New York Times Editorial: The Candidates’ Health Plans

October 28, 2008

The Candidates’ Health Plans

The nation’s health care system is desperately in need of reform — as far too many Americans know from grim, personal experience. In this election, Barack Obama and John McCain are offering starkly different ideas for how to fix that system.

There is no shortage of problems:

¶ Some 45 million Americans lack health insurance, limiting their ability to get timely care.

¶ The costs of medical care and health insurance are rising much faster than household incomes, making it increasingly difficult for people to afford either.

¶ People can’t carry their insurance from one job to another, limiting their mobility. Outside the workplace, it is hard to find affordable insurance.

¶ Despite the wealth and technological prowess of this country, the quality of medical care often lags behind that available in other industrialized nations.

Both candidates have largely accepted the prevailing expert wisdom on ways to improve quality and lower health care costs over the long run, such as relying more on electronic medical records and better management of the chronically ill. But they have very different ideas on the best way to make insurance available and affordable for all Americans.

We believe that Mr. McCain’s plan, which relies on reshaping the tax code, is far too risky. It is likely to erode employer-provided group health insurance and push more people into purchasing their own insurance on the dysfunctional open market, where insurers often reject applicants with pre-existing conditions.

Mr. Obama has focused primarily on extending coverage to a big chunk of the 45 million uninsured Americans by expanding existing private and public programs with the help of federal subsidies and mandates. His boldest innovation would be a new federally regulated exchange where Americans not covered at work would be able to choose — as federal employees currently can — among a variety of private group policies. He would also create a new public program to compete with the private insurers.

Mr. Obama’s plan is a better start than Mr. McCain’s. But it is still not likely to help all Americans who need and deserve affordable, high-quality medical care.

As voters weigh their choice for next Tuesday’s election, we offer this detailed review of the two candidates’ plans.

THE MCCAIN PROPOSAL Mr. McCain’s main idea is to change the tax code so that workers would have to pay income taxes on the value of their employer’s contribution to their health insurance. In return, all Americans, whether currently insured or not, would receive a tax credit of $2,500 for an individual or $5,000 for a family to buy health insurance, either through their employer or on the open market.

Mr. Obama has derided this plan as giving tax credits with one hand and taking them away with the other. But the tax credits are initially so generous that a great majority of workers would end up ahead: their tax credit would exceed the tax they would have to pay on their employer-provided insurance.

They could stay in the same health plan at work and have extra money that could be applied to other health care costs. Or they could buy policies in the open market. As good as that sounds, a $5,000 credit would not go very far toward buying a typical $12,000 family policy but might well suffice for the young and healthy, who get preferable rates.

Mr. McCain correctly recognizes that there are disadvantages to linking insurance to jobs — as thousands of laid-off American workers already are discovering — and that there is an intrinsic inequity in the current tax code that favors those who have employer plans over those buying individual coverage.

The great danger is that Mr. McCain’s plan will fragment the sharing of risks and costs — the bedrock of any good insurance plan — by enticing young, healthy workers to bail out of their employers’ group policies to seek cheaper insurance on their own. Their older or less healthy colleagues would be left behind, which would drive up premiums at work. The rising costs could lead many companies to drop their health coverage entirely.

The proposal also offers little protection for older and sicker people forced to buy policies in the open market. Mr. McCain says the federal government would help underwrite high-risk pools like those operated by many states to cover such patients. But the subsidies his aides have talked about — some $7 billion to $10 billion a year — would fall far short of the amount needed.

Mr. McCain would loosen state regulations on insurers by allowing companies to sell across state lines. Some states require insurers to accept all applicants and provide specified standard benefits, and they limit the ability of companies to base premiums on health status. In the name of promoting competition, Mr. McCain’s plan would free companies from those terms. Anyone who lost insurance as a result would have to seek coverage through the high-risk pools.

THE OBAMA PLAN Mr. Obama would do far more than his opponent to address the nation’s shameful failure to provide health coverage for all citizens. He would require all parents to get coverage for their children and expand Medicaid and the State Children’s Health Insurance Program. He would also require large and midsize companies to offer health insurance to their workers or pay into a kitty to subsidize coverage elsewhere — a provision that Senator McCain castigates as a “fine” but that really is their fair share of the burden.

Mr. Obama says the government would provide subsidies to encourage small employers to offer coverage and to help low-income people buy insurance. This is not a government-run program — as Mr. McCain claims — but it does give the government a much bigger role than it now has by expanding public programs and creating a new national plan.

Mr. Obama would also greatly increase government regulation of the insurance industry. He would require insurance companies to take every applicant and meet a minimum standard of benefits, and he would prevent them from charging higher premiums based on an applicant’s health. Some states have similar requirements now and insurance companies still sell policies there.

COVERAGE Some experts estimate that the McCain plan would reduce the number of uninsured only modestly because millions of people would drop or lose employer coverage, and not many more than that would buy policies outside of work. The nonpartisan Tax Policy Center estimates that the McCain plan would lower the number of uninsured by a mere two million in 2018, out of a projected 67 million uninsured in that year. The Obama plan would cut the number by 34 million, the center says, but still leave nearly 33 million uninsured.

The McCain campaign makes an optimistic prediction that up to 30 million of the uninsured might take out policies using their tax credits. If so, those policies would probably be meager — with high deductibles, large co-payments and limited benefits — and unlikely to provide much help in a crisis.

COSTS Despite all the Republican warnings about high-spending Democrats, McCain’s plan could be a lot more expensive than Mr. Obama’s, at least in the early years, and possibly in the long term. This is because the generous tax credits would drain federal revenues faster than the tax on employer policies would replenish them.

The Tax Policy Center estimates that the McCain plan would cost the federal government $1.3 trillion over 10 years, and the Obama plan $1.6 trillion. Using different assumptions, the Lewin Group, a consulting firm, estimates that the McCain plan would increase federal spending by $2.05 trillion over 10 years, compared with $1.17 trillion for the Obama package.

Neither candidate has persuasively explained how he would pay for his plan. Mr. Obama says he would apply the money saved by rescinding Bush-era tax cuts for the wealthy and hoped-for savings from reforming the health care system, but there is considerable doubt those savings will materialize quickly.

Mr. McCain also counts on cost-containment measures but is mostly relying on market forces to reduce the cost of health insurance and health care. He expects that people who buy their own coverage will shop for cheaper policies and make more careful choices about what medical care they really need. Among the dangers is that chronically ill people may forgo needed treatments.

Mr. Obama’s plan is the better one because it would cover far more of the uninsured, spread risks and costs more equitably and result in more comprehensive coverage for most Americans. We fear Mr. McCain’s plan would jeopardize employer-based coverage without providing an adequate substitute. At a time when so many employers are reducing or dropping coverage, that is not a risk that the country can afford to take.


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