What Do We Know About Obama's Health Care Plan

What do we know about Obama's Health Care Plan

Cornerstone Principles Obama's health care reform plan has many goals, but chief among them are driving down the cost of health care and expanding coverage. To achieve both, Obama has proposed expanding Medicaid eligibility to cover low-income adults while also creating a National Health Insurance Exchange through which the uninsured could purchase a policy with a minimum threshold of benefits. Successful health care reform eluded both Presidents Bill Clinton and George W. Bush. It could be argued that one tried a bit harder at it than the other, but there's little question that the issue will command a significant amount of Barack Obama's attention after he's sworn into office--in large part because the people who elected him care so much about it. Though 62% of voters ranked the economy as their chief concern, according to exit polls conducted Tuesday by the Associated Press and major television networks, 9% of voters listed health care as a primary concern. That trailed the number of voters worried about Iraq by only 1% and tied the percentage of those troubled by terrorism.

In Depth: Obama's Health Care Plan Though some experts don't expect to see major changes until 2010, Obama's proposal has set the tone for a debate about how to cut rising costs while providing insurance to 45 million Americans. While certain elements of Obama's proposal could be modified, at its core are principles that would change health care delivery and coverage in the U.S.

"Obama's put out a framework for how he would tackle health care reform," says Diane Rowland, executive vice president of the Henry J. Kaiser Family Foundation, a Menlo Park, Calif., nonprofit health policy organization. "Now it's up to the policy wonks to take the elements of that framework and put them into a proposal that can get past the U.S. Congress." The Key Points The cornerstones of Obama's plan are to expand Medicaid eligibility to include greater numbers of the uninsured; mandate coverage for children; create a national exchange through which the uninsured could purchase a public or private policy; provide subsidies to lower-income individuals and small businesses to help defray the cost of purchasing insurance; and, tax medium- to large-size firms that decline to provide their employees with health insurance. Consumers currently with insurance would face no change in their status, unless their company chooses to stop providing employer-sponsored insurance and instead contributes to the national exchange. Small businesses would be exempt from mandatory coverage or contributions and would receive a tax credit of up to 50% on health care premiums for employees. "The Obama plan is actually quite traditional," says John Sheils, senior vice president of the Lewin Group, a health care policy research company in Falls Church, Va. It's very similar to the proposals made by other Democratic candidates during the primaries. Sheils, who directed an extensive analysis of both Obama's and McCain's health care proposals, was not impressed by either plan. Both failed to address what he views as the critical flaw in the current system: incentives to provide health care services and procedures instead of incentives to keep patients healthy. Sheils' analysis found that Obama's plan would decrease the number of uninsured by 26.6 million beginning in 2010. The estimated federal cost of enacting the plan is $1.17 trillion from 2010 through 2019. By 2010, annual spending on health care is expected to reach $2.7 trillion. But Obama's plan is expected to cut spending by $54.1 billion in the next decade. The savings are important, but regardless, the price tag is staggering. What Happens Next In addition to the cost problem, there are other significant unknowns. Obama has yet to explain how he intends to finance health care reform or what size of businesses qualify for tax credits and which would be taxed. Rowland says many of the specifics will be tackled as Obama drafts a budget, which is traditionally presented by new presidents in late March or early April. Experts in health care policy have already begun educating U.S. representatives' senior staff members through bipartisan briefings and seminars hosted by nonprofit policy

organizations like the Robert Wood Johnson Foundation and the Alliance for Health Reform. Rowland says the Clinton administration's experience with health care reform taught experts a valuable lesson about trying to deliver fully formed legislation to Congress (read: It doesn't work). Instead, Rowland expects to see members of Congress, including prominent Democrats and Republicans like Ted Kennedy, Chuck Rangel, Orrin Hatch and Ron Wyden, present their own plans. "One of the things [people] should watch is not what Obama leads with but the congressional reaction and see [who's] going to step up to the plate and have their own proposals that might be stronger," says Rowland. Is universal health care possible in America or a pipe dream? Weigh in. Add your thoughts in the Reader Comments section below. As members of Congress argue about key principles, they'll also debate the plan's ancillary cost-cutting measures, which include the re-importation of safe drugs from other countries; the right to negotiate prescription drug prices directly with drug manufacturers; a pay-for-performance incentive plan; and a comprehensive disease-management program. For some of these programs to be truly effective, Sheils says, Obama may have to add financial incentives like under-payment for unnecessarily expensive procedures or lower co-pays for patients who practice preventative health care. The negotiations are bound to reveal bitter disagreements between Democrats and Republicans over the role of the government in providing coverage to the uninsured. But there will also be opportunities for compromise as both parties look to modernize health care administration and technology. "I think you should be prepared for the possibility that the plan that they'll come out with will be very different than what they've described here," Sheils says.

Cost-Controlling Initiatives Obama's proposal also relies on several initiatives to cut costs. They include the reimportation of safe drugs from other countries; the right to negotiate prescription drug prices directly with drug manufacturers; a pay-for-performance incentive plan to keep patients healthy; and a comprehensive disease management program. However, some of these initiatives have had mixed results. Last year, the Rand Corp. conducted a comprehensive study and found little evidence that disease management programs save money.

Controversial Ideas John Sheils, senior vice president of the Lewin Group, a health care policy research firm in Falls Church, Va., says Obama's plan is actually quite traditional in that it advances few new or groundbreaking ideas. Sheils says the controversy will happen over ideology-those who support privatization and deregulation of health care will find little to like about Obama's plan.

How It Works As the proposal currently stands, consumers with insurance would face no change in their status, unless their company chooses to stop providing employer-sponsored insurance and instead contributes to the national exchange. The uninsured could apply for expanded Medicaid eligibility or purchase a policy from the national exchange. Some lower- and middle-income consumers will receive a premium subsidy to help offset the cost of purchasing a plan through the exchange.

What It Means for Small Companies While Obama's plan does give small employers a tax credit to help defray the cost of health insurance, the proposal does not yet specify which companies will receive the credit. The credit will cover up to 50% on premiums paid for employee health care. The Lewin Group has estimated that this tax credit will probably apply to firms with no more than 25 workers.

What It Means for Midsize to Large Companies Under Obama's proposal, medium- to large-size employers must provide a "meaningful contribution" toward health care coverage for their workers. If they decide not to, the alternative is paying a not-yet-specified payroll tax that would be spent on the expansion of government-administered policies. However, the Obama plan has not identified which medium- to large-size employers would be subject to this rule, or what type of coverage is required for a "meaningful contribution."

Potential Consumer Savings

Obama has argued that his health plan will save consumers up to $2,500 per year in medical costs. The Lewin report estimated that all families would spend less on health care each year under Obama's plan, but the figures differ depending on income. For families making more than $150,000 a year, the savings would be $847. Those making $50,000 to $75,000 would see a savings of $483.

Potential Obstacles President-elect Obama will likely face many obstacles in passing health care reform. There will be a contentious debate over ideological differences, but more practically, Obama will have to lay out how he intends to pay for the plan. Neither candidates put forth a concrete spending plan during the campaign, but this will be even harder to do as the country grapples with mounting deficits.

Goldman Sachs Goldman Sachs is Barack Obama's top donor, with contributions totaling $740,000. Goldman is also John McCain's fourth-largest donor, coming up with $220,000.

JPMorgan Chase The House of Dimon is poised to emerge as dominant after the credit crisis, and it's betting on an Obama win with $475,000 donated to him, versus $200,000 for McCain.

Google Maybe Google can get back to its post-IPO highs if Obama wins. Google has given $487,000 to Obama.

Merrill Lynch With donations totaling $350,000, Merrill Lynch is McCain's biggest supporter. Because of the financial crisis, that makes Bank of America McCain's largest campaign supporter.

Morgan Stanley A McCain win should boost prospects for Morgan Stanley, McCain's third-largest backer with donations of a quarter million dollars. Can a come-from-behind McCain win overcome the dilutive effect of Morgan Stanley's $9 billion deal with Japan's Mitsubishi UFJ?

AT&T AT&T likes McCain and has delivered him $180,000 in contributions. Both candidates supported AT&T by voting for telecom immunity when the FISA laws were revised this summer. But telecom companies are always worried about regulation. A McCain presidency just might work out for AT&T, the only telecom to make either candidate's top 20 list.

Microsoft Last time there was a Democratic president, the justice department tried to break up Microsoft into two companies. But bygones are bygones. Microsoft goes to Obama with $430,000 in donations.

UBS Irony of ironies, UBS goes for Obama with donations totaling $420,000. Most observers would have guessed UBS would wind up in the McCain camp, since McCain's economic adviser, Phil Gramm, is a senior vice president and registered lobbyist for the Swiss bank.