More about these plans' effects on: Intro · Uninsured · Quality Of Care · Consumer · Employers

By Marilyn Werber Serafini, National Journal
© National Journal Group Inc.
Friday, Oct. 26, 2007

Predictably, the health care proposals that promise to cover the highest number of uninsured people -- namely, the Democrats' universal coverage plans -- would cost Uncle Sam the most. The candidates who scored high on National Journal's question about insuring more people therefore tended to get a low score on minimizing the effect on the federal purse.

Indeed, Kenneth E. Thorpe, professor of health policy and management at Emory University's Rollins School of Public Health, estimates that any of the three top Democrats' plans would cost the government about $100 billion a year. John Goodman, president of the conservative National Center for Policy Analysis, estimates that the proposals from Hillary Rodham Clinton and John Edwards would cost about $1,000 per household per year in additional spending.

The Democrats say they would partially pay for their initiatives by improving the quality of care. To make up the rest, Clinton and Barack Obama would allow Bush's tax cuts to expire for the highest-income people, and Edwards would repeal top earners' cuts before their scheduled expiration date.

The Democratic plans "all envision major new expenses, and recapturing those in [the same period of] time from the health care system is unrealistic," said Ed Howard, executive vice president of the Alliance for Health Reform. The proposals include significant initiatives aimed at improving care, such as coordinating patient care, adopting electronic patient records, and making information about the quality and price of services readily available. Realizing savings through such steps would take time, Howard said, noting that the spending would have to come first. Stuart Butler, vice president of domestic and economic policy studies at the conservative Heritage Foundation, thinks that the Democrats' claims of overall savings are "exaggerated" no matter when they materialize.

The Republicans, Howard said, "propose less new spending, and thus they have a better chance" of funding their plans with existing federal health care dollars.

Thorpe estimates that the Republican plans would cost the government far less, if anything at all. Rudy Giuliani's plan, he said, could produce a health care surplus of up to $400 billion a year, although the Giuliani campaign has not yet announced an estimate.

Because the Democrats propose higher levels of spending, it's not surprising that their plans scored lower than the Republicans' did when National Journal asked the judges whether the various plans would bring the growth in health care spending in line with the overall economy's growth rate. Most of the experts agreed that this is a key goal for the long term.

Goodman, who was instrumental in the development of health saving accounts, says that reining in the growth of spending depends largely on taking health care choices out of the hands of third parties, such as employers and insurers, and putting the responsibility into the hands of consumers. "You cannot control health care costs unless someone is forced to choose between health care and other uses of money," Goodman said. "In the Democrats' plans, no one is forced to make these choices -- no patient, no doctor, and no government agency."

Robert Reischauer, president of the Urban Institute, had different concerns about the Democrats' plans, which he predicts would boost federal health care spending, "notwithstanding their claims that savings will arise from information technology, prevention, chronic-disease management, evidence-based medicine, etc. The Republicans might be more successful on this dimension," he said, "because fewer people will have coverage and the more that do will have less-comprehensive coverage and will reduce the care they seek or receive. Giuliani will block-grant Medicaid, which should lower its growth rate."

So, which plan gives the federal government the most bang for the buck? John McCain scores high with his plan to replace the tax exclusion for employer-sponsored health plans with a refundable $2,500 tax credit ($5,000 for families). If a policy cost less than the amount of the tax credit, the remainder could go into the individual's health savings account. Government-sponsored health care plans would reimburse medical providers at higher rates for good outcomes, for coordinating care, and for preventive services.

"His tax treatment is more oriented to cost containment than the other Republican plans," said Paul Ginsburg, president of the Center for Studying Health System Change.

In part, Ginsburg said, that's because McCain's plan doesn't encourage people to get additional services even though "it encourages some who don't have coverage to get it."

Ginsburg praised McCain and other Republicans, including President Bush, for focusing on the tax code's treatment of health care spending. "Between the president in his budget, and McCain and Giuliani, the tax treatment of health insurance has never gotten so much high-level attention, even though people like me have talked about it since the 1980s."

Economic Impact

Hillary Rodham Clinton would pay for her plan (estimated to cost $110 billion a year) by allowing President Bush's income-tax cuts for the highest-income people to expire and by saving the federal government money by improving the quality of care. Clinton would continue to exclude employer-provided health premiums from taxes but would limit the exclusion for the "high-end" portion of "Cadillac" plans for workers with annual incomes above $250,000. Small businesses would receive a tax credit to encourage them to continue or begin offering coverage. Clinton would make it harder for drugmakers to block generics from the market, and she would increase funding for the Food and Drug Administration to speed approval of generic drugs. She would create a pathway within the FDA for approval of generic biologic drugs. Clinton would allow Medicare to negotiate directly with drug companies for lower prices. She would limit direct-to-consumer advertising, require reporting of financial arrangements between medical providers and manufacturers, and prohibit physician-prescribing data from being sold to drugmakers. She would reduce federal payments to Medicare managed care plans. John Edwards would pay for his plan (estimated to cost from $90 billion to $120 billion a year) in part by repealing Bush's tax breaks for the highest-income people. The remainder of the money would come from eliminating waste throughout the health care system. He wants the federal government to offer sliding-scale subsidies to low- and middle-income people (earning up to $80,000 for a family of four) in the form of a refundable tax credit. He would reduce federal payments to Medicare managed care plans. He would restrict direct-to-consumer ads for new drugs and strengthen the FDA's ability to monitor newly marketed drugs. Rudy Giuliani would develop a new health insurance credit to help low-income individuals and families buy private insurance, and he would offer an income-tax exclusion of up to $15,000 for families (and $7,500 for individuals) without employer coverage to help them buy private insurance and contribute to expanded health savings accounts. Giuliani wants to end frivolous medical malpractice lawsuits by imposing "reasonable" caps on non-economic (pain and suffering) damages. Giuliani says that health care costs would decline because of new competition. John McCain would provide all individuals with a refundable $2,500 tax credit ($5,000 for families). If a policy costs less than that amount, the remainder could go into a health savings account. Government health care programs would reimburse medical providers more for good outcomes, for coordinating care, and for preventive services. McCain wants tort reform to "eliminate frivolous lawsuits and excessive damage awards." He would protect doctors who follow clinical guidelines and patient-safety protocols. He would develop faster routes for approval of "safe, cheaper" generic drugs, including biologics. He would develop safety protocols that allow Americans to import FDA-approved drugs. Barack Obama would pay for his plan (estimated to cost $50 billion to $60 billion a year) by allowing Bush's tax breaks to expire for people with annual incomes above $250,000. He would "strengthen" antitrust laws to keep insurers from "overcharging" physicians for malpractice insurance. Obama would allow people to import drugs from developed countries if they are safe. He would promote the use of generic drugs in federal health plans and would make it harder for brand-name drug companies to keep generic drugs off the market. He would allow Medicare to negotiate lower prices directly with drug companies and would reduce federal payments to Medicare managed care plans. Mitt Romney estimates that his plan would reduce overall health care spending by 6 percent and says it would result in no new taxes. He would allow the deduction of premiums, out-of-pocket medical expenses, deductibles, and co-payments for people who at least have catastrophic coverage. Romney would redirect a majority of existing federal and state spending from uncompensated care to helping the low-income uninsured buy insurance. Instead of matching state Medicaid spending, the federal government would give block grants to the states so they could decide how to run their programs. Romney wants to lower health care costs by relieving states of some federal administrative requirements for Medicaid. He would impose federal caps on noneconomic and punitive damage awards in medical-malpractice suits. He would encourage states to establish health courts and alternative options for dispute resolution and would impose sanctions for repeated filings of "frivolous" suits.