October 24, 2008

October 24, 2008 | Commentary on Health Care

Candidates' competing prescriptions for health care

Approximately 47 million Americans lack health coverage. It's a huge problem.

To their credit, both major presidential candidates have both ponied up ambitious plans to deal with it. Their approaches are expansive and expensive. And that's where the similarities end.

When it comes to the future of America's health system, John McCain and Barack Obama hold two very different visions.

The Obama health plan would centralize power in Washington.

Increasingly, federal officials would hold the purse strings and make the decisions on health care delivery.

The McCain plan would decentralize control over health care financing and decision-making, empowering individuals and families. In the public health arena, states would retain authority rather than cede power to the feds.

In the case of both plans, some crucial details are sparse. But it's easy to spot the major differences in approaches taken by the candidates.

To expand coverage, Sen. Obama would take four major steps:

  • Create a new national health plan. The new government health plan would enroll those without job-sponsored coverage and those not eligible for coverage under existing government health programs, such as Medicaid and SCHIP.
  • Create a national health insurance exchange. The exchange would be the ultimate regulatory "watchdog," making sure that private health plans competing with the government plan met the same regulatory standards as those applied to the new federal health plan.
  • Impose a "play or pay" employer mandate. Employers would be expected to offer their workers a level of health coverage set by the government. Those who didn't would have to pay a new federal tax - of an unspecified amount - which would be used to help finance the new government plan.
  • Embrace new regulatory initiatives governing health care delivery by physicians and other medical professionals, and expand existing government health programs - particularly Medicaid and SCHIP.

Just how much that would entail government control over medical practice is, again, unclear.

No doubt, Obama's approach would take a big bite out of the uninsured problem. But not as much as you might think.

His approach adds millions to the public health rolls by skimming millions from private health plans - especially employer-based plans.

The Lewin Group, the country's most authoritative health econometrics firm, estimates the plan would extend government health coverage to 48.3 million Americans. But nearly half of those (47 percent) are currently insured through their employers. They and their families would "gain" government coverage because the Obama approach makes it economically advantageous for their companies to discontinue their health benefits and dump them into the government-run plan.

The McCain plan calls for three major steps:

  • Replace federal tax breaks exclusively for employment-based coverage with a universal health care tax credit ($5,000 for a family, $2,500 for an individual). The new health care tax credit would replace the current employees' tax exclusion, not the employer's deduction.
  • Create a national market for health insurance. Individuals and families could buy state-regulated health insurance plans anywhere in the country, not just in the state where they happen to live.
  • Implement a "guaranteed assistance program." The feds would give states financial assistance to provide affordable coverage for the 2 million to 5 million Americans considered "uninsurable" due to serious medical conditions. This would be accomplished through state-based high-risk pools or similar mechanisms

Like Obama, McCain would also promote changes in care delivery with an eye toward securing greater value for health care dollars.

Independent analysts generally see McCain's proposal, powered by the universal health care tax credit, as producing a rapid expansion in private health coverage and a reduction in dependency on government programs. The Lewin Group estimates it would extend private insurance coverage to an additional 26.5 million Americans. Millions of Americans on Medicaid, a welfare program, would transition over to private health insurance. The net reduction in the ranks of the uninsured, according to Lewin: 21.1 million.

The most common concern about the McCain plan focuses on its financing.

Some critics imply his proposal to pay for the tax credit by taxing health benefits amounts to a tax increase. In truth, however, this approach would yield a major tax cut to the vast majority of Americans, particularly for the middle class. Analysts at the Urban Institute estimate the change in tax treatment would leave the typical family roughly $1,200 ahead annually.

The financial question pales in comparison to the far larger issue at hand: the direction this country will take in crafting a 21st century health system. Sen. Obama's plan would take us on the path to a government-controlled system. Sen. McCain's approach would shift the reins of health care financing and selection into the hands of individuals and families.

Robert Moffit, is director of the Center for Health Policy Studies at The Heritage Foundation.

About the Author

Robert E. Moffit, Ph.D. Senior Fellow
Center for Health Policy Studies

Related Issues: Health Care

First appeared in Belleville (IL) News Democrat