Yesterday, the Tax Policy Center released its initial analysis of the health reform plans of the two presidential campaigns. The center is a joint initiative of the Brookings Institution and the Urban Institute, two leading Washington think tanks.
In a nutshell, Obama’s plan is to maintain the current system of employer-sponsored health insurance for everyone who has it and wants to keep hold of it. For those who have no insurance, he will create a National Health Insurance Plan and regulate a set of private plans that can compete against the national plan. Income subsidies will help those who cannot afford to buy insurance alone and employers will be forced to provide insurance or pay towards its costs.
The good news with the Obama plan, according to the Tax Policy Center, is that it will reduce the number of uninsured Americans by 18 million in 2009 and 34 million in 2018. In his convention speech, Obama talked about keeping the promise of ‘affordable, accessible healthcare for every American’ but experts agree that his plan would not create universal coverage. In 2018, 33 million adults would still lack coverage, although coverage for children would be mandatory.
The less good news about the Obama plan is the price tag. The Obama campaign has estimated that its plan would cost the federal government $50 to $60 billion annually. The Tax Policy Center’s estimate is more than double that – $1.6 trillion over ten years. With the federal debt now running at $9.7 trillion, it is hard to see how a new administration could responsibly move forward with the plan as it is.
McCain’s plan has a slightly smaller price tag, according to the Tax Policy Center, $1.3 trillion over ten years. The centre-piece of McCain’s plan is a new tax credit of $2500 a year for an individual or $5000 for a family. This will replace the tax break that is currently available to anyone who gets health insurance through their employer. McCain’s plan is certainly fairer than the existing system because the tax credit is available to everyone, whereas the current tax break does not benefit anyone who has to purchase health insurance alone. It is also worth more to those on higher incomes who have a higher tax bill.
The tax credit is likely to create a strong incentive for employers to drop health insurance altogether and let their employees fend for themselves. The Tax Policy Center estimates that by 2018, 20 million employees would have lost their coverage. Over the same period, 21 million people would get access to coverage through the new tax credit. This would create a net increase of only 1 million insured Americans.
Clearly, neither candidate has the perfect proposal to address healthcare costs and coverage. What is nevertheless striking is how different the outcomes of each proposal would be for Americans over the next ten years. This is not an election where left and right are so narrowly squeezed together on the centre ground that there is little to choose between them. In healthcare, as in many other areas, this is an election of real policy choices.
Vidhya Alakeson is a former Harkness fellow.