One CEO's View: Why McCain's Health Plan Is Better
"John McCain does not believe that you fix health care by replacing one inefficient, irrational, and costly system with another."
Cara Carleton "Carly" Fiorina is the chairwoman of "Victory 2008" for the Republican National Committee and a campaign advisor for presumptive Republican presidential nominee Sen. John McCain. She was CEO of Hewlett-Packard from 1999 to 2005. In light of McCain's speeches this week devoted to health care, WebMD's Washington correspondent, Todd Zwillich, spoke to Fiorina about McCain's plan and why she thinks it's the way to go.
What do you think are the biggest strengths of the health care plan Sen. McCain has laid out?
Fiorina: First, it does provide for health care and insurance for everyone, including the chronically uninsured. But it takes a distinctly different approach from either Sen. Obama or Sen. Clinton. John McCain does not believe that you fix health care by replacing one inefficient, irrational, and costly system with another. That other inefficient, irrational, and costly system would be a big government bureaucracy, which is what Sens. Obama and Clinton are proposing. Instead, what he proposes is to put power, choice, money, control in the hands of patients and families. And he would do that through some very specific actions. It starts with saying people have a choice. They can continue to receive health care through their employer if they have good health insurance provided by their employer, or they can choose to get a $5,000 tax credit for families, $2,500 for individuals, and build up a portable health insurance plan. They can carry it wherever they go. They can also buy insurance anywhere in the United States and they can buy it from anyone.
Today, you know, we have 50 separate markets for health insurance. And under John McCain's plan you could buy insurance across state lines, you could choose any health provider you wanted. And that ability to choose -- the control that the patient and the family have to choose any doctor or choose any plan -- creates competition. And that, of course, drives down costs. He also would make the system much more transparent, requiring health care providers to put their prices, their results, customer comments, up on the Internet for everyone to see. You know there at WebMD that this technology exists, but not enough health care providers are using them, taking advantage of them, or required to use them.
One of the things this plan does is shift the emphasis from employer-sponsored coverage to individual coverage, by shifting around the tax structure. With over 70% of the American public getting their insurance through their employer now, people may well be worried about what is really a tectonic shift in the way Americans get their health care.
Fiorina: First, I would say that employers will continue in many cases to continue providing health plans to employees. It's a real benefit. I mean, I know as a former CEO, our health plan was an attractive benefit for employees. It's one of the reasons we could attract people to come to the company and to stay with the company. So I think there are reasons why employers will want to continue providing it. And I think there are some cases where employees will continue to want to get their insurance from their employer. But I would also say that the tectonic shift you're describing is already happening. That's because health care costs are out of control, and employers, more and more, particularly small businesses, or companies that are not as giant as Hewlett-Packard, for instance, are finding it difficult to keep up. So I think what this plan does is recognize that fewer and fewer employers are going to be able to do this for employees. So let's get ahead of that curve and make sure that people, whoever they work for, have the foundation in place that that shift happens well and we don't leave a lot of people behind.
On to the tax credit, $2,500 for individuals and $5,000 for families. The average cost of coverage now for a family of four is $12,100 per year. For $5,000, realistically, what are people going to be able to buy? It seems, the answer, at least at this point, could be, not much.
Fiorina: If all that happened is people got a tax credit, I would say you're right. But in addition to the credit, John McCain is proposing a number of other important "tectonic shifts," to use your term. One important one is that people can buy health insurance from anywhere. The market today is fragmented, and it's not terribly competitive. If you and your family can shop for health insurance anywhere in the USA, it will drive down costs. Point two, John McCain believes we must -- and it will take time to do it -- but we must start to move health care providers and insurers away from a pricing system that's based on tests and procedures, and toward one based on treatment and outcome. In other words, if you have a diabetic, instead of paying for all the tests and procedures, focus on whether the diabetic is better off after a year or not. That's treatment and outcome instead of tests and procedures. And begin to shift the payments and incentive structures. All of this takes time and won't happen overnight. But unless we're willing to make the move from tests and procedures to treatment and outcomes; from basically an oligopoly structured market to true open competition; and a transparent system where consumers can see, 'what is the price?', 'what am I getting for my money?' ... unless we do those things, we will never get costs down.
You talk about being able to shop anywhere in the country as a way to bring down insurance costs. You're referring, of course, to association health plans, or AHPs. One of the advantages of having those 50 separate state markets you talk about is the consumer protections built into the law in most every state. Guaranteed breast cancer screening, guaranteed maternity stays. There's a large menu of them depending on which state you live in. Do you think that consumers, voters, will be happy when they find out that shopping across state lines means giving up a lot of the consumer protections they now have?
Fiorina: I think they clearly will have to understand that. But I also think that with transparency will come a homogenization of those protections. Part of the reason that variation exists in many cases is because people don't know it exists. And, of course, you have to have consumers making informed choices. That's why transparency is so important. But let's just say you're a young, single man of 30 years old; the most important thing to you at that time in your life may not be breast cancer screening. You may well be willing to make that tradeoff, but you can't make it if you don't understand it.
One of the things Sen. McCain acknowledged in rolling out his plan is that a lot of people would be entering an imperfect market. What I took from that was that costs are not going to come down overnight, and there may be some pain early on. Realistically, if these tax credits were in place and the incentives were to change, what would be the time lag between people getting their money and prices coming down, to a range where they could buy something with it?
Fiorina: Today, prices are going up. The inflation in health care is roughly 10% a year. In some plans, the costs are going up 15% a year. So let's start with the premise that we have a broken system right now. It's not as if we have one that works real well and we're talking about the pain of getting from a good system to a better one. It is just lousy today. Point two, I'm not an expert on this, but I would say realistically it would take a couple of years. But I do think that a more immediate impact of this would be to slow the increase in costs, and I think that's a big deal.
I wouldn't paint a rosy picture of the current system, but the rate of increase in cost has already been dropping, for the last few years.
Fiorina: Maybe, but tell that to an employer. Or to an American family. Or tell that to a company like GM or Ford that said, 'We can't handle this any more' and went and put all their resources into a different kind of financial structure.
Let me try a political question on you. Health care has never been, traditionally, Republicans' strong suit. And Democrats traditionally spend a lot more time talking about their health care plans than Republicans do. In a campaign environment, talking about the economy and the war, can Sen. McCain compete on health care in the general election? Do you think he should try? Do you think he will try?
Fiorina: First of all, he absolutely must, and he will. He must and he will. Because this election is about the issues that matter to the American people. And John McCain will not shy away from those issues, that's not who he is. John McCain is a leader, who, in my terms, runs to a problem, he doesn't run away from it. Health care is a problem. It's a problem for the American people, so he has to talk about it, he wants to talk about it, he will talk about it. Secondly, I think that Democrats frequently highlight their health care proposals because they always come back to 'the government is the answer' at a time when the American people have lost faith and trust in government, at a time when government is demonstrably inefficient, ineffective, and in some cases corrupt. I think John McCain can make the case very effectively that government is not the answer here. Yes, government has a role, but you don't replace one big, irrational, costly system with another.
There appears to be a group of people, maybe not many, whose health plans are valued around $14,000 or $14,500, who are likely to face higher taxes under this plan. It is probably a small group of people, but won't the other side just zero in on this 6%, or 7%, or 8% of people and kind of hammer away at it?
Fiorina: They may, absolutely. But one of the things we will do, and what the American people should do, is go to the Democrats and say, 'Oh, by the way, how are you going to pay for your plan? Why is it that you think your plan will actually provide better health care? Why is it that you think a government monopoly will provide less expensive health care?' All the evidence in the world suggests when you have an inefficient, ineffective, centralized bureaucracy with a lack of transparency, costs go up, not down, and quality goes down, not up.
I want to thank you for joining me.
Fiorina: Well, thanks!
For more about the candidates and their stands on health care, check out WebMD's election special.
Cara Carleton "Carly" Fiorina is the chairwoman of "Victory 2008" for the Republican National Committee and a campaign advisor for presumptive Republican presidential nominee Sen. John McCain. She was CEO of Hewlett-Packard from 1999 to 2005. In light of McCain's speeches this week devoted to health care, WebMD's Washington correspondent, Todd Zwillich, spoke to Fiorina about McCain's plan and why she thinks it's the way to go.What do you think are the biggest strengths of the health care plan Sen. McCain has laid out?
Fiorina: First, it does provide for health care and insurance for everyone, including the chronically uninsured. But it takes a distinctly different approach from either Sen. Obama or Sen. Clinton. John McCain does not believe that you fix health care by replacing one inefficient, irrational, and costly system with another. That other inefficient, irrational, and costly system would be a big government bureaucracy, which is what Sens. Obama and Clinton are proposing. Instead, what he proposes is to put power, choice, money, control in the hands of patients and families. And he would do that through some very specific actions. It starts with saying people have a choice. They can continue to receive health care through their employer if they have good health insurance provided by their employer, or they can choose to get a $5,000 tax credit for families, $2,500 for individuals, and build up a portable health insurance plan. They can carry it wherever they go. They can also buy insurance anywhere in the United States and they can buy it from anyone.
Today, you know, we have 50 separate markets for health insurance. And under John McCain's plan you could buy insurance across state lines, you could choose any health provider you wanted. And that ability to choose -- the control that the patient and the family have to choose any doctor or choose any plan -- creates competition. And that, of course, drives down costs. He also would make the system much more transparent, requiring health care providers to put their prices, their results, customer comments, up on the Internet for everyone to see. You know there at WebMD that this technology exists, but not enough health care providers are using them, taking advantage of them, or required to use them.
One of the things this plan does is shift the emphasis from employer-sponsored coverage to individual coverage, by shifting around the tax structure. With over 70% of the American public getting their insurance through their employer now, people may well be worried about what is really a tectonic shift in the way Americans get their health care.
Fiorina: First, I would say that employers will continue in many cases to continue providing health plans to employees. It's a real benefit. I mean, I know as a former CEO, our health plan was an attractive benefit for employees. It's one of the reasons we could attract people to come to the company and to stay with the company. So I think there are reasons why employers will want to continue providing it. And I think there are some cases where employees will continue to want to get their insurance from their employer. But I would also say that the tectonic shift you're describing is already happening. That's because health care costs are out of control, and employers, more and more, particularly small businesses, or companies that are not as giant as Hewlett-Packard, for instance, are finding it difficult to keep up. So I think what this plan does is recognize that fewer and fewer employers are going to be able to do this for employees. So let's get ahead of that curve and make sure that people, whoever they work for, have the foundation in place that that shift happens well and we don't leave a lot of people behind.
On to the tax credit, $2,500 for individuals and $5,000 for families. The average cost of coverage now for a family of four is $12,100 per year. For $5,000, realistically, what are people going to be able to buy? It seems, the answer, at least at this point, could be, not much.
Fiorina: If all that happened is people got a tax credit, I would say you're right. But in addition to the credit, John McCain is proposing a number of other important "tectonic shifts," to use your term. One important one is that people can buy health insurance from anywhere. The market today is fragmented, and it's not terribly competitive. If you and your family can shop for health insurance anywhere in the USA, it will drive down costs. Point two, John McCain believes we must -- and it will take time to do it -- but we must start to move health care providers and insurers away from a pricing system that's based on tests and procedures, and toward one based on treatment and outcome. In other words, if you have a diabetic, instead of paying for all the tests and procedures, focus on whether the diabetic is better off after a year or not. That's treatment and outcome instead of tests and procedures. And begin to shift the payments and incentive structures. All of this takes time and won't happen overnight. But unless we're willing to make the move from tests and procedures to treatment and outcomes; from basically an oligopoly structured market to true open competition; and a transparent system where consumers can see, 'what is the price?', 'what am I getting for my money?' ... unless we do those things, we will never get costs down.
You talk about being able to shop anywhere in the country as a way to bring down insurance costs. You're referring, of course, to association health plans, or AHPs. One of the advantages of having those 50 separate state markets you talk about is the consumer protections built into the law in most every state. Guaranteed breast cancer screening, guaranteed maternity stays. There's a large menu of them depending on which state you live in. Do you think that consumers, voters, will be happy when they find out that shopping across state lines means giving up a lot of the consumer protections they now have?
Fiorina: I think they clearly will have to understand that. But I also think that with transparency will come a homogenization of those protections. Part of the reason that variation exists in many cases is because people don't know it exists. And, of course, you have to have consumers making informed choices. That's why transparency is so important. But let's just say you're a young, single man of 30 years old; the most important thing to you at that time in your life may not be breast cancer screening. You may well be willing to make that tradeoff, but you can't make it if you don't understand it.
One of the things Sen. McCain acknowledged in rolling out his plan is that a lot of people would be entering an imperfect market. What I took from that was that costs are not going to come down overnight, and there may be some pain early on. Realistically, if these tax credits were in place and the incentives were to change, what would be the time lag between people getting their money and prices coming down, to a range where they could buy something with it?
Fiorina: Today, prices are going up. The inflation in health care is roughly 10% a year. In some plans, the costs are going up 15% a year. So let's start with the premise that we have a broken system right now. It's not as if we have one that works real well and we're talking about the pain of getting from a good system to a better one. It is just lousy today. Point two, I'm not an expert on this, but I would say realistically it would take a couple of years. But I do think that a more immediate impact of this would be to slow the increase in costs, and I think that's a big deal.
I wouldn't paint a rosy picture of the current system, but the rate of increase in cost has already been dropping, for the last few years.
Fiorina: Maybe, but tell that to an employer. Or to an American family. Or tell that to a company like GM or Ford that said, 'We can't handle this any more' and went and put all their resources into a different kind of financial structure.
Let me try a political question on you. Health care has never been, traditionally, Republicans' strong suit. And Democrats traditionally spend a lot more time talking about their health care plans than Republicans do. In a campaign environment, talking about the economy and the war, can Sen. McCain compete on health care in the general election? Do you think he should try? Do you think he will try?
Fiorina: First of all, he absolutely must, and he will. He must and he will. Because this election is about the issues that matter to the American people. And John McCain will not shy away from those issues, that's not who he is. John McCain is a leader, who, in my terms, runs to a problem, he doesn't run away from it. Health care is a problem. It's a problem for the American people, so he has to talk about it, he wants to talk about it, he will talk about it. Secondly, I think that Democrats frequently highlight their health care proposals because they always come back to 'the government is the answer' at a time when the American people have lost faith and trust in government, at a time when government is demonstrably inefficient, ineffective, and in some cases corrupt. I think John McCain can make the case very effectively that government is not the answer here. Yes, government has a role, but you don't replace one big, irrational, costly system with another.
There appears to be a group of people, maybe not many, whose health plans are valued around $14,000 or $14,500, who are likely to face higher taxes under this plan. It is probably a small group of people, but won't the other side just zero in on this 6%, or 7%, or 8% of people and kind of hammer away at it?
Fiorina: They may, absolutely. But one of the things we will do, and what the American people should do, is go to the Democrats and say, 'Oh, by the way, how are you going to pay for your plan? Why is it that you think your plan will actually provide better health care? Why is it that you think a government monopoly will provide less expensive health care?' All the evidence in the world suggests when you have an inefficient, ineffective, centralized bureaucracy with a lack of transparency, costs go up, not down, and quality goes down, not up.
I want to thank you for joining me.
Fiorina: Well, thanks!
For more about the candidates and their stands on health care, check out WebMD's election special.
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