Evaluating the Presidential Proposals for National Health Reform, p.1
Criterion[1] / Obama / McCainCentral goal / Ensure that all Americans have access to affordable, comprehensive coverage; control costs / Control costs, by shifting responsibility for spending and decision-making to individuals and encouraging greater choice and competition in the insurance market.
Universal Coverage / Guarantees universal access to coverage,
coverage expected to increase.
- Expands employer coverage: play or pay
- Expands access to private insurance through NHIE:
- Strengthens regulations on private insurance:
comprehensive coverage and affordability.
Requires guaranteed eligibility for ALL private plans
- Expands opportunities for public coverage:
Medicaid, SCHIP
- Requires children to have coverage.
- Provides increased financial supportto assure affordability
Coverage expected to worsen
- Elimination of tax exemption for employer health benefits
- Tax credits intended to encourage shift toindividual market:
health costs will outpace tax credit,
thus coverage will decline.
- Medical underwriting in the individual market
GAP for high-need individuals will be insufficient:
less than 1% uninsured now covered by similar programs[2]
- Promotes greater privatization of public programs
Coverage estimates[3] / Coverage expected to increase:
Brooking/TPC, 2009—2018:
18m in 2009 and 34m in 2018;)
more than 50% by 2018.
Lewin: reduces uninsured by 26.6m in 2010
Public coverage increases by 48.3m / Coverage estimates mixed:
Brookings/TPC, 2009—2018:
1.3m in 2009 and 2.0m in 2018.
less than 3% in 2018;
Lewin: reduces uninsured by 21.1m in 2010
Public coverage decreases by 5.4m.
Buchmueller et al: see 5m more uninsuredin 5 years.
Criterion / Obama / McCain
Comprehensive
benefits / Comprehensive benefits required:
- In NHIE plans (and new National Plan):
- in employer coverage: “meaningful”
- Tax credits sufficient only for High Deductible Health Plans,
- Inter-state sale of insurance
allowing lower-priced planswith fewer benefits.[4]
Regulations which could be weakened include benefit
requirements, medical exclusions, community rating.
The problem of underinsuranceexpected to increase.
Affordability / Commitment to affordability supported by
- Limited, community rated premiums
- Income-linked subsidies for low-income persons
- Increased financial support from employers’ play or pay
- Expansion of Medicaid and SCHIP
- Meaningful definition of affordability
- Maximum risk-pooling to spread costs
- Stable financing and realistic cost controls
against adverse selection[5] / Affordability threatened by:
- Tax credits lower than average ESI premiums:
- Premiums in individual, nongroup market cost more than
due to higher administrative costs (2X higher)[7]
- Policies with lower premiums—e.g. HDHPs—
low-income people can afford[8]
- Risk-selection will make premiums
- Costs of ESI likely to increase
choose cheaper individual plans
- Tax credits are not indexed to health costs,
causing credits to be increasingly insufficient
Criterion / Obama / McCain
Fair and stable
financing;
Long-term cost controls / Distributes costs fairly among major payers:
counteracts current trend toward shifting costs to individuals,
ends high-income tax cuts,
eliminates subsidies to private Medicare plans,
offers reinsurance for catastrophic employer costs
and subsidies for small business ESI.
Implements quality and cost-effectiveness measures
to achieve system savings
Encourages competition to lower premium and
drug prices
Uses group purchasing power to control costs
by limiting prices for premiums, Medicare drugs,
and provider reimbursement.[9]
Cost containment is constrained by
continuation of private insurance:
Shareholder obligations and high overhead are costly:
administrative costs of current system
estimated at 30% total spending,[10]
Costs for comparable coverage are higher in
private than public insurance.[11]
Effective regulation to ensure adequate private insurance
will be costly.
Estimated net federal cost:
Lewin, 2010-2019: $1.17Tr / Shifts costs to individuals and government;
potentially decreases costs for employers.
Equalizing tax benefits of ESI would increase fairness
if done without reducing affordability
The central cost-containment strategy—
cost-shifting to individuals, increased insurance competition--
Is inefficient:
Nongroup insurance costs much more than group insurance;
Concentration of health spending on sickest--
85% money to 25% sickest—
means price incentives can target only 15% spending[12]
Is regressive and potentially harmful to health:
Greater burden for low-income individuals;
Underinsured will delay/avoid care, damaging health.
Offers additional cost containment proposals:
Quality and cost-effectiveness measures
to achieve system savings
Competition to lower premium anddrug prices
Savings in Medicare and Medicaid
Estimated net federal cost:
Lewin, 2010-2019: $2.05 Tr.
Costs per uninsured individual covered:
7X higher than Obama. Brookings/TPC[13]
[1]This evaluation grows out of the EQUAL Health Care project of the Center for Policy Analysis. For questions or comments please feel free to contact me:
Debbie LeVeen at .
[2]Sack, Kevin. McCain Plan to Aid States on Health Care Could Be Costly. New York Times, July 9, 2008.
[3] Coverage estimates are taken from:
Brookings/TPC: Brookings-UrbanJointTaxPolicyCenter. An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Revised August 15, 2008
and Aug. 28:
The Lewin Group, McCain and Obama Health Care Policies: Cost and Coverage Compared. October 8, 2008.
Buchmueller, Thomas, et al. Cost and Coverage Implications of the McCain Plan to Restructure Health Insurance. Health Affairs 27(6) 2008. Published
online 10 September 2008, pp. 474-5.
The decline in employer coverage is widely expected, as is the increasing inadequacy of the tax credit as it fails to keep up with health costs. A recent New
York Times article described widespread business fears of both prospects, and concerns about the limits of the individual market. Sack, Kevin. Business
Cool toward McCain’s Health Coverage Plan. New York Times, October 7, 2008.
[4] McCain proposes to allow insurance to be sold across state lines, thus reducing “the excesses of state-based regulation” and creating “more vigorous nationwide
competition, as we have done over the last decade in banking.” See McCain, Better Care at Lower cost for Every American, Contingencies, Sep/Oct.08.
Insurance companies would be bound only by the regulations of the state in which they are based, and
could choose states with the least regulatory environment. See Buchmueller, op cit.
[5] A strong public plan is central to two national proposals which share the central features of the Obama plan (though both are stronger in a number of critical
areas). The first is Jacob Hacker’s plan, Health Care for America: A Proposal for Guaranteed, Affordable Health Care for allAmericansBuilding on
Medicare and Employment-based Insurance. EPI Briefing paper #180, January 11, 2007. The second is the
Commonwealth Fund’s Building Blocks proposal, summarized in Schoen, Cathy, et al, Building Blocks for Reform: Achieving Universal Coverage with
Private and Public Group Health Insurance. Health Affairs 27(1) May/June 2008, 646-657.
[6] KFF/HRET, Employer Health Benefits: 2008 Summary of Findings.
[7] Buchmueller, op cit. According to an industry survey, average premiums in the nongroup market in 2006-07 were $2613 for singles and $5799 for families.
Premiums increased with age: for singles aged 60-64, premiums averaged $5090. SeeAHIPCenter for Policy and Research, Individual Health Insurance
2006-2007. p.4 .
[8] Jacobs, Paul; Gary Claxton, Comparing the Assets of Uninsured Households to Cost Sharing under High-Deductible Health Plans. Health Affairs 27(3) 2008.
Jacobs reports that average deductibles in HSA-qualified HDHPs in 2004 were $2364 / 4653 (individual/family): less than 1/3 of households with income
below 300% FPL had sufficient assets to cover that expense. Median gross financial assets for low-income uninsured households in 2004 were $300.
“Paying premiums for a policy that exposes the uninsured to unaffordable medical bills may be viewed as an uneconomical use of their limited assets.”
[9] The Lewin analysis projects that the National Plan will have lower premiums due to lower provider payment levels; other also assume greater efficiencies.
[10] See Woolhandler, Steffie et al. Health Care Administration in the United States and Canada: Micromanagement, Macro Costs. International Journal of Health
Services 34(1), 2004
[11] See Ku, Leighton and Broaddus, Matthew, Public and Private Health Insurance: Stacking Up the Costs. Health Affairs 27(4) 2008: w318-w327
published online 24 June 2008.
[12]See Zuvekas, Samuel H and Joel W Cohen, Prescription Drugs and the Changing Concentration of Health Care Expenditures. Health Affairs 26(1)
January/February 2007
[13]Bivens, Josh and Gould, Elise. Obama health plan outperforms McCain plan in coverage and efficiency. Economic Policy Institute, May 23, 2008.
Memorandum #126.