Coverage vs Cost-Cutting: A look Inside the Obama and McCain Healthcare Plans

CHICAGO-This year’s roiling political contest took center stage at ASCO 2008 in a special session that reviewed the healthcare insurance reform proposals of Sen. John McCain and Sen. Barack Obama, the presumptive presidential nominees.

Two experts discussed the candidates’ proposals: Jonathan Gruber, PhD, professor of economics at Massachusetts Institute of Technology, a health economist who consulted with several of the Democratic presidential candidates, and Gail Wilensky, PhD, with Project Hope, an advisor to McCain.

Obama: Goal of universal coverage

Dr. Gruber considers universal coverage the central construct of healthcare reform: "The three key features of any universal healthcare coverage initiative are pooling risks to make it attractive to payers, affordability, and a mandate."

Dr. Gruber was a key architect in Massachusetts's healthcare reform, which includes privatized subsidized coverage for the low-income population, pooled coverage for those above the poverty line, and an individual mandate, enforced through tax penalties.

 “We have two presidential candidates with fundamentally different visions about how to reform our system,” Dr. Gruber said. “It could be the most significant domestic policy difference we’ve seen in an election in 30 years.”

“We have two candidates with fundamentally
different visions about how to reform our system.”

 The Obama plan is similar to the Massachusetts initiative, Dr. Gruber said, but with one critical difference: no mandate. “Obama’s plan has low-income subsidies and a reformed market so you can’t charge different prices based on a person’s health status. However, instead of a mandate, there’s auto-enrollment that defaults people into insurance if they’re offered a plan but don’t take it. But that only covers about a quarter of the uninsured,” Dr. Gruber said.

Obama’s plan has the government and the healthy pay for the sick: The former will offer big subsidies while the latter will see a significant bump in insurance rates, Dr. Gruber predicted.

But for Obama to achieve universal coverage depends on the mix of the population within the various pools of uninsured. “Plans like Obama’s will get us about two-thirds of the way-a major contribution, but far from universal coverage,” Dr. Gruber said.

Implementing the Democrat’s plan will cost between $60 and $100 billion a year, by Dr. Gruber’s estimate. Also, “there’s a legitimate question whether Obama’s plan can work without a mandate,” he said.

McCain: Controlling costs

Dr. Wilensky said that although most of the focus of healthcare reform is on the uninsured, the “big three” problems overwhelming our healthcare system are unsustainable growth in spending, medical errors and patient safety, and measuring clinical appropriateness and quality.

Dr. Wilensky said that McCain’s reform focuses mainly on tax code changes. “Through tax credits, McCain is striving to enable people to become more conscious of their healthcare dollars. His $5,000 credit might not sound like a lot, but it is much more than most workers currently receive from the employer-sponsored insurance (ESI) tax exclusion,” she said, adding that under McCain’s plan, you don’t have to pay taxes to get the credit.

She noted that McCain’s plan would allow shopping for insurance across state lines to avoid certain state’s costly coverage mandates. It also offers an insurance pool for high-spending patients.

Dr. Wilensky said that both candidates agree on the general approaches to enhancing the healthcare system and lowering cost, such as more government focus on prevention, coordinated disease management, interoperable health HIT, and more transparency in pricing and quality. But she basically agreed with Dr. Gruber that neither candidate has a real cost-control plan. “There are lots of ideas,” Dr. Gruber said, “but nothing that fundamentally tackles our unsustainable path of spending.”

“We should really be concentrating on what’s going on in Congress because only Congress gets to vote on new domestic policy legislation.”

                                                   -Dr. Gail Wilensky

Dr. Wilensky cautioned that while the candidates’ debate is stimulating, “we should really be concentrating on what’s going on in Congress because only Congress gets to vote on new domestic policy legislation. It is not irrelevant what the President wants, but the political mix between Democrats and Republicans in Congress is far more important.”

The Bottom Line

The most basic difference between the two plans, Dr. Gruber said, is posed by the question, Should we devote significant new federal resources to the uninsured? Obama would provide major federal subsidies to the poor requiring at least $60 billion a year, while McCain would provide smaller subsidies through his guaranteed access plan, to be paid for by removing the ESI tax exclusion.

Put the Two Plans Together?

“I think Obama’s got a terrific plan without enough financing and McCain has a terrific source of financing without a good plan,” Dr. Gruber said. He suggested the best way forward for our healthcare system would be to put the two plans together by mandating universal coverage (Obama) while financing it by getting rid of the ESI tax exclusion (McCain).

He noted that the Wyden-Bennett bill currently before Congress includes both of these concepts.

Highlights of the Obama and McCain healthcare plans

Obama Plan

1. Insurance mandatory for children. Auto-enrollment for adults, ie, individuals are defaulted into a plan when offered. Workers would be automatically enrolled in their employer-sponsored insurance (ESI) plan.
2. Retains ESI tax exclusion. Would require employers to offer ESI or contribute toward employee’s health insurance cost, or contribute to the costs of the proposed National Health Insurance Exchange of public and private plans.
3. Subsidies, based on income, for low-income persons who do not qualify for Medicaid, to purchase insurance from the proposed National Health Insurance Exchange. The Exchange would also be available to those without access to employer coverage, eg, the self-employed and small business owners, and to those uninsured due to pre-existing conditions.
4. Financed by other economic proposals.

McCain Plan

1. No mandate. No one would be required to have health insurance.
2. Ends the exclusion of employer-sponsored insurance (ESI) from taxation, ie, the employer’s contribution is treated as income on which employees must pay tax.
2. Provides tax credits of $2,500 (individual) to $5,000 (family) to individuals who purchase health insurance (from their employer if available or elsewhere).
3. Less-regulation of the marketplace: Individuals can shop nationwide for individual coverage instead of being restricted to insurers in their state.
4. Federally funded state-level high-risk insurance pool for the uninsured-Guaranteed Access Plan (GAP). Some subsidies provided for low-income population.
5. Financed by end of ESI taxation exclusion.