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The McCain and Obama Health Care Plans

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Overview - Obama. Medicaid expansion, income related subsidies ... Risk Sharing - Obama. Increases regulation, broadening the spreading of risk; ... Financing - Obama ... – PowerPoint PPT presentation

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Title: The McCain and Obama Health Care Plans


1
The McCain and Obama Health Care Plans
  • Linda Blumberg and John Holahan
  • The Urban Institute

2
Outline of Presentation
  • Overview of 2 plans
  • Coverage and Affordability
  • Sharing of Risk
  • Cost Containment
  • Financing

2
3
Overview - Obama
  • Medicaid expansion, income related subsidies
  • National Health Insurance Exchange (NHIE)
  • Guaranteed source of coverage, with pooling of
    risk
  • Public plan
  • Mandate for children, not for adults
  • Employer mandate for medium and large firms
    through play or pay approach employer subsidies
    for small firms reinsurance
  • Broad based approach to cost containment
  • Electronic health records, chronic care
    management, prevention
  • Competition in NHIE
  • Public plan
  • Financing increased rates on top two tax
    brackets

3
4
Overview - McCain
  • End employer tax exclusion, replace with
    2,500/5,000 credit credit could be used in
    employer or individual market credit grows with
    CPI
  • Allow insurers to sell across state lines, will
    reduce effectiveness of regulation in spreading
    of risk
  • Support high risk pools (710b per year)
  • Cost containment
  • Tax credits grow with CPI, individuals pay more
    each year, will choose lower cost plans, reduce
    demand for services
  • Malpractice reform, prevention, chronic care
    management
  • Financing intended to be budget neutral over 10
    years Medicare and Medicaid cuts

4
5
Coverage - Obama
  • Expand public coverage income-related subsidies
    in NHIE
  • Exchange open to small employers and individuals
  • Benefits similar to ESI
  • Prohibit denials health status rating
  • Mandate for kids, not adults
  • Subsidy schedule and public eligibility not yet
    announced
  • Estimate 94 coverage with assumed subsidy and
    eligibility levels
  • Neither plan includes undocumented population.

5
6
Coverage - McCain
  • Fixed, refundable tax credits for group or
    non-group market
  • Low/moderate income subsidy larger in near term,
    changes over time
  • Encourages coverage in non-group market
  • Subsidies not income-related, so affordability
    still major problem
  • Declines in ESI problems in NG low subsidies
    relative to premium little change in net
    coverage, possibly negative.

6
7
Risk Sharing - General
  • More sharing of risk across diverse groups,
    closer costs are to population-wide average
  • Broad risk spreading benefits those with higher
    needs at cost to the healthy
  • Narrow risk sharing increases costs to the sick,
    benefits the healthy
  • Insurance regulation, largely province of states,
    sets desired level of risk sharing. Lots of
    variation across states.

7
8
Risk Sharing - Obama
  • Increases regulation, broadening the spreading of
    risk
  • Prohibits denials, health status rating,
    reinsurance
  • Guaranteed issues, source for purchasing ESI-like
    policies
  • Focusing subsidies on low-income leads to
    affordability
  • Broad-based financing means costs are shared by
    all regardless of insurance status
  • Mandate keeps all kids in the pool, regardless of
    health status
  • No mandate for adults, means some additional risk
    spreading likely to be necessary.

8
9
Risk Sharing - McCain
  • Advocates substantially less risk sharing than
    Obama and today. Accomplished in 2 ways
  • Decreased employer-sponsored insurance
  • Allowing insurance to be sold across state lines.
  • Tax credit for group or non-group decreases ESI
  • Pull greatest for small/medium sized firms and
    the young and healthy.

9
10
More risk sharing in group than non-group, even
today
  • Same premiums in a group, regardless of health
    status
  • Coverage generally comprehensive
  • Some cross subsidy from high- income to
    low-income
  • Non-group issues
  • High admin costs, doesnt well serve those with
    higher health care needs
  • Complexity, narrower benefits, denials, benefit
    riders, underwriting.
  • Places greater financing burden on users of care.

10
11
Sales across state lines
  • Allows those in states with some risk sharing to
    buy coverage from states without it.
  • Saves money for healthy at cost to those who
    remain.
  • Leads to race to the regulatory bottom
  • Leads to less accessible, less affordable
    coverage for those with health problems
  • High admin costs offset some of the savings for
    the healthy.
  • Risk pool investment (7-10b) cannot rectify the
    problem.
  • Top 10 of spenders account for 65 of costs
  • Without averaging with the healthy, subsidization
    would have to be tremendous.

11
12
Cost Containment - Obama
  • Electronic Health Records
  • Chronic Care Management
  • Prevention
  • Comparative Effectiveness
  • Negotiate Drug Prices, Lower Medicare Advantage
    Rates
  • Competition in NHIE
  • Public Plan

12
13
Cost Containment - McCain
  • Relies on change in tax incentives to reduce
    demand for services
  • should reduce use but some uncertainty
  • skewness of health spending will limit savings
  • Electronic health records, chronic care
    management, prevention

13
14
Financing - Obama
  • Estimates (TPC) are 86b in 2009, 160b in 2013
    (no cost containment assumed) 1.6t over 10
    years
  • Uncertainty because not clear about subsidies,
    benefits, reinsurance
  • Cost containment should meet goals if commitment
    2,500 premium not accurate, but 8 of health
    spending is plausible
  • Financed by increasing tax rates on top two
    brackets

14
15
Financing - McCain
  • Estimates (TPC) are 185b in 2009, 141b in 2013
    1.3t over 10 years
  • 20 less than Obama over 10 years
  • But doesnt include cost of high risk pool
  • Tax credit gt value of exclusion for most
    families, increasingly less true over time
  • Two issues
  • credit may have to be more generous at low income
    levels
  • credit may have to grow faster than CPI
  • Potentially very costly with little impact

15
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