beginning to offer voluntary “global medical travel” options on their corporate plans. According to the industry watchers at Epstein Becker, other insurers fear that they may be at a disadvantage if they do not offer such schemes.

Overcoming initial scepticism, Aetna, a giant American insurer, has this year launched a pilot scheme in partnership with Singaporean hospitals. Charles Cutler of Aetna notes that the savings for his firm are not as great as they may be for some others, since it gets volume discounts from American hospitals thanks to its size. Therefore travel abroad for Aetna’s clients makes sense only for procedures costing $20,000 or more, which might include heart surgery. But he remains bullish, observing that quality at the best foreign facilities can be much better than at the average American hospital, thanks to greater transparency and better information technology. He thinks this is inspired by the Asian hospitals’ need to market to a sceptical foreign audience.

David Boucher of Blue Cross and Blue Shield of South Carolina, another big health insurer, at first doubted the quality of care abroad. So he visited Thailand’s Bumrungrad hospital a couple of years ago to see for himself. He recalls sipping coffee at the Starbucks in the hospital’s lobby and thinking that “this is not a straw-village clinic with rusty scalpels!” He has persuaded his firm to let him run a division, called Companion Global Healthcare, to pursue this “blue ocean” opportunity.

Mr Boucher says his division’s customers, mostly manufacturers and other firms with margins that are squeezed by global competition, are keen to experiment with an idea that he reckons could easily replace 5-8% of a company’s health spending with cheaper options; in time, he reckons that share may rise to a fifth. Medical travel may be unfamiliar to individual patients, but he points out that thinking globally is nothing new to his corporate clients: “They may be based in Columbia, South Carolina, but they have competitors and customers in Colombia, South America, as well as in South Africa and in Asia.”

Curtis Schroeder, boss of Bumrungrad, thinks the search for value will push people in his direction: “After all, we’re selling Cadillacs at Chevy prices,” he says. He has good reason to beam: some 33,000 Americans came to his outfit last year alone.

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Ok, it goes on for quite a bit longer. If you want to read the whole thing, here is the link:

http://www.economist.com/business/di...ry_id=11919622

I swear to God that if this thread gets no comments or views, I am going to make up some inflammatory, fake thread title and re-post it.

I guess we would rather sling mud and call each other retards than actually talk like adults, not that I am much better at times.

Regardign Mr. Steele and his successful hip replacement.

Where was that procedure conceived and invented? Where were the techniques fine-tuned so that it is now a routine procedure, with fantastic results? How many different surgical techniques is that answer the same for? Is that answer a coincidence?

If it is not, and the U.S. follows the model set by the rest of the world, (the world that gets to take advantage of our advances); where will those advances come from?

I can't wait until enough politicians get bribed that we'll have laws on the book making medical tourism illegal... the same way it's already illegal for an individual to import prescription drugs.

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Originally Posted by 101A

Regardign Mr. Steele and his successful hip replacement.

Where was that procedure conceived and invented? Where were the techniques fine-tuned so that it is now a routine procedure, with fantastic results? How many different surgical techniques is that answer the same for? Is that answer a coincidence?

If it is not, and the U.S. follows the model set by the rest of the world, (the world that gets to take advantage of our advances); where will those advances come from?

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History

The earliest recorded attempts at hip replacement (Gluck T, 1891), which were carried out in Germany, used ivory to replace the femoral head (the ball on the femur).[1]
In 1960 a Burmese orthopaedic surgeon, Dr. San Baw (29 June 1922—7 December 1984), pioneered the use of ivory hip prostheses to replace ununited fractures of the neck of femur ("hip bones"), when he first used an ivory prosthesis to replace the fractured hip bone of an 83 year old Burmese Buddhist nun, Daw Punya.[2] This was done while Dr. San Baw was the chief of orthopaedic surgery at Mandalay General Hospital in Mandalay, Burma. Dr. San Baw used over 300 ivory hip replacements from the 1960s to 1980s. He presented a paper entitled "Ivory hip replacements for ununited fractures of the neck of femur" at the conference of the British Orthopaedic Association held in London in September 1969. An 88% success rate was discerned in that Dr. San Baw's patients ranging from the ages of 24 to 87 were able to walk, squat, ride a bicycle and play football a few weeks after their fractured hip bones were replaced with ivory prostheses. Ivory may have been used because it was cheaper than metal at that time in Burma and also was thought to have good biomechanical properties including "biological bonding" of ivory with the human tissues nearby. An extract from Dr San Baw's paper, which he presented at the British Orthopaedic Association's Conference in 1969, is published in Journal of Bone and Joint Surgery (British edition), February 1970. With modern hip replacement surgery, one can expect to walk, using crutches for support or even just a cane for balance, within a week.

Modern process

The modern artificial joint owes much to the work of John Charnley at Wrightington Hospital; his work in the field of tribology resulted in a design that completely replaced the other designs by the 1970s. Charnley's design consisted of three parts—
a metal (originally stainless steel) femoral component,
a teflon acetabular component which was replaced by Ultra High Molecular Weight Polyethylene or UHMWPE in 1962, both of which were fixed to the bone using
PMMA (acrylic) bone cement,and/or screws.
The replacement joint, which was known as the Low Friction Arthroplasty, was lubricated with synovial fluid. The small femoral head (7/8" (22.2mm)) was chosen for its decreased wear rate; however, this has relatively poor stability (the larger the head of a replacement the less likely it is to dislocate, but the more wear debris produced due to the increased surface area). For over two decades, the Charnley Low Friction Arthroplasty design was the most used system in the world, far surpassing the other available options (like McKee and Ring). Recently the use of a polished tapered cemented hip replacement (like Exeter) and uncemented hip replacements have become more popular. Once an uncommon operation, hip replacement is now common, even among active athletes including racecar drivers Bobby Labonte and Dale Jarrett. Prince (musician) has also undergone hip replacement.

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1) Germany
2) Burma
3) England

Do you actually research this stuff before posting?

Hell no I don't research; if I did I couldn't get owned like that. Off the top of my head.

I actually still go to my dentist in Argentina whenever I head over there for preventive care. I'm yet to find a good dentist here in the US that's not a money grubber. It's like you can't go to a dentist here without having at least one visit to have x-rays done, and at least 2 or 3 sessions.
I was in Argentina last month, and visited my guy. Had a checkup and dental cleanup. It cost me 60 pesos (U$S20) for everything. This is out of pocket, without insurance. Last time I went to see a dentist here in the US, he was charging U$S 100 per cavity fix, not including the office visit.

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Originally Posted by 101A

Hell no I don't research; if I did I couldn't get owned like that. Off the top of my head.

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:lol It's all good.
I do understand what you mean by R&D... But I think that's more applicable to drugs or high end surgery.
The reality is that 3rd world countries still can't do certain procedures that require incredibly high tech. That's still being done in the US, and you have to pay handsomely for it.
But outpatient stuff, or procedures that have become mainstream (like bypass surgery or hip replacement), it's mind-boggling the price difference.
One of the major factors have to do with the cost of insurance for doctors/practices over here. It really drives prices up a lot. It's part of living in a litigious society.

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Originally Posted by ElNono

:lol It's all good.
I do understand what you mean by R&D... But I think that's more applicable to drugs or high end surgery.
The reality is that 3rd world countries still can't do certain procedures that require incredibly high tech. That's still being done in the US, and you have to pay handsomely for it.
But outpatient stuff, or procedures that have become mainstream (like bypass surgery or hip replacement), it's mind-boggling the price difference.
One of the major factors have to do with the cost of insurance for doctors/practices over here. It really drives prices up a lot. It's part of living in a litigious society.

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There is also the administrative cost involved in billing and tracking all of the insurance plans, as to what is paid, how much, and when, uses a lot of labor.

Administrative costs have been identified several years running as one of the primary drivers of increases by the Price Waterhouse Cooper whitepaper that studies the components of increases every year.

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Originally Posted by baseline bum

I can't wait until enough politicians get bribed that we'll have laws on the book making medical tourism illegal... the same way it's already illegal for an individual to import prescription drugs.

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Some of the problems that plague medical tourism cause that as well.

Who do you hold accountable if the drugs are contaminated, diluted or poor quality?

Things as simple as the timing mechanisms for drugs can vary greatly.

If you have some time-release method for a drug that you are supposed to take twice a day, but the time-release, inactive ingredient portion of the drug is one of the corners that is cut, then you get all of the medicine flooding into your system in the course of 2 hours instead of 12, then it wears off, and you are without the benefit of that drug for 4-6 hours until your next pill.

Little things like that can make a big difference in quality of medicines, and are VERY hard to control when the factory is overseas.

Mexican medical maquiladoras! I am all for it. A round of margaritas after surgery.

Joking aside, that would transform the American medical system to truly being free-market. I don't know what you would call the current system but until doctors are advertising their charges and Motel 6 operates a hospital chain what we have here does not seem to be very free-market.

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Originally Posted by byrontx

Mexican medical maquiladoras! I am all for it. A round of margaritas after surgery.

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Heh, a lot of them take a vacation in the host country after the surgery.

I could very much see this being done in Cuba if the stupid sanctions were lifted.

Doctors are one of Cuba's main exports.

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Originally Posted by RandomGuy

There is also the administrative cost involved in billing and tracking all of the insurance plans, as to what is paid, how much, and when, uses a lot of labor.

Administrative costs have been identified several years running as one of the primary drivers of increases by the Price Waterhouse Cooper whitepaper that studies the components of increases every year.

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You know, this begs a question I've thought a lot about lately. The cost of healthcare is very high, and growing; but so is the number of jobs healthcare accounts for. You make it a lot more efficient; you do so by, frankly, eliminating steps in the process; eliminating jobs. Could that be why Obama is shying away from calling for single payor, govt. healthcare?

Admin cost is a wretched joke. See all those paper files. Its the only industry I know of so dependent on paper. Hear them moaning about the cost of converting to electronic storage, it's because efficiency is a non-issue when you get to constantly pass operating costs along to the payers (which aren't the same as the end-user) so they muddle along burning money with their inefficient systems.

Insurance companies and government agencies should refuse to pay on anything that is not sent in an electronic format.

Hell, my car's service history is in an electronic form.

Medical tourism by US tourists is huge business.

of course it is trashed by US docs and dentists, but US medical care kills 100K/year due to medical errors, so whining about botched medical work overseas is dishonest.

Medicare overhead is about 3%, commercial health insurance overhead is 20% - 30%, which is why McLame wants to kill medicare/medicaid and force people into for-profit medical care.

similarly, Social Security o/h is about 1%, but what would privatized for-profit s/s o/h be? minimum 7%.

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Originally Posted by boutons_

Medicare overhead is about 3%, commercial health insurance overhead is 20% - 30%, which is why McLame wants to kill medicare/medicaid and force people into for-profit medical care.

similarly, Social Security o/h is about 1%, but what would privatized for-profit s/s o/h be? minimum 7%.

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Link.

An interesting bit on 3% Not a source for the statistic, but an interesting analysis.

http://www.thehealthcareblog.com/the..._the_thre.html

I would guess the ultimate source for that stems from an analysis of the Medicare budget.

The most interesting thing brought up by the above blog is that Medicare tends to get people who are really sick, and require expensive treatment. This skews the costs a bit downwards, as sick people cost a lot compared to the amount of money spent on administrative overhead.

http://www.pnhp.org/news/2008/septem...eforall_wh.php

Another interesting article from the Physicians for a National Health Car Program.

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The “One-Size-Fits-All” Objection Falls Apart

Ironically, Medicare-for-All and other “single-payer” plans are frequently disparaged as “one-size-fits-all” programs, as if that were undesirable. Yet we all need the same protection in the event of illness or injury, and many of us want that for everyone else as well. Indeed, the most exemplary rule of all time is to “do unto others as you would have them do unto you.” That “one-size-fits-all” rule is hard to beat. In fact, by pooling all existing contributions from all plan sponsors and participants, existing varying contribution rates would be perpetuated. That way, premiums and contributions would not be one-sized after all. And those rates could share in Medicare- for-All’s savings.

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Originally Posted by RandomGuy

An interesting bit on 3% Not a source for the statistic, but an interesting analysis.

http://www.thehealthcareblog.com/the..._the_thre.html

I would guess the ultimate source for that stems from an analysis of the Medicare budget.

The most interesting thing brought up by the above blog is that Medicare tends to get people who are really sick, and require expensive treatment. This skews the costs a bit downwards, as sick people cost a lot compared to the amount of money spent on administrative overhead.

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Tends to get people who are really sick...absolutely; those over 65. It is not hyperbole that we will all "spend" over half of our lifetime supply of healthcare dollars in the last year of our lives as doctors and hospitals try heroically to save our asses from a lifetime of hard livin (well, some of that was hyperbole).

Anyway, as the baby-boomer leave the private work place, and enter the public; Medicare is going to tank even harder...but, since retirement accouts are currently getting pummeled by the stock market tank; many bber's won't be able to retire, and will stay on the private rolls, thus exacerbating the problems on THAT side.

A truism in the industry, "Your Claims are going to be your claims". They are also going to be the most significant portion of healthcare dollars spent. So public, or private, we are ALL going to have a lot more dollars spent on healthcare over the next 20 or so years, and their ain't a damned thing we can do about it. The boomers (not paragons of good health) are JUST NOW starting to get diagnosed with the REALLY expensive shit. 15 years ago they started getting limp dicks, and we got VIAGRA; now their getting to the next stage, and we're gonna get saddled with that, as well. You wonder what it's gonna be? Just watch the evening news, and note the drug commercials (about 60% of ALL the commercials), and that'll give you a pretty good indication.

I did read an article a while back that said that said the MIC and the health care industry have become major drivers of the US economy.

pre-emptive killing and self-inflicted disease, not exactly what the Founding Fathers hand in mind for USA, no?

Now add in that financial wheeling and dealing (producing nothing) has exploded to about 20% of the economy, and you get a really perverse picture.

Quote:

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Originally Posted by RandomGuy

http://www.pnhp.org/news/2008/septem...eforall_wh.php

Another interesting article from the Physicians for a National Health Car Program.

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When docs realize that all "succesfull" govt. payor systems get that way, in large part, by strictly controlling what doctors can charge for their services, you will see a HUGE backlash from the AMA.

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Originally Posted by boutons_

I did read an article a while back that said that said the MIC and the health care industry have become major drivers of the US economy.

pre-emptive killing and self-inflicted disease, not exactly what the Founding Fathers hand in mind for USA, no?

Now add in that financial wheeling and dealing (producing nothing) has exploded to about 20% of the economy, and you get a really perverse picture.

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BIG difference between the MIC and healthcare, although both consume a similar size of GDP, is the number of jobs provided. Not even close. Healthcare is much greater.

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Originally Posted by 101A

When docs realize that all "succesfull" govt. payor systems get that way, in large part, by strictly controlling what doctors can charge for their services, you will see a HUGE backlash from the AMA.

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Indeed.

Limiting the fees doctors can charge is one of the things that helps keep costs down in places like Germany or Japan.

Doctors might actually have to be a bit more cost-efficient. GASP!

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Originally Posted by RandomGuy

Indeed.

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Gonna start calling you "Spock".

"Doctors might actually have to be a bit more cost-efficient."

Doctors in industrial countries with national health systems don't have a staff just to fight with insurance companies, nor do they have to hire billing companies to collect from paitents. A lot of docs now refuse clients with insurance, accepting "private pay" only.

Such overheads are driving independent docs :

1) into groups of doctors where o/h is shared

and

2) out of general practice/primary care, where there is now a critical shortage.

I think I read an article where an independent, average primary care doctor has overhead of $250K.

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Originally Posted by RandomGuy

Indeed.

Limiting the fees doctors can charge is one of the things that helps keep costs down in places like Germany or Japan.

Doctors might actually have to be a bit more cost-efficient. GASP!

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Medical school does them no favors. It pumps out individuals that can generate revenue with the best of them; but give them absolutely no business education. Add to that the Hubris that is apparently bred and fostered into these people, and most of them can't be told, either.

Docs make a lot of money, but they spend a lot of money.

A doctor has to make 3 times another successful person to enjoy the same living standard.

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Originally Posted by 101A

Medical school does them no favors. It pumps out individuals that can generate revenue with the best of them; but give them absolutely no business education. Add to that the Hubris that is apparently bred and fostered into these people, and most of them can't be told, either.

Docs make a lot of money, but they spend a lot of money.

A doctor has to make 3 times another successful person to enjoy the same living standard.

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I concur.

Doctors, like a lot of small business people, often suck at the business side of the house.

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Originally Posted by 101A

Gonna start calling you "Spock".

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http://tbn0.google.com/images?q=tbn:...al_Spock-1.jpg

I hope that picture comes through.

My dad recently racked up a six figure bill from the hospital from a completely random encounter with a nasty flesh eating bacteria. He'll end up paying pennies thanks to his insurance. He got amazing care and didn't have to wait months for an MRI.

I love America.

http://graphics8.nytimes.com/ads/spacer.gifLooks like McBottomGun's health plan is as popular with businesses as was dubya's privatizing of s/s was rejected the The Great American People.

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October 7, 2008

Business Cool Toward McCain’s Health Coverage Plan

By KEVIN SACK

American business, typically a reliable Republican cheerleader, is decidedly lukewarm about Senator John McCain’s proposal to overhaul the health care system by revamping the tax treatment of health benefits, officials with leading trade groups say.

The officials, with organizations like the U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Business, predicted in recent interviews that the McCain plan, which eliminates the exclusion of health benefits from income taxes, would accelerate the erosion of employer-sponsored health insurance and do little to reduce the number of uninsured from 45 million.

That is largely the argument made in recent days by Mr. McCain’s opponent, Senator Barack Obama, who has revived a dormant campaign debate over health care with an intensified attack on the McCain plan. Conscious that the issue plays well with swing voters, Mr. Obama devoted a speech on Saturday to characterizing Mr. McCain’s plan as “radical” and a “Washington bait and switch,” and he has reinforced the message in four television advertisements.

That has set off a furious back-and-forth between the campaigns, with the McCain campaign countering that Mr. Obama’s plan also would undermine employer coverage by mandating that medium and large companies either provide insurance for their workers or pay a tax. The payments would help subsidize a new government health plan for low-income people, and some economists believe it would entice workers away from their employer-sponsored coverage.

Mr. Obama, the Democratic presidential nominee, opened his assault two weeks ago by telling crowds that Mr. McCain “wants to tax your health benefits.” He did not explain that Mr. McCain, the Republican nominee, would offer tax credits in exchange to cover the increased liability for many Americans.

Over the weekend, Mr. Obama more accurately characterized the McCain plan as a swap but one that would work to the detriment of millions. Middle-class families, he said, would “watch the system they rely on begin to unravel before their eyes.”

The business leaders said that was also their fear. Despite steady declines this decade, employers still provide coverage to 62 percent of Americans younger than 65. Surveys show that they want to continue doing so to attract and maintain a productive workforce.

The business leaders forecast that Mr. McCain’s free-market approach would impose particular burdens on small businesses and old-line manufacturers that are already struggling.

“To some in the business community, this is very discomforting,” said R. Bruce Josten, executive vice president for government affairs at the Chamber of Commerce. “The private marketplace, in my opinion, is ill prepared today with an infrastructure for an individual-based health insurance system.”

Health economists are ideologically divided over Mr. McCain’s plan. Analysts who support it project that it might provide coverage to 25 million people, while critics predict that the number of newly insured would peak at five million and then decline.

Though Mr. McCain says his plan would not add to federal spending, the Tax Policy Center has estimated that it will cost at least $1.3 trillion over 10 years. And while right-leaning economists emphasize that the plan would provide a tax cut for the average American, opponents respond that certain high-earners will face an increase and that some in the middle class may break even only by reducing their coverage.

The centerpiece of Mr. McCain’s plan is the elimination of the provision that has, since 1954, excluded the value of employer-sponsored health benefits from a worker’s taxable income. The exclusion can be worth thousands of dollars for some workers.

In its place, Mr. McCain would offer all Americans income tax credits of $2,500 per person or $5,000 per family for heath coverage, regardless of how they bought it.

Mr. McCain would not change the ability of companies to deduct health benefits as a business expense on their corporate income taxes. And advisers have said he would continue to exclude the value of health benefits from the payroll taxes that finance Social Security and Medicare.

The income-tax exclusion benefits 162.5 million Americans but costs the federal government $145.3 billion in foregone revenue, second only to the tax break for retirement account contributions, according to the Congressional Joint Committee on Taxation.

Still, the exclusion has encouraged the pooling of workers into large purchasing groups that tend to lower costs. And with group coverage, no one can be denied coverage, everyone pays the same rates and the healthy and wealthy essentially subsidize the sick and the poor.

Consequently, it is often more expensive to buy equivalent coverage as an individual, partly because insurers pass along the administrative costs of weeding out unacceptable risks.

The exclusion has long been criticized as unfair because the 18 million people who buy health insurance on their own are not entitled to it. Critics also say that it is most valuable to those in high tax brackets with the costliest health plans, that it contributes to job-lock, and that the subsidization of group insurance encourages people to buy more coverage and consume more health care than they need, driving up health spending.

Mr. McCain and his health advisers argue that replacing the tax exclusion with tax credits for all would encourage consumers to shop more deliberately, stoking competition in the marketplace and lowering premiums. He would allow them to shop for policies across state lines.
“It will help to change the whole dynamic of the current health care system by putting individuals and families back in charge and forcing insurance companies to respond with better service at lower cost,” Mr. McCain wrote recently in The New England Journal of Medicine.

For some workers, depending on their tax bracket and insurance costs, the new tax credits would exceed the value of the tax exclusion, making the swap profitable. But with the average employer-sponsored family policy costing $12,680 this year, other workers would find the exchange a losing proposition. They would either have to spend more, reduce their coverage or persuade employers to make up the difference.

Officials with eight business trade groups contacted by The New York Times predicted the McCain plan would raise costs and force some employers to stop providing health benefits.

A recent survey of 187 corporate executives by the American Benefits Council and Miller & Chevalier, a consulting firm, found that three-fourths felt the repeal of the tax exclusion would have a “strong negative impact” on their workers. Only 4 percent said they would provide additional pay to fill any gaps.

John J. Castellani, president of the Business Roundtable, an association of leading chief executive officers, said his group instead supported extending the tax exclusion to those who bought coverage on their own.
“One of the things we don’t want to do,” Mr. Castellani said, “is jeopardize 170 million Americans who do get insurance through their employers.”

A number of business officials are worried that Mr. McCain’s tax credits would lure young and healthy workers into the individual market to take advantage of cheaper, less-generous policies. That, they say, would leave employers to cover an older and sicker pool of workers, forcing up premiums.

Workers who found that they had less buying power with the tax credits than with the tax exclusion could be expected to pressure employers to raise salaries or benefit subsidies, the business officials said.

“There are huge questions about the $5,000 per family being an insufficient amount in terms of being able to purchase the same coverage,” said Mr. Josten with the Chamber of Commerce.

Helen B. Darling, president of the National Business Group on Health, a coalition of 300 companies, agreed that many workers would face a net loss. “The last thing you want to do to the average working person, especially when you’re bailing out big financial companies, is take something they hold near and dear partially away,” Ms. Darling said.

Economists forecast that the problem would worsen over time because Mr. McCain, according to advisers, would index his tax credits to overall inflation. Health insurance premiums have grown four times faster than inflation since 1999.

James A. Klein, president of the American Benefits Council, said concern that the tax credits would not keep up with inflation was a primary reason his 280 member companies “take a very dim view” of repealing the tax exclusion.

Mr. McCain theorizes that if the government’s subsidization of health care is capped, consumers will cut back on their use of the system, slowing the growth in spending. But critics worry that he overestimates his ability to control health costs, and that a growing number of people will find they cannot obtain traditional coverage.

http://www.nytimes.com/2008/10/07/us...gewanted=print

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