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What do we know about Obama's Health Care Plan

Cornerstone Principles

Obama's health care reform plan has many goals, but chief among them are driving downthe cost of health care and expanding coverage. To achieve both, Obama has proposedexpanding Medicaid eligibility to cover low-income adults while also creating a NationalHealth Insurance Exchange through which the uninsured could purchase a policy with a

minimum threshold of benefits.

Successful health care reform eluded both Presidents Bill Clinton and George W. Bush. Itcould be argued that one tried a bit harder at it than the other, but there's little questionthat the issue will command a significant amount of Barack Obama's attention after he'ssworn into office--in large part because the people who elected him care so much aboutit.

Though 62% of voters ranked the economy as their chief concern, according to exit pollsconducted Tuesday by the Associated Press and major television networks, 9% of voterslisted health care as a primary concern. That trailed the number of voters worried about

Iraq by only 1% and tied the percentage of those troubled by terrorism.

In Depth: Obama's Health Care Plan

Though some experts don't expect to see major changes until 2010, Obama's proposal hasset the tone for a debate about how to cut rising costs while providing insurance to 45million Americans. While certain elements of Obama's proposal could be modified, at itscore are principles that would change health care delivery and coverage in the U.S.

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"Obama's put out a framework for how he would tackle health care reform," says DianeRowland, executive vice president of the Henry J. Kaiser Family Foundation, a MenloPark, Calif., nonprofit health policy organization. "Now it's up to the policy wonks totake the elements of that framework and put them into a proposal that can get past theU.S. Congress."

The Key Points

The cornerstones of Obama's plan are to expand Medicaid eligibility to include greaternumbers of the uninsured; mandate coverage for children; create a national exchangethrough which the uninsured could purchase a public or private policy; provide subsidiesto lower-income individuals and small businesses to help defray the cost of purchasinginsurance; and, tax medium- to large-size firms that decline to provide their employeeswith health insurance.

Consumers currently with insurance would face no change in their status, unless their

company chooses to stop providing employer-sponsored insurance and insteadcontributes to the national exchange. Small businesses would be exempt from mandatorycoverage or contributions and would receive a tax credit of up to 50% on health carepremiums for employees.

"The Obama plan is actually quite traditional," says John Sheils, senior vice president ofthe Lewin Group, a health care policy research company in Falls Church, Va. It's verysimilar to the proposals made by other Democratic candidates during the primaries.

Sheils, who directed an extensive analysis of both Obama's and McCain's health careproposals, was not impressed by either plan. Both failed to address what he views as the

critical flaw in the current system: incentives to provide health care services andprocedures instead of incentives to keep patients healthy.

Sheils' analysis found that Obama's plan would decrease the number of uninsured by 26.6million beginning in 2010. The estimated federal cost of enacting the plan is $1.17 trillionfrom 2010 through 2019. By 2010, annual spending on health care is expected to reach$2.7 trillion. But Obama's plan is expected to cut spending by $54.1 billion in the nextdecade. The savings are important, but regardless, the price tag is staggering.

What Happens Next

In addition to the cost problem, there are other significant unknowns. Obama has yet toexplain how he intends to finance health care reform or what size of businesses qualifyfor tax credits and which would be taxed. Rowland says many of the specifics will betackled as Obama drafts a budget, which is traditionally presented by new presidents inlate March or early April.

Experts in health care policy have already begun educating U.S. representatives' seniorstaff members through bipartisan briefings and seminars hosted by nonprofit policy

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organizations like the Robert Wood Johnson Foundation and the Alliance for HealthReform.

Rowland says the Clinton administration's experience with health care reform taughtexperts a valuable lesson about trying to deliver fully formed legislation to Congress

(read: It doesn't work). Instead, Rowland expects to see members of Congress, includingprominent Democrats and Republicans like Ted Kennedy, Chuck Rangel, Orrin Hatchand Ron Wyden, present their own plans.

"One of the things [people] should watch is not what Obama leads with but thecongressional reaction and see [who's] going to step up to the plate and have their ownproposals that might be stronger," says Rowland.

Is universal health care possible in America or a pipe dream? Weigh in. Add your

thoughts in the Reader Comments section below.

As members of Congress argue about key principles, they'll also debate the plan'sancillary cost-cutting measures, which include the re-importation of safe drugs from othercountries; the right to negotiate prescription drug prices directly with drug manufacturers;a pay-for-performance incentive plan; and a comprehensive disease-managementprogram.

For some of these programs to be truly effective, Sheils says, Obama may have to addfinancial incentives like under-payment for unnecessarily expensive procedures or lowerco-pays for patients who practice preventative health care.

The negotiations are bound to reveal bitter disagreements between Democrats and

Republicans over the role of the government in providing coverage to the uninsured. Butthere will also be opportunities for compromise as both parties look to modernize healthcare administration and technology.

"I think you should be prepared for the possibility that the plan that they'll come out withwill be very different than what they've described here," Sheils says.

Cost-Controlling Initiatives

Obama's proposal also relies on several initiatives to cut costs. They include the re-

importation of safe drugs from other countries; the right to negotiate prescription drugprices directly with drug manufacturers; a pay-for-performance incentive plan to keeppatients healthy; and a comprehensive disease management program. However, some ofthese initiatives have had mixed results. Last year, the Rand Corp. conducted acomprehensive study and found little evidence that disease management programs savemoney.

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Obama has argued that his health plan will save consumers up to $2,500 per year inmedical costs. The Lewin report estimated that all families would spend less on healthcare each year under Obama's plan, but the figures differ depending on income. Forfamilies making more than $150,000 a year, the savings would be $847. Those making$50,000 to $75,000 would see a savings of $483.

Potential Obstacles

President-elect Obama will likely face many obstacles inpassing health care reform. There will be a contentiousdebate over ideological differences, but more practically,Obama will have to lay out how he intends to pay for theplan. Neither candidates put forth a concrete spendingplan during the campaign, but this will be even harder todo as the country grapples with mounting deficits.

Goldman Sachs

Goldman Sachs is Barack Obama's top donor, withcontributions totaling $740,000. Goldman is alsoJohn McCain's fourth-largest donor, coming up with$220,000.

JPMorgan Chase

The House of Dimon is poised to emerge as dominantafter the credit crisis, and it's betting on an Obama winwith $475,000 donated to him, versus $200,000 for

McCain.

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Google

Maybe Google can get back to its post-IPO highs if

Obama wins. Google has given $487,000 to Obama.

Merrill Lynch

With donations totaling $350,000, Merrill Lynch isMcCain's biggest supporter. Because of the financial

crisis, that makes Bank of America McCain's largestcampaign supporter.

Morgan Stanley

A McCain win should boost prospects for MorganStanley, McCain's third-largest backer with donations of

a quarter million dollars. Can a come-from-behindMcCain win overcome the dilutive effect of MorganStanley's $9 billion deal with Japan's Mitsubishi UFJ?

AT&T

AT&T likes McCain and has delivered him $180,000 incontributions. Both candidates supported AT&T byvoting for telecom immunity when the FISA laws wererevised this summer. But telecom companies arealways worried about regulation. A McCain presidency just might work out for AT&T, the only telecom tomake either candidate's top 20 list.

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Microsoft

Last time there was a Democratic president, the justicedepartment tried to break up Microsoft into twocompanies. But bygones are bygones. Microsoft goes toObama with $430,000 in donations.

UBSIrony of ironies, UBS goes for Obama with donationstotaling $420,000. Most observers would haveguessed UBS would wind up in the McCain camp,since McCain's economic adviser, Phil Gramm, is asenior vice president and registered lobbyist for theSwiss bank.