Health-Care Reform: McCain vs. Obama


The candidates' proposals reflect their philosophical differences, but both pledge to cover the 45 million uninsured Americans

There is a basic philosophical difference at the heart of the health-care reform proposals of Senators John McCain and Barack Obama, and in this case McCain really is the maverick.

McCain, the Republican candidate, wants to decouple insurance from employment to some degree, long the standard way most Americans get coverage. He believes market forces unleashed will broaden the number of people covered and lower health-care costs. Democratic candidate Obama wants to expand the existing employer and government-based insurance system.

These two very different approaches reflect a debate that has been raging in the health-care community for years. Virtually every policy expert, doctor, and hospital administrator espouses either a market approach or a government approach. There is rarely a combination of the two.

Given the current economic crisis, however, experts question whether there will be any money around for either approach. Both McCain and Obama are promising a lot more than they will likely be able to afford if elected. Still, neither has backed down from his pledge to expand insurance coverage to the 45 million Americans currently uninsured, while reining in health-care inflation, which now runs at about 9% annually.

The voters still care very much. According to a Marist College poll taken in late September, 78% of voters say they want the next President to deal with health-care reform even if it means greater government debt, while 70% say health-care reform is more important than cutting taxes.

Higher taxes or a larger deficit are probably a given if either candidate's proposals are enacted. The Commonwealth Fund, a nonprofit that studies health-care issues, estimates that McCain's plan would reduce the number of uninsured Americans by 1.3 million over the next decade, at a cost of $1.3 trillion, while Obama's plan would reduce the uninsured by 34 million and cost $1.63 trillion. The Lewin Group, a health-care market researcher, figures that McCain's proposal would cost $2.05 trillion over 10 years, and Obama's would cost $1.17 trillion. Both campaigns dispute all these estimates, saying costs would be lower and coverage higher.

There are two aspects to the proposals of both candidates—coverage and rising costs. The candidates' proposals for holding costs down are almost identical, and both are short on details. Covering the uninsured gets much more attention:

Coverage

McCain wants to tax employer-sponsored health insurance as income, removing the tax exemptions currently granted to the 177 million Americans covered through their workplaces. If employees kept their employer-based insurance policy (the average value of which is now $12,000), it would be considered income. To offset the tax burden, a tax credit would be granted, up to $2,500 for individuals and $5,000 for families. Employees could apply the tax credit toward the insurance, thus offsetting the tax hit. Or they could drop their employer-provided insurance altogether, avoid the tax penalty, and then combine the tax credit with any money they were contributing to the policy, and buy insurance on the open market.

The federal government would work with states to create a Guaranteed Access Plan to ensure that people are not denied coverage for preexisting conditions. To foster competition, insurance could be sold across state lines, something that cannot be done now in most states.

Obama would require that all employers either offer health benefits to their employees or contribute to the cost of a new public program. Small employers and individuals with no job-based insurance could enroll in this new Medicare-like plan, and subsidies would be available based on income. All children would be required to have health insurance, and Medicaid and SCHIP (federal insurance for children) would be expanded.

Cost

McCain says he would slow health-care inflation by promoting the deployment of information technology in hospitals and doctors' offices, and investing in the prevention and care of chronic illnesses. He would allow patients to import lower-cost drugs from foreign countries and encourage faster introduction of generics. He would encourage pay-for-performance schemes that would reward quality care, and provide consumers with more information on treatment options and costs. McCain also promises medical malpractice reform, which presumably would reduce malpractice premiums paid by doctors and hospitals and reduce the amount of unnecessary, defensive medicine performed now to avoid potential lawsuits.

Obama also wants more health-information technology, and he proposes a federal investment of $50 billion to make it happen. He wants to improve the prevention and care of chronic conditions, allow drug reimportation, and promote generic drugs. He would also push for Medicare to be allowed to negotiate with drug companies on prices, which it is not allowed to do now. He would require hospitals and providers to make costs and quality outcomes public. And he would reform medical malpractice.

Again, these are just campaign proposals. Neither candidate's plan appears to be winning over a majority of voters. According to a new poll from Harvard School of Public Health and Harris Interactive, 40% of registered voters don't see either candidate's health-care plan as better for them. An additional 37% favor Obama's plan, while 27% choose McCain's proposals.

Arnst is a senior writer for BusinessWeek based in New York.

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