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Studies Analyze Costs, Impact of Obama, McCain Health Care Plans

By Shweta Jha, CQ Staff

September 16, 2008 -- Twenty million people will lose coverage provided through their employers under Sen. John McCain's health care plan, while Sen. Barack Obama's proposal will add $100 billion in new spending every year, according to two separate analyses published Tuesday in the journal Health Affairs.

The studies take aim at proposals they say will bring health insurance to the 47 million Americans who currently don't have any.

A key feature of McCain's health care plan is a shift away from employer-sponsored coverage. The Arizona Republican has proposed removing the tax exclusion for employees and instead providing a tax credit of $2,500 for individuals and $5,000 for families toward buying the private health insurance of their choice.

That move will result in 20 million Americans who lose their coverage, said the authors in their analysis of the effects of McCain's plan. In addition, a similar number of Americans would use the tax credits to buy cheaper but less-generous non-group coverage, resulting in about the same number of uninsured Americans, said researchers Thomas Buchmueller of the University of Michigan, Sherry Glied of Columbia University, Anne Royalty of Indiana University-Purdue University at Indianapolis, and Katherine Swartz of Harvard University.

"Studies suggest that many employers would be quick to drop health benefits in response to a major policy change, such as the McCain plan, that greatly altered the business case for offering benefits," the authors said. "These estimates account only for the price effect of eliminating the tax preference; they do not account for the number of low-wage workers who might lose employer-sponsored insurance when employers are no longer bound by the nondiscrimination rules, nor do they capture the impact of breaking up existing risk pools."

Ben Porritt, a spokesman for the McCain campaign, rejected the study's findings, calling it "a blatant attempt to pick and choose certain policies to meet a preconceived and biased notion.

"The McCain plan will offset rising insurance costs with a $5,000 tax credit while giving families their choice of coverage, including the opportunity to keep their employer coverage," Porritt said.

The proposal from Obama, D-Ill., is a mix of private and public coverage. It seeks to reduce the number of uninsured by imposing a mandate for employers to offer health insurance to their workers, or else pay a payroll tax that would help fund a new public program.

The mandate on employers is "a political expedient that conceals who actually pays for the required benefit," said authors Joseph Antos of the American Enterprise Institute, Gail Wilensky of Project Hope and Hanns Kuttner, formerly of the University of Michigan. Wilensky also is a volunteer McCain campaign adviser, according to a press release from Project Hope, which publishes Health Affairs.

"The play-or-pay mandate, which is meant to help workers who do not have insurance gain coverage, could instead undermine their chances for economic success," the authors said.

In addition, Obama's plan could cost approximately $100 billion annually, they said. The estimate is based on cost projections of a proposal released by The Commonwealth Fund that shares certain features with Obama's plan, including a mandate for employer-sponsored insurance.

Neera Tanden, domestic policy director for the Obama campaign, said the plan would only result in $50 billion to $65 billion in net new costs to the government.

She dismissed the study's findings, saying, "The Health Affairs study is an analysis of a plan that is not Sen. Obama's."

The Commonwealth Fund plan used in the study, she noted, "has an individual mandate and a premium cap, which increases the cost of the plan. Our plan is fiscally responsible, will not add to the deficit and lowers health costs for American families by $2,500."

Tanden added, "Under Sen. Obama's plan, the pay-or-play applies to large businesses, the majority of whom already provide coverage, and who recognize the need for shared responsibility, where everyone has a role to play to fix our broken system."

Separately on Tuesday, Commonwealth Fund President Karen Davis said the Obama health plan differs from the fund's plan in other ways. For example, she said, the Obama plan does not require adults to have insurance and it has not specified the level of income-related premium subsidies or income eligibility levels for Medicaid and the State Children's Health Insurance Program.

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