Bush and Kerry: Whose Plan Is Healthier?

The candidates offer voters starkly contrasting ideas on health insurance

Pop quiz: on what issue do President Bush and Senator John F. Kerry (D-Mass.), his likely Democratic challenger, differ most sharply? Nope, it's not Iraq. And it isn't even the economy. The real contrast between them: health care.

The two candidates offer voters a stark choice. Kerry would spend more than $900 billion over the next decade to shore up the current health insurance system (table). Nearly all Americans, including most of the 44 million who are uninsured, would get coverage either through their job or through government programs. Says Emory University health economist Kenneth E. Thorpe: "Kerry takes the existing structure and builds on it."

By contrast, Bush is proposing an agenda that, at first glance, seems far more modest. The centerpiece: Some $90 billion in tax breaks over 10 years to encourage people to buy individual insurance. This would only slice the ranks of the uninsured by less than 4 million. But it could be the first step toward a dramatic shift in the way Americans buy insurance, sharply reducing the role of employers as their source of coverage. "We've got to fundamentally change the way health care is delivered," says Bush campaign aide Megan Hauck.

Both campaigns are trying to tap into Americans' deep concern about the cost and availability of health insurance. Neither candidate actually has much of a plan for tackling runaway medical costs. Instead, each focuses primarily on helping the uninsured, who make up more than 15% of the population. Roughly half go without insurance for 18 months or more. Yet many more Americans fear losing coverage: Fully 64% worry about being able to afford care, more than fear a terrorist attack or losing their job, according to a poll completed on May 4 by the Henry J. Kaiser Family Foundation.

The candidates' sharply differing approaches mirror a long-standing debate in Washington. While companies, unions, health-care providers, and consumers joined forces for Cover the Uninsured Week on May 10-16, they have been unable to agree on how to solve the problem. An airing in the November election could force a compromise in 2005, but for now "the prospects for doing anything are foul," says Brookings Institution economist Henry J. Aaron.

COVERAGE BLITZ

The biggest downside to the Kerry plan is its massive cost. He would spend more than $500 billion to boost state-run health programs for the poor, including Medicaid and the State Children's Health Insurance Program. An additional $250 billion would shore up the employer system by insuring companies against individual workers' catastrophic health expenses. The remaining $150 billion would help small businesses and workers between jobs by providing tax subsidies to help pay for individual coverage and for insurance through the Federal Employees Health Benefit Program. These steps would cover about 27 million uninsured, figures Thorpe.

To pay for all this, Kerry would roll back Bush's tax cuts for those earning more than $200,000 a year. He also claims he would save $300 billion over 10 years by deploying both information technology and disease management programs, in which people at risk for chronic illness are identified early and put on aggressive prevention programs.

RADICAL CHANGE?

Sounds good on paper, but there are major hurdles even if the staggering price tag is politically acceptable. To start, Harvard University health economist David M. Cutler questions whether Kerry's plan would achieve all the savings he promises, even though Cutler strongly backs the use of disease management programs.

More fundamentally, a large expansion of public programs could end up threatening the employer-based system Kerry wants to bolster. If too many employees become eligible for government insurance, companies may simply drop their coverage, throwing still more workers onto the public rolls. Already, three-quarters of the uninsured have jobs. Some work at companies that don't offer insurance; barely half of small businesses have a health plan, according to the Kaiser Foundation. Other workers are eligible but can't or won't pay the premiums.

Bush takes a more modest approach that may lead to far more radical change. His $90 billion would pay for tax credits and new deductions for health insurance premiums for those who don't have coverage at work. By giving Americans an incentive to shop for and buy their own health coverage, say Heritage Foundation economist Stuart M. Butler and other conservative advocates, individualized insurance would lead to more choice and inject market discipline into the indus- try, ultimately holding down medical inflation.

As it stands, Bush's plan for tax credits of up to $1,000 won't entice many workers to abandon the employer-based system. But many conservatives hope -- and liberals fear -- that encouraging such a decision is exactly what Bush is planning for a second term. "You should look at your place of work as where you sign up for insurance rather than determining what insurance you buy," says Butler.

Such a dramatic change would require a bigger policy shift than Bush is willing to endorse today. Currently, employer-sponsored insurance enjoys two massive tax benefits. Companies get a tax deduction for the premiums they pay, and workers receive those company-paid benefits tax-free -- a break worth as much as $180 billion a year, according to congressional estimates. To truly level the playing field between individual and company insurance, conservatives would require workers to pay taxes on some of the value of employer-provided insurance but give them tax breaks for buying insurance on their own. Companies would continue to enjoy their tax break.

That's a far more controversial step than Bush is likely to propose in a tight reelection campaign. Even many businesses, whose employees would lose a generous tax break, are wary of such a step. Nonetheless, even his far more modest tack for the short term -- and its contrast with Kerry's ambitious defense of the existing system -- may help kick off an important debate this year.

By Howard Gleckman in Washington

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