Substance over Style: Health Care. The good news is that Kerry's health care plan (PDF) is as solid and as sensible as advertised. Kerry plans to expand eligibility for Medicaid and State Children's Health Insurance Program (S-CHIP), a long overdue move that will all but eradicate the number of uninsured children in America.
But the second, most expensive, part of his proposal -- the plan to have government insure catastrophic illness -- is the main event. Everyone has his or her own pet candidate for "the big problem" with health care in America. To give an example: health care costs rise dramatically simply because there will always be new health services, and people will pay nearly anything to get them. So in the absence of any financial disincentive, doctors will provide a lot of unnecessary -- even inappropriate -- care. On the other hand, look what happens if the government uses market competition to put bottom-line pressure on HMOs and insurance companies. The companies reduce unnecessary coverage, but they also try to avoid covering catastrophic illnesses. (This is known as "adverse selection"; a more detailed paper can be found here.) Furthermore, a few big illnesses can ratchet up premiums in a company pool, as The Washington Post recently discovered.
Under John Kerry's proposal, the government would pay for 75 percent of medical bills over $50,000 a year. Because the costs of covering catastrophic illness would be greatly reduced, insurance companies would no longer have incentive to avoid those who need health care the most. Insurance rates would fall, and younger, healthier people would be more likely to buy health insurance, since they no longer have to pick up the tab for the less fortunate. Kerry's plan attacks the worst aspects of private insurance, while preserving its benefits. If Kerry can stress this point, and allay fears about a government takeover of health care, he could well convince moderate Republicans to sign on.
Kerry has a number of other, smaller ideas for health care. Perhaps most significant is his plan to close the legal loopholes that allow "brand-name" pharmaceutical companies to stop cheaper, generic drugs from entering the market. Ever since the Hatch-Waxman Act was passed in 1984, drug companies have used hordes of lawyers to exploit the patent laws and extend their protections. It's high time to end corporate welfare for the drug industry.
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