Wall Street Journal examines presidential candidates' health care plans
23 10 08 - 18:16
Health-Care Fixes: Plan vs. Plan
Forget Joe the plumber. Many Americans are wondering what the presidential candidates' health-care plans would mean for them.
Sens. John McCain and Barack Obama have each offered sweeping, and contrasting, prescriptions for how to reform the health-care system. In last week's presidential debate, the two clashed over how their policies would affect the Ohio plumber, whom Sen. McCain has showcased as a sort of Everyman American. But the two health plans would have very different effects on various groups. The impact depends on factors such as your income, health status and what kind of insurance you currently have, if any.
Both candidates have pointed to big problems in the health-care system, including rising costs and the large number of people who aren't covered. Slightly fewer than 1 in 6 Americans were without health insurance last year, according to the Census Bureau. Meanwhile, premiums for workplace health benefits averaged $12,680 per family this year, more than double the 1999 level, according to a survey by the Kaiser Family Foundation and the Health Research & Educational Trust.
Most analyses of the two proposals conclude that Sen. Obama's plan will do more to reduce the current ranks of the uninsured. But as a pocketbook issue, both candidates' plans will likely save money for a lot of people in the short term. The average household's federal tax tab would go down $1,241 as a result of Sen. McCain's health-care plan, and $782 under Sen. Obama's, according to the Tax Policy Center. The Lewin Group, a health-care consulting firm, found in a new analysis that 65% of families would see their health-insurance costs decline by at least $250 a year with the McCain proposal. Under the Obama version, 48% of families would realize such savings.
Because the candidates' plans leave a number of questions unanswered, forecasters have to rely on some guesswork, which can lead to varying conclusions. Lewin Group, a unit of insurer UnitedHealth Group Inc., said its analysis of the plans was performed with no input from its parent company and wasn't solicited by either campaign. The Tax Policy Center, a nonpartisan joint venture between the Urban Institute and Brookings Institution think tanks, said its analysis was also independently done.
Based on these reviewers' findings, and interviews with other experts, here's a look at which groups of people might tend to do better, and worse, under each plan. For more information about the impact on you, go to WSJ.com to see data from the Lewin Group and the Tax Policy Center, as well as other resources.
Sen. McCain's Plan
Many people are financial winners under the McCain plan, at least in the short term, according to the Lewin Group and Tax Policy Center analyses. Among families making between $100,000 and $149,000 annually, for instance, 38% would save more than $2,500 a year on health costs, according to the Lewin Group. That level of savings also would be realized by 41.5% of families with incomes between $50,000 and $99,000.
Sen. McCain wants to give people tax credits of $2,500 per person, or $5,000 per family, to defray the cost of insurance. He also would make workers pay income tax on health benefits they get from their employers.
For most people with employer-based insurance, the tax credit is worth more than the new income-tax hit. For instance, the McCain plan would reduce the average federal tax bill by $1,641 a year for households making between $66,354 and $111,645, according to the Tax Policy Center.
One way to check how Sen. McCain's plan could affect you is to ask your employer the cost of your health benefits and calculate how much additional income tax you would owe if that sum were added to your wages.
Among people wanting to buy insurance, the young and healthy could do particularly well under the McCain plan. This group is the cheapest to insure, so the tax credit would likely be enough for them to buy individual policies. And allowing people to buy insurance from another state, as Sen. McCain has proposed, will let them seek out the cheapest plans.
But some older people, or those with pre-existing medical conditions, could lose out under Sen. McCain's proposals. These consumers may find it expensive and difficult to buy health plans on the individual market. With the ability to sell their products nationally, insurers may avoid states where regulations require health plans to cover all applicants.
"For the sicker people who have a tough time now getting coverage, though they will get some help because of the new tax credit, that money may not stretch enough," said Joseph Antos, a scholar at the American Enterprise Institute, a conservative think tank.
Douglas Holtz-Eakin, Sen. McCain's senior policy adviser, says people with pre-existing conditions would be covered by new, high-risk insurance pools. This, he says, would cost the federal government $15 billion to $20 billion a year and would draw on money from states and insurers.
Many states currently offer high-risk pools, which often have limits and problems, including high premiums. The Lewin Group analysis, which assumes a large pool program, said the federal cost would rise each year, to as much as $33 billion after a decade.
Mr. Holtz-Eakin said the Lewin Group had done a "good estimate" of the McCain plan. But, he said, the campaign contests the finding that the McCain plan isn't budget neutral.
One big unknown: Would employers stop offering health insurance once their workers start having to pay tax on this benefit? Mr. Holtz-Eakin says this won't happen to a significant degree, partly because employers' own tax status won't change.
Many analysts disagree. Some smaller employers will use the tax change "as an excuse to drop coverage," says Paul Fronstin, senior research associate with the Employee Benefit Research Institute, a nonprofit group. The Tax Policy Center suggests 3.3 million fewer people would initially have workplace coverage, with the number growing in later years to as many as 20 million. The Lewin Group projects 9.4 million would lose workplace coverage in the first year.
Sen. Obama's Plan
Most American families in the short term would save money on health insurance or see little effect under the Obama plan, the Lewin Group said. For instance, among households earning between $50,000 and $99,000 a year, nearly 60% would see health-insurance costs decline by $250 or more. Among families making between $100,000 and $149,000 annually, 66% would save at least $250.
Sen. Obama's plan would add new mandates on families and companies: He wants to require that all children have insurance. And employers would have to either provide health benefits or pay a fee. Companies below a certain size would be exempted, and smaller firms would also get tax credits to help pay for health insurance.
Low and moderate-income people could gain new coverage or assistance through the expansion of Medicaid and the State Children's Health Insurance Program, as well as new income-linked subsidies. People with health problems who aren't able to find coverage now would be able to purchase private insurance because of a rule requiring health insurers to sell to all comers.
Losers under Sen. Obama's plan could include some healthy people who don't qualify for the subsidies, some analysts say. That's because individual policy premiums could go up once insurers are required to sell policies to all comers.
Neera Tanden, a top Obama policy adviser, said the campaign believed the Lewin Group analysis relied on flawed assumptions and was "fundamentally wrong." Ms. Tanden said Sen. Obama's plan was expected to save $2,500 for the typical family through reforms leading to greater efficiency in the health-care system. She added that proposed regulations on private insurers wouldn't drive up costs for healthy consumers. "We dispute how any American would see their health-care costs rise," she said.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
Such windfalls aren't cheap. The Tax Policy Center projected the Obama plan would cost $1.6 trillion over 10 years; it set the McCain price tag at $1.3 trillion. Lewin Group had different figures -- $2.1 trillion for McCain's plan and $1.2 trillion for Obama.
The analyses didn't account for whether taxes might have to go up to offset those costs. The Obama campaign has said it plans to use money from the ending the Bush tax cuts for wealthier Americans to help pay for its plan. A McCain adviser says the Republican's plan is "budget neutral." Both campaigns say they expect big cost savings as a result of increased efficiencies in delivering health care.