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Studies Detail Contrasts in Rivals' Health-Care Plans

Obama's Proposal Would Insure More but at Higher Cost

By LAURA MECKLER

 

WASHINGTON -- Republican presidential candidate John McCain's health-care plan would make only a small dent in the ranks of the uninsured, at best covering about five million more people, two new reports conclude.

Democratic nominee Barack Obama would cover more people -- eventually adding about 34 million, according to one of those reports, by the nonpartisan Tax Policy Center.

Sen. Obama's plan would be costly, the center concluded: $1.6 trillion over 10 years. Sen. McCain's would cost nearly as much: $1.3 trillion over the same span. The center doesn't give either campaign credit for initiatives to reduce the cost of health care.

The advantages of the McCain plan, according to the reports, are less government regulation, a more generous tax break and, for many, more flexibility and choice in where to buy coverage.

The Tax Policy Center called its estimates for both plans preliminary because neither campaign has put out enough information to provide a full evaluation.

Similarly, a pair of studies analyzing the candidates' plans, being published Tuesday in Health Affairs, a peer-reviewed policy journal, found many details lacking.

But the campaigns have made clear what direction they would take the health-care system. The differences provide a sharp contrast for voters.

Neither plan would offer universal coverage, though Sen. Obama regularly says his would. Critics of each plan suggest the other would erode the employer-based system that currently covers some 170 million people.

The reports shed new light on the potential and the problems of each plan.

THE OBAMA PLAN:

Sen. Obama would give consumers more options, but he would increase federal regulations.

Review the candidates' positions on key issues from Iraq to health care.

He would create a new government-run plan as well as an "exchange" in which private companies would offer insurance to compete with the government plan. New rules would require that insurance companies provide coverage to everyone, at consistent prices, even those with existing ailments. Parents would be required to cover their children, and large employers would be required to cover their workers or pay a fine.

It amounts to a significant amount of new regulation, health experts Joseph Antos, Gail Wilensky and Hanns Kuttner write in Health Affairs.

"Each of these [new rules] extends the control of government over health insurance, imposing new requirements that will drive up the cost of insurance," they write.

The government-run plan would set a minimum standard for benefits that private plans would have to meet, they explain. Politically, there will be pressure to include generous benefits, they say, and that will lead to high premiums, leaving few options for those who want cheaper, more basic coverage.

It is likely that companies would be required to offer the same generous benefits to their workers, they say -- another increase in government regulation.

Still, the impact on the uninsured is significant. Overall, the Tax Policy Center predicts that the Obama plan would reduce the number of uninsured by 18 million people in the first year and by 34 million in 10 years.

THE McCAIN PLAN:

Sen. McCain would reduce both state and federal regulations and give consumers more choices about where to buy health insurance.

Current law offers a tax break only to those who get insurance through their jobs. The McCain plan would give a refundable tax credit to all who find coverage: $2,500 per person or $5,000 per family. In trade, workers would pay income taxes on the value of health insurance as part of their compensation.

But, unlike a similar plan put forth by President George W. Bush last year, health benefits still would be exempt from the payroll tax paid by workers and employers, and that is why the McCain plan is more expensive than Mr. Bush's, said Len Burman, director of the Tax Policy Center.

Because people could buy insurance on their own, some would leave the employer-sponsored system, especially young and healthy people who can get a better deal on their own. Older, sicker people are likely to face problems buying coverage.

Overall, the Tax Policy Center and the four academics writing in Health Affairs project that about 20 million would leave employer-sponsored coverage, while about 21 million people would be newly covered on the open market. That is a net increase of about one million insured people.

"Many employers would be quick to drop health benefits in response to a major policy change, such as the McCain plan, that greatly altered the business case for offering benefits," the article concludes.

The Tax Policy Center projects that the number of newly insured Americans could climb in future years and perhaps reach five million people before dropping again.

The Health Affairs article, whose lead author is Thomas Buchmueller of the University of Michigan, finds other problems with the McCain plan. Because administrative costs are higher on the open market, where insurers evaluate customers individually, he predicts that coverage would be more expensive but less generous.

The McCain plan would allow consumers to buy insurance across state lines. That would give people more choices, but it also would undermine state laws that mandate certain benefits and provide various consumer protections.

Write to Laura Meckler at laura.meckler@wsj.com

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