Hillary Clinton’s Health Care Plan – A Detailed Analysis

Senator Hillary Clinton unveiled her health care reform plan, called the American Health Choices Plan. Clinton’s health care plan promises to bring health insurance to every American. Clinton promises lower insurance premiums for every American, improved delivery of health care, health insurance for all, and a “net tax cut for American taxpayers.” She also promises to end insurance “discrimination,” which we’ll return to at the end of this post. Her plan raises significant questions in part because the costs are astronomical and the plan’s cost assumptions are suspect. Before I get to the cost of the plan, though, here are the elements of her proposal and some important links so you can check it out for yourself.

Key Provisions of Clinton’s American Health Choices Plan

americanhealthchoicesplan-11.gifYou can download a pdf version of the plan by clicking on the image to the right or by clicking here. The plan has 5 key provisions:

  • Universal Coverage: The plan covers everybody. There are about 47 million Americans without health insurance, and Hillary Clinton’s proposal would provide coverage for all of them. The coverage would come from one of a number of sources she calls the new “Health Choices Menu.” The menu would include a Medicare type option and an option similar to the Federal Employee Health Benefit Program (FEHBP).
  • Coverage is Mandatory: Although she calls here plan the American Health Choices Plan, you don’t have a choice. Everybody must be covered by health insurance.
  • Eliminate Insurance “Discrimination”: Hillary Clinton wants to prevent an insurance company from setting rates based on the health of the insured, a common and sensible practice in the insurance industry (e.g., bad drivers pay more for car insurance) that she labels as “discrimination.”
  • Modernize Health Care to Produce Cost Savings: Clinton believes her plan can deliver health care to you more efficiently than the health care industry, and that her plan will result in annual savings of $56 billion.
  • “Net Tax Cut for American Taxpayers”: The plan includes refundable tax credits to help pay for health insurance. In conjunction with the cost savings, Clinton plans on paying for these credits by raising taxes on high income earners to the tune of $54 billion. Apparently, the credits are more than the increased taxes, abracadabra, a net tax cut.

How Much Will Clinton’s Health Care Reform Plan Cost the American People?

dollarsign.jpgClinton’s plan will cost $110 billion annually. Unfortunately, she doesn’t tell us how she arrived at that number. We don’t know, for example, how many individuals will receive government assistance to pay for insurance or how much the insurance will cost. We don’t know what assumptions or estimates went into her calculations or if it was based on sound projections. But we do know how she plans to fund her proposal.

Of the $110 billion annual tab, $56 billion will be covered by various cost savings and $54 billion from increased taxes. Cost Savings: The Clinton plan claims to save $56 billion annually through the phase-out of excessive Medicare overpayments ($10 billion), savings from unnecessary Medicare and Medicaid spending ($7 billion), constraining prescription drug costs ($4 billion), and modernizing the health system with Health Information Technology (HIT) ($35 billion). Tax Increases: The tax increases will come from raising the top two income tax rates and reducing deductions for health insurance on those making $250,000 a year or more. For everybody else, she claims no new taxes and lower health insurance premiums. This is where things start to get slippery, so let’s proceed with caution as we take a closer look.

Clinton’s Projected Health Care Savings Are Suspect

Let me make sure I’ve got this right–The U.S. government under Hillary Clinton’s plan will teach the health care industry how to improve quality and lower costs. I don’t see anything that can go wrong here, do you? Now to be fair, there are aspects of her plan that would reduce costs. For example, she proposes a phase-out of excessive Medicare overpayments to HMOs and other managed care plans ($10 billion annual savings). These over-payments are nothing new, and in fact there is at least one bill already introduced in Congress that relies on these cost savings for funding. The biggest cost savings in her plan, however, is to modernize the health care system ($35 billion annual savings). This is where the trouble begins.

Clinton relies on a consulting report by the Rand Corporation. The report, entitled, Can Electronic Medical Record Systems Transform Health Care? Potential Health Benefits, Savings, And Costs, is not unlike other IT consulting presentations I’ve read. You can download the report (pdf format) by clicking here. What Hillary Clinton’s plan won’t tell you about this report are it’s many uncertainties. Here are some examples taken directly from the report:

Barriers to adoption [of the proposal] include high costs, lack of certification and standardization, concerns about privacy, and a disconnect between who pays for EMR systems and who profits from them.

The efficiencies [resulting from technology improvements] could be used to improve health care quality rather than to reduce costs.

In general, the currently useful evidence [about cost savings] is not robust enough to make strong predictions, and we describe our results only as “potential.”


Clinton’s plan also doesn’t mention that the estimated cost savings don’t fully accrue for 15 years! In fact, five years after full implementation of the technology, according to the report, annual estimated savings total just $21.3 billion, so it remains a mystery how the Clinton team included the $35 billion cost savings figure in the plan.

Finally, the Clinton plan failed to mention that much of the cost savings will come from what the RAND Report describes as “resource reduction.” In other words, people losing their jobs. The RAND Report doesn’t quantify the amount of job loss, although $35 billion a year can pay a lot of people. Furthermore, the loss of the jobs will only increase the number of individuals who lack health insurance. The point here is not that improved technology should be avoided because of potential job loss. The point is that Clinton should have made the American people aware of this ramification of her proposal.

Everybody Will Pay Plenty Under Clinton’s Plan, Not Just The “Rich”

Clinton proposes to fund the program by discontinuing the “Bush tax cuts for [the] top two income tax brackets and [the] Bush increases in tax exemptions (PEP/Pease) for households over $250,000.” She also proposes eliminating the tax deduction for health insurance premiums for those making over $250,000. Total savings–$54 billion annually. There’s nothing new about taxing the “rich.” It has broad appeal and is a politically safe approach. It’s also misleading. The fact is everybody will pay for this plan, not just the unfortunate few who make more than $250,000 per year.

The top 20% of wage earnings currently earn 61% of the income and pay 73% of the income tax:



Should this category of wage earners pay even more taxes? I think a reasonable argument can be made that they already pay enough. But here is the important point that gets lost by the careful wording of Clinton’s plan–the cost will be born by everybody, not just the “rich.”

The money generated from increasing taxes on the rich could go to address the coming crisis in Social Security or Medicare. According to the Tax Policy Center, a fiscal crisis with both programs is just a few years away:


Both the administration and the CBO have projected that, under specific assumptions, current budget deficits will diminish and then disappear altogether over the next decade. In the longer run, however, retirement of the baby boom generation will cause spending on Medicare and Social Security to soar far above the payroll taxes that support it. Under current projections, Medicare spending will exceed revenues from its dedicated tax by 2010, and its trust fund will be exhausted by 2018. Social Security is in better financial shape but will reach the same landmarks in 2017 and 2040, respectively.

You can read the full report from the Tax Policy Center here. Given the crisis we face with Social Security and Medicare, it would be fiscally irresponsible to undertake yet another health care program costing (under very rosy assumptions and projections) in excess of $100 billion annually. The $54 billion raised under Clinton’s proposal could go to address, in part, the coming crisis with Social Security and Medicare. The point is, the middle class shouldn’t get too comfortable with Clinton’s plan–all will pay for it one way or another.

Will Clinton’s Plan Provide Health Insurance to Undocumented Immigrants?

One would expect this question to be an easy one, or at least one Clinton could answer. She can’t. In an interview after unveiling her plan, Clinton’s senior policy advisers stated that the plan doesn’t include any details on whether illegal immigrants will be covered. Senior policy adviser Laurie Rubiner said, “That’s one we’re going to have to think through a little bit.” Given that there are an estimated 12 million undocumented immigrants in the United States, Clinton’s policy advisers had better think real hard. Assuming that most of this group are uninsured and assuming that many lack the means to pay for insurance, this issue has the potential to dwarf Clinton’s current $110 billion annual cost guesstimate.

Clinton’s Plan to End Insurance “Discrimination”

When you buy health insurance through your employer, you generally pay the same as your co-workers. And you pay the same regardless of your health condition. So, for example, a 70 year old smoker would pay the same premium as a 20 year old in great physical health. Insurance companies accomplish this through pooling the risk of a large number of insureds. What’s really happening here is that the 70 year old is paying less than if he or she bought health insurance on their own, and the 20 year old is paying more. Is that fair? No, but it works. Now, if you go to buy health insurance on your own, you are no longer part of a large pool of insureds. As a result, your premiums will be based on your health condition, not unlike when you go to buy life insurance on your own. And if you’re in really bad shape, you may not find an insurance company to issue you a policy. According to Hillary Clinton, that’s discrimination.

The problem is, it ain’t. At least it’s not discrimination in any meaningful sense of the word. I guess I “discriminate” when I choose one store over another because of lower prices or better quality. Or insurance companies discriminate when they charge dangerous drivers more for insurance than they charge safe drivers. The point is that if Clinton wants to propose insurance pooling, she should just say so. It means that in all cases the healthy will pay more for insurance than they otherwise would, and the not so healthy will pay less. But of course, describing it that way doesn’t sound so appealing, thus, we get her plan to “eliminate discrimination.”

So now it’s your turn. What do you think of Clinton’s plan?

Topics: Financial News

26 Responses to “Hillary Clinton’s Health Care Plan – A Detailed Analysis”

  1. I think that forcing insurers not to discriminate on the grounds of health could work if they were able to pool the risk on the more massive scale of the entire population.

    There is an argument that people who are uninsured now are likely to be a drain on a comprehensive system, but presumably they aren’t actually denied all healthcare now if they can’t afford to pay for it. Its possible that this might not be too bad.

    Finally, I’ve read that the US government spends more on healthcare than the British government. We have free comprehensive universal healthcare, and you have to pay extra for yours. The American healthcare industry could certainly be more efficient.

    As to the details of the plan, I’ll take your word for it.

  2. Thanks for the information. I’m always skeptical of anything Hillary Clinton says. 😉

    I do know that the state of Oregon adopted the Oregon Health Plan for low income people without insurance, and it has been a serious financial drain on our state. Furthermore, a lot of doctors won’t see patients on the Oregon Health Plan, because the state doesn’t even reimburse the doctors enough to pay malpractice insurance.

    Whenever I hear about “universal health insurance” or “guaranteed health insurance”, I think of what’s happened in our state and say no thanks.

  3. Plonkee, thanks for the comment. Most health insurance in the U.S. is based on pooled risk as it’s purchased either through an employer sponsored plan or a government sponsored plan. There are pros and cons to this. What troubled me about the Clinton plan is that she describes risk-based pricing as “discrimination.” It’s not. And in fact, a lot can be said for charging a smoker more for health insurance than a non-smoker, for example. As for cost, there is no doubt that health care could be delivered more efficiently. Of course, we have a larger population than England, so costs will be higher. Some view our health care system as the best in the world, too, and as they say, you get what you pay for (except when it comes to mutual funds!).

  4. Russ Andrews

    Your article “Hillary Clinton’s Health Care Plan is Slick, So Watch Your Step” was very good. It had taken me a good half hour on the internet to find a balanced and informative article about her health plan, and it was yours. Thanks for putting these types of BALANCED articles out there.

  5. I just wanted to take the time to thank you for this well-written and informative piece. I have few friends that hear the word “free” and automatically think it is a good idea.

    I might have missed it, but when I read through Hillary’s pla, it kept mentioning, “working people”. What about the people that are not working and can’t get medical assistance currently? Perhaps you made a comment on that and I missed it. I will surely reread…and of course pass it on to those that think this a is a good idea.

    Keep up the good work!!

  6. Anne-Marie Ritts

    For the first time EVER, I find that I can agree with something Hillary Clinton says. It is a bit frightening, actually. BUT HOW COULD ANYONE NOT AGREE THAT IT IS DISCRIMINATION FOR PEOPLE WHO ARE NOT HEALTHY TO BE CHARGED MORE FOR HEALTHCARE. THIS IS NOT FAIR.




    • Anne-Marie, thanks for your perspective; I know it’s shared by a lot of people. But please consider this. Hillary Clinton speaks often about “shared prosperity.” That phrase scares me. This country wasn’t built on “shared prosperity.” No, we were built on shared opportunity. As a nation, we have not always given everybody shared opportunity, to our disgrace. But we are working toward that goal. But shared prosperity will, in the end, make us as a nation LESS prosperous. The notion of shared prosperity, which taken to the extreme is a dressed up form of socialism, has always made every nation poorer that has walked down its tempting path. Universal health care is a form of shared prosperity. It may make us feel good at first, but it won’t make us as a nation healthier physically or financially. I would say this to Senator Clinton, fix social security, medicare and our budget deficits first, then let’s talk about universal health care.

  7. Nancy Mohrmann

    We have something similar to the “non-discrimination” here in New York. Health insurance companies cannot base premiums on age or health condition . The result is that health insurance rates for EVERYONE in MY are skyhigh relative to most other states. My employer ( a major hospital/health system network BTW) has me classified as per diem employee, not salaried, so they can deny myself and others in my job as ineligible to buy into the health insurance, no matter how many hours a week I work . And I also don’t qualify as “self-employed/independent contractor” because I get a w-2 !! Which leaves me with a very small choice of Individual private insurance possibiities, all of which are outrageously priced. There are only a handful of compmanies that even WRITE indiividual policies in NY, and our wonderful Governor who campaigned on the usual “affordable healthcare” BS, is going to add an “assessment” to individual policies next year. I may have to drop my ins. altogether. Of course I earn too much to qulaify for the much-touted “State subsidized” plans which are discounted

  8. Martha du Pont

    You ruin your whole report by being a smart ass with smart ass remarks instead of acting like a professional which makes me mistrust you. You sound like you have an agenda, political and maybe you work for Obama or McCain. Its a shame you dilate your whole report with this attitude and thus are judged untrustworthy. No health care plan at this time is caste in stone and you know it.

    • Martha, Martha, Martha, where do I start? First, it’s remarkable that you can leave this type of comment on my blog and accuse me of not acting like a professional. Second, that you mistrust me is silly from the start. You don’t even know me, so where did trust enter into the equation. You either agree with my perspective, or you don’t. If you don’t, feel free to articulate why. Thus far, you haven’t. Third, you’ve “judged” me “untrustworthy?” Why, because I write with an edge? Because I believe that Hillary Clinton describes her universal health care plan in terms I find to be disingenuous? And the suggestion that you have judged me to be untrustworthy bespeaks an arrogance worthy of the du Pont name. Fourth, your comment that “no health care plan at this time is caste in stone and you know it” is curious. Hillary Clinton’s universal health care plan is not just caste in stone, it’s caste in a full color glossy brochure you can download from my article. Fifth, I don’t work for Obama or McCain, but even if I did, it wouldn’t change the validity of my perspective (if it has any), or the vapidness of your comment. Finally, if you liked the article, don’t forget to subscribe to The Dough Roller!

  9. some interesting stuff here. DR, firstly, great article. I don’t see martha’s attitude problem in your article but rather feel the emanation of your passion. You, like many of us, still believe in the potential of our nation, and by exposing the sugar coated prospects you speak directly to us that know how to listen. Candidates throw their words around because they know many supporters will follow them to the end for mostly other agenda’s (women/racists for hilariously rotten clinton, rich white or racists/sexists for mccain) than their own. good or flawed visions, as long as they speak with excitement, others will vote unbeknownst to the harsh reality until its too late. People like you are the americans I respect. The ones that will always question the world around them with an unbiased view. Get the whole story, share it, and be open to the inevitable criticism. Although I don’t know or care about who you will choose to support, I will support you forever for having the intelligence and using it the right way. Thank you for that. Ciao

  10. Melissa Bowman

    While I agree with your concern about paying for Hillary’s plan I think she is doing her best to come up with a solution for a very complex problem. Our current health care “system” is not a system at all and we all know it is broken. Healthcare costs keep rising and insurance companies just keep making more money. I’m not against businesses making money, that is why they’re in business after all, but I am against companies making obscene profits and the executives making outrageous sums of money when we have so many uninsured. If our country continues with profit at all costs behavior what does this teach the next generation? I understand your point about socialism but does this mean we shouldn’t concern ourselves with the wellbeing of our fellow countrymen? Every other industrialized nation in the world has some sort of “universal” health plan. Why don’t we? If we had a universal plan then we wouldn’t need Medicare, Medicaid, or SCHIP, so those monies could be used to pay for some of the costs of a universal plan. Currently my healthy family of four pays over $5000 a year in healthcare premiums. This does not include any out of pocket costs, which in the first three months of this year, are already over $300. According to my research on costs in other countries, the average person who makes $50, 000 a year would pay an extra $2000 in taxes to insure EVERYONE in the U.S. I also understand the argument about those who are sicker paying more for insurance. But it is not like bad drivers paying more for car insurance. Bad drivers have control over their driving behavior but many sick people have no control over being sick. Sure there are some people who have made bad choices and gotten sick but what about those people who have diseases they could have done nothing to avoid? MS, MD, Huntington’s, Parkinson’s, asthma, hypertension, diabetes or mental illness. Should these people be penalized for something they have no control over? Our government is supposed to help those unable to help themselves. We need to remember that 200 years ago some very bold and innovative men decided that the then current way of running a country wasn’t working and they set out to fix it. They accomplished their goals and today the U.S. is a superpower. Let’s learn from other countries and build a better healthcare system. We have the power to pick and choose what works and what doesn’t in a universal healthcare plan and if we give the right people the right tools we can build the best system in the world.

  11. So, what might Hillary’s “discrimination elimination” mean for a relatively healthy, young adult who has a physical disability? From what I understand, it’s difficult to get insurance if you have a “pre-existing condition” from birth–for someone who would possibly need some followup care and perhaps ortho surgery every 5 years. With talk about medicare and social security loss in the near future, there might not be anything else left for those people in this situation. Our son is currently covered under our program, but as he nears adult age, we have concerns about how he will manage to get his medical needs met for himself.

  12. Sharon

    I appreciated this article and the links and am glad that you are willing to put the information out there for us to read and make our own decisions. I’m also thankful for people like you who are willing to take the crap from the “Marthas & Nicks” out there and still maintain your cool. I have worked in the healthcare field for 18 years trying to get insurance companies to pay for people’s office visits and treatments and it is a depressing task. Insurance companies do everything possible to deny/refuse payment, although folks have paid their premiums faithfully. If all the major insurance companies have so many ridiculous “hoops” to jump through, how much worse will it be with a government mandated policy? And the drs. aren’t all the wealthy people some might think (except the neurologists, heart surgeons, etc.). Ask your drs. what they have to pay in malpractice insurance each year and compare that to the greatly reduced payments they receive for treatment. I’m surprised the drs. don’t all just go back to a “cash only” basis when seeing patients. Hillary scares me on several levels, but her healthcare plan scares me the most.

  13. Everyone here should not fear the unknown. Reform takes support, but with whats already a disgraceful healthcare system here in the US…..we should embrace any changes. I am out of work and was perscribed muscle relaxer pills (painful rotator cuff injury)…..i have no health insurance and can’t afford $130 for a 30 day supply, so my script just sits. This country sucks, maybe i will move to another country, which i am working on! Can’t believe i can’t afford anything in my home country. Everyone here should see SICKO by Michael Moore. Puts everything in perspective.

    • Nick, if you are out of work with no health insurance, get a job at Starbucks. They provide health insurance to all of their employees. If you are looking for another country, I hear it’s easy to get into Mexico. And then you can really experience a disgraceful health care system.

  14. Pat Wyble

    Saying its unfair for a twenty year old to pay the same for health care as a seventy year old is wrong. The twenty year old will become seventy years old, so it works out even. Otherwise, as the average person ages and really needs the care, its too expensive. ANNE-MARIE RITTS above Feb 10 2008 IS RIGHT ON.

  15. Anne-Marie Ritts

    This comment is in addition to the above comment I submitted in 2008. Today, my daughter, who works in a pharmacy while attending college, filled two prescriptions for an white senior male American who had Medicaid Part D coverage. His total charge was $800 for a 90-day supply. Because he could not afford this mediation (one prescription for his wife, and one for himself), she had to reduce the supply to 30 days, which reduced the charge to just over $300. A Hispanic woman whose husband could not speak English came in to fill a prescription for her child who has Medicaid coverage. The prescription was for a brand-name medication. The cost was $0. I don’t believe in denying the child needed medication, but this is NOT FAIR. This man may well have served in World War II. Now he is poor because his country does not provide his basic need for health care.

    • Anne-Marie, it seems to me that there are no easy answers. When you say that “his country does not provide,” what you are really saying is taxpayers don’t provide. Right now Washington, D.C. is considering a $1.5 trillion health care overhaul. To pay for this bill, they plan to tax the “rich,” who already pay an overwhelming majority of taxes. Furthermore, we have social security and medicare heading toward insolvency. We’ll we tax the “rich” to fix those programs, too, and if so, where does it end? I think we can make substantial improvements in health care without socializing medicine. In fact, government needs to become less involved in health care, not more involved. But that’s not going to happen. The fact is that health care “reform” will pass, the senior citizen you speak of will get prescriptions for a lot less money, and the financial irresponsibility in Washington, D.C. will greatly lower the standard of living in this country. It’s sad, but politicians have proven time and again incapable of making tough decisions.

  16. The privately inursed pay less, get faster service and have a broader range of choices. Why do you hate your grandparents so much that you demand they be deprived of that?Most old people ALSO buy private insurance because Medicare sucks so badly. Those who were NEVER ENROLLED in Medicare (a vanishing group, but there are still plenty left) are gleeful they are not among the unfortunate souls who ARE on Medicare. Why do you hate your family so much you demand they be locked into the more expensive, delay-intensive, choice-limiting system you’re pushing?

  17. anonymous

    Why don’t gov. or state get health insurance plans through group plans? The way employers do for employee’s. This would cut the costs down and make it less costly. Then plans could be found with lower deductibles, out of pocket max, co-pays, and prescription coverage.

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