Got Insurance?

Barack Obama and John McCain have put forth radical—and radically different—proposals to change the way Americans do, or don't, get health insurance. Is it really possible to make sure everyone's covered? Are the candidates even trying for that? And what lessons can we learn from Massachusetts, which has embarked on its own experiment with universal health care? NEWSWEEK's Mary Carmichael spoke with Katherine Swartz, a professor of health policy and economics at Harvard who studies insurance and recently published an in-depth analysis of the McCain plan:

CARMICHAEL: McCain wants to take away the tax break workers get on health insurance at their jobs, and instead give people who buy their own insurance $2,500 in tax credits. Families would get $5,000. What do you make of this idea?
SWARTZ: The positive part is that it would reduce favoritism in the tax system. If you're unemployed, or if you're with a small employer who doesn't provide health insurance, you don't get any special treatment [taxwise] on insurance now. The bad part is that the tax credit could make it harder for low-income people to get insured. In the current system, a lot of low-income people with jobs are getting insurance they could never afford on their own.

The credit is supposed to help.
But you have to purchase health insurance to get the tax credit, and low-income people still may not be able to do that. For a family, insurance premiums in the nongroup markets are typically above $700 a month, and that's with a deductible of at least $5,000. We're talking $8,400 a year in premium payments, but the tax credit is only for $5,000. You still have to pay $3,400, plus the deductible, before the insurance covers medical expenses. Also, the type of coverage on the individual market typically does not cover as many services as group policies. If you buy your own policy, when you get sick, you are going to pay more out of pocket.

Can you explain McCain's plan to help out people with previously existing conditions by expanding "high-risk pools"?
We've had state-sponsored high-risk pools for several decades, but they cover fewer than 200,000 people. They were set up so insurance companies could essentially cede people who they predicted would have very high health-care costs. At one point McCain said he would subsidize high-risk pools with between $7 billion and $10 billion a year. That would cover maybe 3 million people, which is not much of a dent in the 47 million people without insurance now.

How many people would be insured under McCain ' s proposals, compared to today?
My colleagues and I have predicted that around 21 million people in the first year would lose access to health insurance because their employers would stop offering it. About 21 million higher-income people would take the tax credits and buy their own insurance. So it would be a wash in the first year. We worry that within five years, more employers would stop offering insurance, and we'd end up with more people uninsured than there are now.

Now let ' s look at Obama ' s plan. What exactly is an insurance exchange?
The one he's proposing looks a lot like the Health Connector we have in Massachusetts. It acts as a clearinghouse where people can buy insurance policies that are essentially given the Good Housekeeping Seal of Approval by the state. In the Obama plan, there's a minimum set of benefits every plan has to offer, and if your income is below some threshold yet to be specified, you would get a subsidy. Small businesses could also use this exchange to provide health insurance. This has worked very well in Massachusetts.

And his national health plan?
It's basically one more choice offered in the exchange. It sets a floor for what kinds of services the other plans would have to offer. Here's where we have to start thinking about the total cost. If the national plan is quite generous in terms of services covered, the proposal's cost will be more than the campaign is estimating.

In Massachusetts, costs have already gotten out of control.
Costs are higher than expected, but that's partly because the original projections underestimated the number of uninsured people who were eligible for subsidies. It's also partly because health-care costs are rising—and that's the case everywhere.

Obama would also require insurers to cover people with pre-existing conditions. Wouldn ' t insurers raise premiums?
Yes, premiums may be higher. I think people need to consider the alternative—if patients are closed off from coverage, they still go to the ER, and we all pay for that.

Does the Obama plan actually provide universal coverage?
No. It requires that children be covered, but there's no mandate for other individuals. Some adults would continue to be uninsured—roughly 6 percent of the nonelderly, compared with 17 percent now, so many more people would have insurance than do now.

Obama ' s plan is very ambitious. How on earth can we pay for it?
Given the federal deficit, that's a problem for both plans. McCain's plan is not cheap either. I think it will be hard for either candidate to do much in the next few years.