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Obama Health Plan Would Leave Employer System Intact


 

With Sen. Barack Obama (D-Ill.) set to become the Democrat's presidential nominee, experts are scrutinizing his health care reform plans.

The centerpiece of Sen. Obama's plan is a public-private system that would allow people to remain in their employer-sponsored health plans while offering the uninsured the chance to purchase either a private or government-sponsored plan.

For the government-sponsored plan, the proposal uses as a model the Federal Employees Health Benefits Program—the system available to federal employees and to Congress. For those who want to purchase insurance on the private market, Sen. Obama proposes a National Health Insurance Exchange. All plans offered through the exchange would be required to offer at least the same coverage as the government-sponsored plan and adhere to the same quality and efficiency standards.

Under the Obama plan, employers that do not offer or contribute to employee health coverage must pay a percentage of their payroll toward the cost of the government health plan. There would be an exemption for some small employers.

The proposal also calls for expanding eligibility for Medicaid and the State Children's Health Insurance Program. The government would offer subsidies to individuals who do not quality for Medicaid or SCHIP but still needed financial assistance to purchase health insurance.

Sen. Obama also would guarantee that no American could be turned down for health insurance because of illness or a preexisting condition. However, his proposal stops short of requiring all Americans to purchase coverage. Instead, the plan mandates coverage for children only.

The other half of Sen. Obama's plan is aimed at reducing premiums and decreasing overall health system costs. Under his plan, the federal government would reimburse employer-sponsored health plans for a portion of the cost of catastrophic health events above a certain threshold. In exchange, the plans would have to use the savings to reduce the cost of premiums.

Cost control also is addressed in the Obama plan, with electronic health records playing a big role. The candidate proposes to spend $10 billion a year for the next 5 years in an effort to encourage widespread adoption of EHRs. The idea is that the investment would reap savings through increased efficiencies since paper records are more costly to store and process than are electronic ones, according to the Obama campaign. The plan also seeks to control costs through greater regulation of insurance companies and by allowing the federal government to negotiate drug prices.

The Obama campaign estimates that the reforms they are proposing would save the average family about $2,500 a year in medical expenses.

But the plan continues to face critics. Grace-Marie Turner, president of the Galen Institute, an organization that favors free-market approaches to health care, said she is concerned that the government-sponsored program would be underpriced and crowd out the private insurance options the same way that Medicare has crowded out private insurance in the over-65 market. “That is not a level playing field,” said Ms. Turner, who also is an adviser to the presidential campaign of Sen. John McCain (R-Ariz.).

Ms. Turner also criticized Sen. Obama's plan to have the federal government take on a portion of the costs of catastrophic health costs in employer-sponsored health plans. This type of approach would require the government to be heavily involved in auditing health care expenditures, she said.

On the left, Dr. Don McCanne, senior health policy fellow with Physicians for a National Health Program, said the plan “falls far, far, short” for continuing to use the private health insurance industry. His organization favors the elimination of private plans.

The concern with providing a government-sponsored plan in competition with private plans is that it would be subjected to adverse selection and the premiums would become unaffordable, Dr. McCanne said. The only way around that would be to provide additional funding through taxes or to have some method of risk pool transfer, in which the private plans with healthier beneficiaries would shift funds to pay for higher risk individuals. But Dr. Jack Lewin, CEO of the American College of Cardiology, said that maintaining the private system is politically smart.

One of the drawbacks of Sen. McCain's plan is that it has the potential to destabilize the existing employer-based coverage system, he said. While it might be a good idea to move away from that system, that should be a gradual process, he said.

Dr. Lewin also praised the Obama plan for starting with coverage for children. However, after the mandate for universal coverage of children, the plan's details are somewhat murky, he said. For example, Sen. Obama's plan commits to improving quality and efficiency in the system but doesn't define how it would be done, he said.

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