Obama for America

Fact Check: Why The Obama Health Insurance Plan Covers More People More Rapidly Than The Clinton Plan Does

TO: Interested Parties
FR: Austan Goolsbee, Jeffrey Liebman
DA: November 29, 2007
RE: Why the Obama health insurance plan covers more people more rapidly than the Clinton plan does

As we get closer to the Iowa Caucuses, the first casualty of an increasingly competitive campaign has become the facts about each candidate's health care plan.

Earlier this week, Hillary Clinton took the unusual step of flying from South Carolina to Iowa with the specific purpose of launching her most pointed attack at Senator Obama to date. At her event, she said her plan covered every American and that Obama's universal plan "flunked the truth in labeling test." You don't have to dig too deep into the numbers to see that:

1) Despite her repeated claims, Senator Clinton's plan does not cover every American, in fact it leaves 15-20 million Americans without health insurance

2) Her claim that Obama's plan leaves out 15 million Americans is highly misleading.

3) The Obama plan would cover more people more quickly than the Clinton plan.

READ THE REST OF THE MEMO BELOW

I. Both Obama And Clinton Have Serious Plans For Achieving Universal Health Insurance, But They Are Based On Different Diagnoses Of The Problem

Senator Obama's plan is based on the premise that Americans desperately want health insurance, but can't afford it. In his view, universal coverage cannot be achieved unless we make insurance affordable and enrollment as close to automatic as possible, and so he believes that the focus of the reform effort must be on affordability and accessibility.

Obama has allocated sufficient resources in his plan to cover 100 percent of the population and has said that if we implement his plan and find that there is a tiny percent of Americans who still lack insurance, he will figure out why they are falling through the cracks and get them covered.

Senator Clinton has implied that by including a mandate she will automatically get to universal coverage. Experts agree that this is not true.[i] Indeed, Senator Clinton herself acknowledged this fact when she gave a speech in 1994 criticizing the same individual mandate she now supports:

'The only examples we have of individual mandates are those like auto insurance requirements in many states where, in spite of the fact that the state has access to all drivers through the licensing process, literally thousands and even hundreds of thousands of drivers remain uninsured in states with such an individual mandate.' [ii]

It would be extremely unfair to enact a mandate before we make health care affordable-which could take several years. And even once a mandate is in place, the evidence suggests that millions of Americans would need to be exempted and that millions more would not comply.

II. The Evidence Suggests That the Clinton Plan Will Leave 15 to 20 million People Without Health Insurance.

Senator Clinton has repeatedly refused to say how she will enforce her mandate. Even if we assume that she will ultimately propose some substantial penalty for people who do not buy health insurance, the experience from auto insurance and in Massachusetts-the only state that has ever enacted a health insurance mandate-suggests that she will fall far short of universal coverage.

First, Massachusetts has exempted almost 20 percent of the uninsured from the mandate because at today's prices, health insurance is simply too expensive even with the large subsidies provided.[iii] Any national mandate would need to do the same.

Second, Massachusetts is not going to achieve 100 percent compliance even among those required to purchase health insurance--and that's in a program with a clear enforcement mechanism. The director of the Massachusetts plan said this quite clearly in a recent New York Times article.[iv] While it is difficult to estimate precisely how far short of 100 percent Massachusetts will fall, particularly because we are in only the first year of implementation, the numbers so far suggest that between 30 and 40 percent of the uninsured have complied with the mandate.[v]

Further, the majority of those were people who were automatically enrolled by the state. Among those who needed to take action to enroll, the number is much lower. Even if Massachusetts does better and ends up with only 10 to 20 percent who refuse to comply, those numbers would translate to another 5 to 10 million people uncovered nationwide.

This number of people without health insurance is completely consistent with the evidence from the one kind of insurance where mandates are common - automobile insurance. Although 47 states mandate that everyone have insurance, almost 15 percent of drivers do not. [vi]

The bottom line is that the Clinton approach is likely to leave somewhere between 15 and 20 million people uninsured, even with a stronger enforcement mechanism than she currently seems comfortable with.

III. Clinton's Misleading Attack on Obama's Plan

Hillary Clinton repeatedly says that Obama's plan leaves out 15 million people. This estimate does not take into account several features of the Obama plan including his program to immediately cover of all children and his program to actually get coverage for young adults 18-25 (who are the least insured and most likely to disregard a mandate).

Senator Clinton also leaves out the fact that the number includes around 7 million undocumented immigrants who are not covered by her plan either.

The reality is that Obama's plan will cover every American because it cuts costs aggressively, makes enrollment virtually automatic, and because he has allocated sufficient resources to ensure that if after implementation there are some Americans who still don't have health care, he can find a way to get them covered

IV. The Obama Plan Will Cover More People Than The Clinton Plan Will, And Will Do So More Quickly

The main reason that people are uninsured in America today is that they cannot afford health insurance. The Obama plan does more to control costs than the Clinton plan does, and it will cover more people, because:

The Obama plan makes much more significant up front investments in information technology than Senator Clinton's plan does;
the Obama plan provides real reinsurance to alleviate the cost of catastrophic illnesses for all employers and employees, a feature the Clinton plan lacks;
The Obama plan would increase the coverage among young adults by allowing them remain on their parents' insurance up to age 25 regardless of educational status.
The Obama plan would mandate health care coverage for children with a specific enforcement mechanism.

IV. We Cannot Afford To Fail

All of the leading Democrats have put forth serious proposals for achieving universal health insurance. But we have to get the job done. Failure to pass a plan, no matter how well designed on paper, will leave all 47 million uninsured Americans still uninsured. The key question is which person and which plan has the best chance of bringing the country together to actually get the job done. Passing major health care reform requires a president who can bring people together, take on the special interests, and do it in an open and transparent way. On all these measures, Barack Obama's record is unrivaled in this campaign.

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[i] "The truth is that neither the Obama plan, nor the Clinton plan, guarantees 'universal coverage' for all Americans, although they both aspire to this goal. Let's look at the Clinton plan first. MIT economics professor Jonathan Gruber, one of Clinton's health care advisers, describes her plan as a 'universal coverage' plan, in contrast to the Obama plan, which he terms a 'universal access' plan. But he also acknowledges that the Clinton plan will not include everybody. 'Any system that does not have a single payer will not have 100 per cent coverage,' he told me, when I reached him after the Las Vegas debate. 'But you can come very close.' ... The system proposed by Clinton is more analagous to the government-subsidized private insurance system in the Netherlands, where roughly one and a half per cent of the population is estimated to fall through the cracks.' [Washington Post Fact Checker, 11/19/07]

'Robert Blendon, director of the Harvard Program on Public Opinion and Health and Social Policy, estimates Obama's plan would end up covering 5 percent to 10 percent fewer individuals than Clinton's. But that's assuming that it's possible for Clinton to require everyone to purchase insurance. Blendon suspects that it isn't. 'At the end of the day,' he tells FactCheck.org, 'it's not going to be everybody. We have no idea what the actual falloff would be.' ... Preliminary data from Massachusetts, which implemented a sweeping health insurance plan last year, is showing that many people would rather remain uninsured than purchase a stripped-down plan. 'People always say having some insurance is better than no insurance,' Blendon says. 'It turns out, in some of the focus groups in Massachusetts, people don't believe that.'' [FactCheck.org, 11/16/07]

John Holohan, the author of a study conducted at the Urban Institute, a Washington-based think tank, that gamed out various different models for health care reform in Massachusetts several years ago, does not believe that either the Clinton or the Obama plan will eliminate the problem of the uninsured altogether. 'We would all be very happy if we got down to one and a half per cent,' he said. [Washington Post Fact Checker, 11/19/07]

[ii] Speech to the Group Health Association of America, February 15, 1994.

[iii] Dembner, Alice, "Health Plan May Exempt 20% of the Uninsured" [Boston Globe, 4/12/07]

[iv] "There's good evidence," Mr. Kingsdale said, "whether it's buying auto insurance or wearing seat belts or motorcycle helmets, that mandates don't work 100 percent." [New York Times, 11/25/07]

[v] The state reports that 200,000+ additional people have acquired health insurance in Massachusetts in the last year. http://www.mahealthconnector.org. There are several different estimates of the number of uninsured individuals in Massachusetts in 2006 (prior to implementation of the mandate. The most commonly used estimate comes from researchers from the Urban Institute who concluded that the number of uninsured was around 500,000. The Census Bureau says there are 650,000 uninsured in Massachusetts. A different team of Urban Institute researchers estimated a number that was roughly 15 percent higher than the Census Bureau number.

[vi] Insurance Research Council, 6/28/06