ISSUES AND THE PRESIDENTIAL CANDIDATES: HEALTH CARE

Divergent Paths

The most fundamental difference between Republican John McCain and Democrat Barack Obama in this policy area is over the scope of government involvement in America's health care system.

by Marilyn Werber Serafini

Sat. Jun 7, 2008


Interactive Graphic McCain and Obama on Health Care Over the next several weeks, National Journal plans to examine the differences between Barack Obama and John McCain on major issues in the presidential race. This week's report focuses on their health care policy proposals and records.

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When it comes to revitalizing the nation's health care system, Republican John McCain and Democrat Barack Obama agree that the key is to rein in escalating costs.

Beyond that starting point, though, the two presumptive presidential nominees take different paths. Sure, like most policymakers, they both want to promote electronic record-keeping, provide more information to consumers about the cost and quality of care, pay medical providers more for positive outcomes, and make sure that doctors and hospitals are well informed about "best practices." But they certainly don't agree on how to reach their broader goals.

Their most fundamental difference is over the scope of government involvement in America's health care system. Of course, for decades this has been the great partisan divide obstructing Washington's efforts to revamp the system.

Obama's proposal calls for increased government control over health care. He would require all parents to buy health insurance for their children. His goal is for every American to be insured by 2012, and he does not rule out additional mandates, if necessary, to get all adults covered. (Currently, 47 million Americans lack health insurance.)

Obama would create a national health insurance exchange to help individuals and businesses buy into either a government or a private health plan. Liberals have applauded Obama's proposal, saying it would create cost-lowering competition between public and private health plans. But Grace-Marie Turner, president of the Galen Institute, a think tank that advocates a free-market health care system, isn't convinced. "When you think of a public plan, it absolutely will have subsidies that will [deny private plans a] level playing field," she said. "There's no way a private plan can compete.... So they would go out of business, and you would have one government plan."

In addition, Obama would require employers who don't offer health insurance to their workers to instead make a "meaningful" contribution to their employees' coverage or to contribute a specified percentage of their payroll toward the cost of the public health plan. He would also expand eligibility for Medicaid and the State Children's Health Insurance Program, two federal-state health care programs for low-income people.

And, if Obama gets his way, Uncle Sam would impose new nationwide rules on insurers. Currently, states regulate health insurance, while following some federal requirements about what benefits insurers must offer. Obama would impose significant new mandates on insurers to stop so-called cherry-picking: He wants to prohibit insurers from rejecting applicants because of illness or pre-existing conditions. Moreover, he wants every carrier's benefits to be similar to those that federal employees now receive.

But Obama's embrace of government control does not go all the way to a single-payer health care system. A single-payer program, which would place all Americans in a government-run, Medicare-style health care system, is still the top choice for some congressional Democrats, but even they acknowledge that it isn't politically feasible today.

A growing number of policy makers on both sides of the aisle would require all Americans to have insurance but would offer them many options, not just a government plan. Obama is close to, but not yet entirely in, that camp. He has drawn considerable inspiration from the universal coverage law that Massachusetts implemented last year after then-Gov. Mitt Romney, a Republican, ushered the measure through the Democratic-controlled state Legislature.

Although some key congressional Republicans are warming to the concept of mandates to get all Americans insured, McCain's health care proposal is closer to the traditional GOP view that putting more decision-making power and some subsidies into the hands of individuals would be enough to get them to sign up for insurance. McCain clearly wants less government involvement in health care than Obama envisions.

Still, McCain favors a bit more government involvement than most other Republican candidates have traditionally supported. Like President Bush, McCain proposes tax breaks as an incentive for people to buy insurance on their own. However, his tax credits would be more generous than the ones that Bush advocates.

McCain would replace the existing tax exclusion for employer-sponsored health coverage with a refundable tax credit for all Americans. Individuals would get a refundable $2,500 tax credit ($5,000 for couples) as an incentive to buy health insurance. If a policy cost less than the amount of the tax credit, the consumer could deposit the remainder into a health savings account. People could get insurance through any organization or association, including an employer, and workers could carry policies from job to job.

Unlike Obama, who would place greater controls on insurance companies, McCain would remove some requirements. McCain seeks to boost competition among insurers by allowing individuals to purchase coverage from out of state, which is currently prohibited.

McCain would not require anyone to buy anything, and his proposal aims to loosen the connection between employers and insurance coverage. Today, 158 million Americans are insured through an employer. Critics complain that the generous tax benefits associated with employer-sponsored insurance are unfair because individuals who buy their own coverage get no tax break, and because the employer role increases costs by making patients less sensitive to prices. Moreover, the employer-based system doesn't allow workers to take their insurance with them when they change jobs.

AUDIO Special Event Audio file playback requires Flash player. Download here. Policy Briefing: Health Care (Jun. 25) - National Journal hosted a policy discussion with representatives from the McCain and Obama camps. Listen to the event here.

Still, polls consistently indicate that most people with employer-sponsored health insurance like it. McCain wouldn't dismantle employer-based insurance, but he would encourage a shift toward individual insurance by abolishing the tax exclusion for employer-sponsored health insurance and giving a break to all taxpayers instead, regardless of whether they are insured through an employer or buy their own policy. Critics see McCain's proposal as undermining employer-sponsored health coverage--a development that some proponents of his plan would welcome because they believe that the current system undermines the competitiveness of U.S. businesses and insulates patients too much from price considerations.

But all of these differences between the McCain and Obama approaches may hold little importance once one of them becomes president, says Stuart Butler, vice president of the Heritage Foundation, a conservative think tank. "Neither considers himself a health expert," he said. "The implication is that probably neither is that set in stone ... [as] would have been the case with Hillary Clinton. I suppose that's good news. One might actually see some interesting dynamics in terms of moving forward."

Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, noted that McCain has a long history of working with both parties in Congress on health care matters. That indicates he might be open to seeking common ground, she said.

In his 21 years in the Senate, McCain's leadership on health care has consisted of heading a 1989 attempt to delay implementation of a catastrophic health insurance law and sponsoring a controversial patients' bill of rights in 2001 that would have allowed patients to sue their managed care plans (a mostly Democratic effort).

In 2004, McCain was one of five Senate Republicans to co-sponsor legislation that would have allowed pharmacists and wholesalers to import drugs from Canada and Europe that were approved by the Food and Drug Administration. In 2003, he was one of eight GOP senators to oppose final passage of legislation that eventually created a prescription drug benefit for Medicare recipients.

Obama, meanwhile, has served on the Health, Education, Labor, and Pensions Committee since joining the Senate in 2005. His limited leadership on health care has focused on reducing the number of medical errors, preparing to combat avian flu, and expanding stem-cell research.

In Butler's view, revamping federal health policy would be "marginally easier" during an Obama presidency because a Democratic-controlled Congress "would want to cooperate with him." Ron Pollack, executive director of the consumer group Families USA, contends that prospects for health care reform would be substantially better under Obama. "If Senator McCain pursued his agenda on health care, it would set up a significant fight between Congress and the president. I don't think the Democratic Congress is going to feel any sympathy for deregulating the insurance industry and allowing insurance companies to continue to cherry-pick and impose unaffordably high premiums on those who need health care the most. I don't think the Democratic Congress is going to acquiesce to undermining the employer-sponsored insurance."

Moreover, neither candidate has discussed the financial problems facing Medicare and Medicaid. Pollack predicted that Obama and McCain would address those problems very differently. "The Democratic Congress will want to protect those government programs. At least in terms of the hints that Senator McCain has given, he probably will try to cut those programs. He talks about the need for 'entitlement reform.' That's code language. He talks about how you've got to balance the budget, and at the same time he embraces making the Bush tax cuts permanent. At the same time, he talks about extending the war in Iraq. If you extend the war in Iraq and make Bush's tax cuts permanent, how will you balance the budget? Obviously, you try to cut Social Security, Medicare, and Medicaid. That will set up a big fight between the Democratic Congress and the White House."

Regardless of who wins the election, the best chance for major health care reform is if the new president moves quickly because, "normally, presidents have a limited honeymoon," Pollack said. But quick action on any major changes may be unlikely. Early next year, Congress must turn its attention to reauthorizing SCHIP. Last year, Democrats--and some Republicans--sought to reauthorize and expand that program. Bush vetoed the legislation, and Congress eventually passed an extension that will expire in March. Proponents of expanding SCHIP tried again this year and are expected to try next year, too. They are more likely to prevail if Democrats have strengthened their majorities on Capitol Hill and taken control of the White House. Regardless of how the playing field has changed by January, the SCHIP battle will be heated and probably protracted. And Congress is unlikely to roll comprehensive health care reform into SCHIP legislation.

"If health care continues to be one of the top-most dominant issues in the general election campaign, the new president will have to take some action. He'll use some of his election capital to make it happen," Galen's Turner predicts. "I don't think it will be one big huge bill, but movement toward a new vision. It may wind up being some steps."

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