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President Bush and John Kerry are at odds over whether company-based group insurance plans should be bolstered, or whether people should be encouraged to buy insurance on their own.
updated 9/28/2004 3:41:20 PM ET 2004-09-28T19:41:20

With soaring insurance costs squeezing workers and employers, voters’ choices this November may well be swayed by an issue that has great personal significance to Americans and their pocketbooks: health care.

Polls indicate the public's concern over the rising cost of health care premiums and prescription drugs is growing, and recent data show the ranks of the uninsured in the United States have swelled to nearly 45 million people.

What’s more, employer-sponsored insurance premiums have jumped 11.2 percent this year, the fourth straight year of double-digit growth, according to the Kaiser Family Foundation, leading some companies to stop offering health benefits to their workers.

“Health care is one of the top three concerns Americans have, but it’s a boring and complicated problem, and that’s the reason why it hasn’t really been a major issue in the campaign so far,” said Howard Berliner, a health policy professor at the New School University in New York City.

Berliner says the growing number of uninsured is destabilizing the health care system. “And no one knows how many uninsured will topple the whole system,” he adds. “From a health care perspective, that’s the issue that’s going unaddressed.”

The Bush plan
President Bush and Sen. John Kerry have deeply contrasting philosophies on how to structure the U.S. health care system. The main divider is the issue of whether company-based group insurance plans should be bolstered, or whether people should be encouraged to buy insurance on their own.

Bush's plan includes the recently enacted Medicare prescription drug benefit, a program to subsidize seniors' drug purchases. It will take effect in 2006 and is estimated to cost $564 billion over 10 years.

Bush also builds his initiative around a plan to allow individuals to buy their own health plans. His focus is Health Savings Accounts, or HSAs, which give participants tax breaks on money put aside for medical expenses. Bush would also offer tax credits to people who don’t receive health insurance through work.

The Kerry plan
Kerry’s plan is much more ambitious, and more expensive. He proposes expanding the existing health system, in which the vast majority of Americans receive insurance through their employers, or through government programs like Medicare or Medicaid.

He proposes allowing businesses access to the congressional health plan and says the government should shoulder the cost of the most expensive medical cases, potentially alleviating the weight of rising premiums that have led many companies to drop health care coverage.

While the Bush camp estimates its plan would deliver health insurance to 10 million, Kerry estimates his plan would extend it to 26.7 million Americans and cost $653 billion over 10 years. Both also seek to limit medical malpractice lawsuits, which some analysts say is a main cause of high health care costs.

From a financial perspective, both Bush and Kerry's plans have drawn criticism. The Bush administration says the Kerry proposal would simply patch up the existing health care system and bog it down in government controls, while opponents of Bush’s plan say tax-favored savings accounts will cover only a small fraction of the uninsured.

Experts see problems with both plans
Health care experts like Jacqueline Zinn, a professor of risk insurance and health care management at Temple University in Philadelphia, say no plan is likely to solve the bigger problems facing the U.S. health care industry.

Zinn estimates that Bush’s tax credit plan will help only about 5 percent of the uninsured because his proposed tax credits fall short of the amount needed to support a family for a year. In terms of dealing with the problem of the uninsured, the Kerry plan offers a bigger bang for the buck, said Zinn. “The problem I have with the Kerry plan is health care premiums are so high — they are going up at about 10 to 15 percent a year — a plan that reduces premiums by 10 percent may not be enough to get companies to offer health insurance,” she said.

Soaring insurance costs are especially difficult for small businesses. Bush and Kerry are offering tax credits and other incentives to corporations for maintaining health insurance, but these incentives may not be enough to entice smaller companies to do the same, according to Linda Bergthold, a senior consultant at employee benefits consultancy Watson Wyatt Worldwide.

HSAs could help — and hurt
“The problem is even with a tax credit, health care coverage is still adding to the cost of doing business, and so unless a company is having trouble attracting workers, why would they offer it? It all depends on labor market conditions,” Bergthold said.

HSAs also may have unintended consequences, said Zinn. Bush’s HSAs are a windfall for those who can afford them, and they may attract healthy individuals. But they may also mean that sicker employees who pay more for health care are left behind in a company insurance pool with rising premiums, she said.

“The result might be that a company may decide it can’t afford to offer health care any more,” said Zinn. “I’m not saying this is going to happen, but you can see how things like this could occur. The healthier and wealthier will prefer a higher paycheck, but insurance is based on risk pooling, where the healthier subsidize the sicker.”

The main criticism leveled at Kerry’s ambitious plan is its cost. Former Clinton administration economist Ken Thorpe has estimated the cost of Kerry's health care program to be $650 billion over a decade, and Kerry has proposed footing the bill by rolling back Bush’s income tax cuts for individuals who earn more than $200,000.

“It remains an open question as to whether the numbers will work, but I think he could get close,” said Leif Wellington Haase, a health expert at the Century Foundation, a public policy research group. But Haase adds that reducing the now sizeable annual budget deficit at the same time will be tricky.

Conservative view on Kerry's plan
Joseph Antos, health economist at the conservative American Enterprise Institute, thinks the costs of Kerry’s plan are greatly underestimated.

Antos says the plan assumes cost savings from disease management — the practice of coordinating resources across the health care system — and the growing use of technology in medicine. If Kerry’s policies were to work, he said, they would mean an increase in federal spending of $1.5 trillion between 2006 and 2015. Over the same period, the Bush health care plan would cost $128.6 billion, he estimates.

“The nub for me is with the Kerry plan we are putting more money into a system that hasn’t worked,” said Antos.

Antos says Bush’s health savings accounts are far from perfect but a step in the right direction because they may give consumers a better sense of the cost of health care, which may in turn make them more health-conscious.

Kerry's prescription for drugs
On the issue of soaring drug costs, some on Wall Street are worried about the potential effect of Kerry's platform on prescriptions drugs.

Kerry's plan includes a number of proposals to cut the cost of prescription drugs, including allowing the reimportation of medicine from outside the United States, something Bush has opposed. Kerry also advocates changing the Medicare law to allow the government to negotiate drug prices directly, and lowering certain barriers to generic drug competition.

“If the United States were to do what Europe does and set fixed prices it would definitely not be good news for drug companies,” said Berliner, of the New School. “But it’s also important to note that they are used to providing discounts to insured Americans.”

The Associated Press contributed to this report.

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