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The Way Forward

Posted on Jun 18, 2008 by Sergio Ulloa ()

You know it's going to be a bad day in the healthcare industry when the chairman of the Federal Reserve, Bernard S. Bernanke, is predicting a massive rise in the cost of healthcare in the USA unless some serious measures to tackle the problem are introduced. At the same time as the Fed is struggling to come to grips on this ever worsening issue the Democratic and Republican presidential candidates are also starting to focus in on current healthcare policies and ways to change the present situation.

With the primaries over, and the presidential elections just round the corner, Barack Obama and John McCain are going to have to convince the voting public that they will be able to address the current healthcare crisis, and it may not be as easy as you think. Both these candidates know that their ability to offer a suitable solution may be the difference between winning and loosing a state. With that in mind we're going to give you a brief rundown of the options and what they could mean if implemented.

The two main options on the table are:

Barack Obama's Proposal

1.           A move to a paperless healthcare system where all patient records and health insurance documents would exist only in electronic form. This would be implemented along with quality disease prevention (as opposed to disease management), and ensuring portability of health insurance should a policyholder loose their job, and consequently their coverage.

John McCain's Proposal

2.           Create tax breaks of up to $2,500 for individuals, and $5000 for families, who have purchased private health insurance. These tax breaks will occur each year, and while this would have a relatively limited impact on the number of uninsured individuals in the USA, it would create an incentive for private citizens to obtain their own health insurance rather than relying on their employer.

These two proposals aim to solve the current healthcare and insurance crisis in radically different ways. By removing paper from the healthcare industry Obama aims to eliminate one of the major sources of spending (namely paper) by moving everything to an electronic format. It's easy to see how this simple proposal would save quite a bit of money, but there is a problem.

Electronic conversion is moving at a snails place in the USA; as it turns out, people like doing business on paper. In addition to this the amount of money being saved (an estimated $ 77 billion a year) is based off one survey, of which industry experts are not convinced about the accuracy. Disease prevention is always going to be less costly that disease management, but overhauling the current system to institute these reforms will be costly, and there is no guarantee that the implementation will have any effect at all.

By far the most promising part of this proposal, at least in the eyes of the American public, is the issue of health insurance portability should an individual loose his job, and subsequently their employment backed insurance. However, it is important to note that with the HIPPA and COBRA legislations the US government has already attempted, albeit not very successfully, to address this issue. Creating legislation to guarantee portability and renewability will always be an uphill battle, and may be harder than Obama realizes.

Citing immediate results may get Obama votes on this issue, but analysts are warning that even if these proposals are accepted by the government, the earliest changes to the system will happen approximately 5 years after the institution of the plan. This means that the USA would only see the benefit from these changes 1 year after the presidential term, and with the state of the healthcare system, this may be too long to ask of the average voter.

In terms of immediate impact the winner is clearly the tax break initiative proposed by John McCain. Creating a system whereby individuals would receive tax credit for any health insurance policy that they have purchased could be instituted immediately, which could give strength to the proposal in the eyes of the voting public. In addition to this McCain is not planning on upsetting the current free market system of healthcare in the USA, which would allow healthcare businesses to continue business as normal.

Critics of the McCain plan claim that this proposal would seriously undermine the American public's ability to access healthcare as the policy would involve the removal of employer backed health insurance coverage. However, this is not the case at all. Under the tax break system suggested by McCain employees would still be entitled to job-sponsored insurance and this initiative would simply give a dollar for dollar tax rebate to any individual who had purchased medical insurance.

This would, in McCain's eyes, give the American public an incentive to go out and buy health insurance, which would in turn reduce corporate spending, and improve the overall quality of health insurance plans which in turn would increase the availability of healthcare. If there truly was a free and open market for health insurance established in the USA, rather than the fairly closed system that currently exists, then obviously consumers would choose to obtain the best plan at the best price, forcing the insurance industry to adjust accordingly by increasing the quality of the products that they supply. However, critics are unsure and claiming that this rebate proposal would continue to isolate sick Americans who at present are unable to obtain private insurance unless they are covered by their employer.

Both arguments have their critics and supporters, and both proposals recognize that there is a fundamental problem in the American healthcare system. With rapid medical inflation, millions of uninsured and underinsured citizens and pharmaceutical prices skyrocketing this is an issue that may play a very important role in the upcoming elections. But it's up to the voting public to inform themselves and understand the subject. Is one of these plans the way forwards for healthcare and insurance in the USA? Only time will tell.

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