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Evaluating the Candidates’ Health Care Plans

With skyrocketing health insurance premiums and a persistent rise in the number of uninsured, health care has assumed center stage in this year’s presidential race. While President Bush and Democratic candidate John Kerry have developed detailed health care proposals, the nature and scope of the proposals are dramatically different.

The president and Kerry have both proposed extending the tax cuts passed in 2001 and 2003 beyond 2010, when they are set to expire under current law. But whereas Bush would extend these tax cuts to all Americans, at an overall cost of $3.3 trillion, Kerry would exclude from the tax cuts the richest 2% of Americans — those whose average income is about $800,000 per year. Instead, Kerry has proposed using the estimated $860 billion in increased tax revenue to finance his health care and education proposals. How this $860 billion in federal funds is distributed represents the biggest area of contention in the presidential race.

Kerry’s health insurance plan aims to provide 27 million uninsured Americans with health insurance. In addition, he has proposed reducing health insurance premiums by 10%. The Kerry plan also focuses on improving the efficiency of our health care system by modernizing how providers bill for their services. In addition, he has proposed improving the quality of health care services by incorporating several of the important recommendations recently made by the federal Institute of Medicine. Overall, the Kerry plan would cost the federal government $653 billion over the next 10 years.

The Kerry plan would enroll uninsured single adults living below the poverty line in Medicaid. Additionally, uninsured parents living under 200% of the poverty line and uninsured children under 300% would be enrolled in the State-Children’s Health Insurance Program. The Kerry plan would make the same health plans that federal workers and members of Congress receive available to all. Under his Congressional Health Plan, companies with fewer than 50 employees that do not provide insurance today would receive a 50% tax credit to provide coverage through private insurance pools. Workers between jobs would have 75% of their premium paid. People between the ages of 55 and 64 who are uninsured would receive a 25% credit toward the cost of their insurance.

A novel aspect of the Kerry plan is the proposal to lower health insurance premiums by 10%. His approach would pay 75% of the costs of catastrophic health care costs — above, say, $30,000 in spending — thus reducing the overall cost of insurance. This would take much of the risk and uncertainty out of underwriting health insurance, lower the cost of administering insurance and allow health plans to focus attention on providing high-quality care.

Following the recommendations of the Institute of Medicine, the Kerry plan would restructure how we deliver health care to chronically ill patients. It would increase the use of care- and disease-management programs in the Medicare program and among private health plans. By requiring providers to send their bills and invoices to health plans electronically, the Kerry plan aims to reduce the costs of administering our health care system.

Today, about 60% of bills are sent electronically to health plans. The remaining bills use paper — which costs about $5 per transaction on average. Use of electronic submissions, as other industries have found, is less expensive, averaging around 50 to 75 cents per transaction. Clearly, improving the efficiency of how we administer health care will lower costs.

The Kerry plan also includes proposals for improving the quality of health care. Recent studies have shown that chronically ill patients, such as diabetics, receive only about 50% of the clinically recommended medical treatments and procedures. The Kerry plan would change this by reorganizing how health care is provided to chronically ill patients, placing a premium on delivering all clinically effective care. Since patients with chronic illness account for most of our health care spending, this approach will improve quality and provide better value for our health care dollar.

In contrast to Kerry’s sweeping proposals, Bush has proposed a more limited approach to addressing health care. The primary focus of the president’s domestic-policy agenda has been cutting taxes for all Americans. Given the price tag associated with these cuts — and resulting increase in the deficit — the president’s plan limits the funds available to address other issues, including health care and education. Partly as a result, the extent of federal assistance included in the Bush health care proposal is more modest than in Kerry’s, and insurance would be extended to fewer uninsured Americans.

The Bush approach would provide single adults earning less than $15,000 with a $1,000 refundable tax credit to purchase health insurance. This tax credit ends for singles earning $30,000. In addition, the president would allow individuals purchasing high-deductible plans to take a deduction for the premium paid, if the plan is purchased in combination with a health savings account. Finally, the Bush plan would allow businesses and associations to purchase health insurance through larger purchasing pools. All told, the Bush health care proposals would provide about 2 million uninsured with coverage, at a federal cost over the next 10 years of $90 billion.

The president has also advanced proposals for streamlining how we administer health care and manage chronic illness. He would provide $100 million to help health care providers increase the share of electronically submitted claims. He has also supported accelerating the use of care- and disease-management programs in Medicare. Bush and Kerry largely agree on these two points. At issue is how fast these changes would occur. The candidates have provided quite different approaches for managing chronic illness and accelerating the transition to electronic billing.

Both candidates have proposed reforms of our current medical malpractice system. The president would cap awards to injured patients for noneconomic damages, such as pain and suffering, at $250,000 per case. This would result in lower medical malpractice premiums for hospitals and physicians, and a slight (about 0.5%) reduction in health insurance premiums. Kerry has proposed eliminating punitive damages in malpractice cases. He has also proposed approaches for reducing the frequency of frivolous claims by requiring the use of medical specialists to determine the merit of new claims. Kerry would also expand the use of mediation to lower the costs of defending malpractice claims.

The difference between the candidates’ health care proposals can indeed be quantified: $653 billion. If Bush wins in November, the money would extend tax relief to the top income brackets. If Kerry wins, the money would provide health care coverage for an estimated 27 million uninsured Americans. The choice now belongs to the voters.

Kenneth Thorpe is Robert W. Woodruff professor of health policy and management at Emory University’s Rollins School of Public Health. A former deputy assistant secretary for health policy in the U.S. Department of Health and Human Services, he coordinated all financial estimates and program impacts of President Clinton’s health care-reform proposals.

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