Massachusetts Health Plan Model

Here are the main points of the Massachusetts Health Plan. Senator Obamas plan is thought to mirror the approach described below.

Legislators say by that by providing every Massachusetts resident with health insurance, the costs of health care are actually lowered. For instance, the way the system works now, employers who offer insurance also have to pick up part of the tab for the cost of care for the uninsured at hospitals. By having more employers provide insurance, and having fewer uninsured people, these costs to employers go down. Analysts also say that adding more healthy people -- who use less care -- into the insurance system keeps deductibles and premiums down for all.

A look at how the bill would affect employers and individuals:

All individuals must have coverage.
-- Those below 300 percent of the federal poverty level (about $38,500 for a family of three), but not eligible for Medicaid, will have their private insurance plans subsidized at a sliding-scale rate. -- Children whose families earn below 300 percent of the federal poverty level (FPL) will be given free coverage through Medicaid.
-- Individuals with incomes below the FPL ($9,600) will have premiums waived on private insurance. (Currently most childless adults are not eligible for coverage under the state's Medicaid plan.) -- Those who can afford insurance will be increasingly penalized for not buying coverage. In the first year, they'll lose their state personal income tax exemption.
-- Family coverage will be extended to cover young adults up to the age of 25.
-- Allows the use of "health savings accounts" with cheaper high-deductible "catastrophic" coverage plans. HSAs allow consumers to invest money and withdraw it "tax free" to cover health-care costs. BusinessesAll employers who have more than 10 employees must contribute to employee health-care costs.
-- Employers who don't provide insurance will pay an annual fee of $295 per full-time employee.
-- Encourages private insurers to offer more low-cost options.
-- Creates a "health insurance connector" to help individuals and businesses find affordable private coverage.

McCain Health Plan And Tax Credit

John McCain's fix for health-care reform is based the logical Republican remedy: competition in the marketplace.

"John McCain is putting the American family in charge," said Douglas Holtz-Eakin, McCain's chief policy adviser, a former director of the Congressional Budget Office and a member of President Bush's Council of Economic Advisers.

"The basic template is to control the cost and growth of health care and to control the outcomes," he said. "It's about competition in the marketplace Let's have them compete on the right grounds -- quality of care."

The foundation of McCain's health-care strategy is his proposal to provide a tax credit of $2,500 for individuals ($5,000 for families) to buy health insurance. His campaign estimates the plan could remove 25 million to 30 million people from the rolls of the uninsured; critics contend the number would be far fewer.

At the same time, McCain proposes removing the favorable tax treatment of employer-sponsored insurance, a move that some people think will cause employers to drop health-care coverage for employees, pushing them into the private market.

"The goal of the McCain plan is to transform health care to center on Americans' choices, while providing access to quality and affordable health care for all Americans," the campaign says. "Families -- not government bureaucrats or insurance companies -- will make the decisions that best reflect their family needs."

Other provisions of the McCain plan would make coverage portable, allow insurance to be purchased across state lines, and permit reimportation of drugs.

McCain's plan is vague about cost savings.
Holtz-Eakin from McCain's campaign said the average out-of-pocket cost for an individual health plan is $5,100. For those who are turned down for insurance, coverage would be available through a fallback "guaranteed-access plan."

McCain would use "the biggest lever available" by reforming Medicare, the federal health-care program for the elderly that sets the standard, in terms of cost and service, for private health-care plans, Holz-Eakin said.

If new standards for Medicare are enacted, all health-care providers, as McCain sees it, would have to become more conscious of the quality of care to compete in a retooled health-care system that pays a single price for a cardiac bypass surgery, not the tidal wave of bills that now deluge patients after such a procedure.

Holtz-Eagin said: "Providers would have an incentive to get their act together, to share records cheaply and quickly, and even to prevent the person from having the bypass if possible. There's no incentive to do anything now.

"This is something that has to happen. We have to get something done in America on health care. None of this should be done overnight. This isn't the kind of thing where you pass a bill and you're done."

Jay Khosla, a McCain health-policy adviser who worked for then-U.S. Senate Majority Leader Bill Frist, R-Tenn., emphasizes the competition aspect. "We need to ensure that drug companies, insurance companies, hospitals and every other aspect of the health-care system compete vigorously.

McCain Obama Health Care Debate

A major beef between John McCain and Barack Obama is their differing health care plans. Both sides say that the other candidates plan leads employers to drop coverage for their employees. Employer sponsored health insurance covers over 170 million American workers.

McCain argues that since Obama would give people the chance to sign up for insurance through a government-run exchange, employers would channel their workers into the exchange. That would mean more Americans subject to government regulations.

Obama meanwhile, argues that the McCain plan would lead employers to drop coverage because he changes the tax treatment of health benefits. No longer would workers be required to get insurance on the job in order to qualify for a tax subsidy.

McCain’s economic adviser Douglas Holtz-Eakin argues that many would stay in employer coverage, partly because of a key policy decision the McCain camp made in designing its plan. In trade for the new, generous tax credit, McCain would subject the value of health benefits to the income tax, meaning workers would have to pay taxes on the value of whatever health insurance employers provide. But neither employers nor workers would have to pay Social Security taxes on those benefits. That’s a change from a very similar plan offered by President Bush last year.
But that decision is not without consequences either. Because McCain would create a new tax break and not completely get rid of the existing tax breaks, his plan would cost $1.3 trillion over 10 years.

By contrast, Obama’s plan would cost $1.6 trillion over 10 years but eventually get insurance to an additional 34 million people.

Illinois Student Health Insurance

Illinois Gov. Rod Blagojevich recently used his executive power to raise the cutoff age for insuring employees’ children to 26. Student health insurance will not be necessary for many young adults.

Starwalt, a Sherman resident and state employee is happy that her daughter, Bridgette, a 20-year-old sophomore at Millikin University, won’t be cut off from Starwalt’s state health plan at age 23 — the current age limit.

Tracy Starwalt said her daughter now won’t have to interrupt her pursuit of a master’s degree in nursing to get a job with health benefits. “It is one more thing not to have to worry about,” Tracy Starwalt said.

Illinois previously had no law requiring dependent health coverage. Many employers offer insurance to dependents through their early or mid-20s, and then only if they are full-time students.

But barring a legal challenge, on June 1, 2009, Illinois will join 20 other states in requiring dependent coverage.

Most of those states passed laws to do this in the past three years, and most of them, like Illinois, require the coverage to be offered regardless of whether a dependent is a student.
Fueling the trend is the fact that young adults are the fastest-growing group of uninsured people in the United States.

These generally healthy “young immortals,” as they are called in the insurance industry, often decide not to buy private insurance after they “age out” of their parents’ insurance plans.
After college, however, recent graduates — and young workers in general — may find that health insurance is not offered at entry-level jobs or may be unaffordable.

Blagojevich set the new mandate in motion when he expanded the scope of House Bill 5285 through an amendatory veto in August. The Illinois House and Senate accepted the governor’s changes later in the month.

Jay Shattuck, executive director of the Illinois Chamber’s Employment Law Council, said the new requirement, which the chamber might challenge in court, is one of many state insurance provisions that are driving up the cost of health insurance for employers. The expansion might prompt employers to charge more for dependent coverage or drop it altogether, he said.
“We believe this will actually reduce coverage because of the cost,” Shattuck said. “Employers should not be obligated to provide insurance coverage to young adults.”

Blue Cross and Blue Shield of Illinois estimates that the law will result in its rates for employee groups rising an average of 1 percent.

But because young adults are relatively cheap to insure, state insurance regulator Michael McRaith estimates the requirement will add only 0.3 percent to the cost of an employer’s health plan.

It’s unclear whether similar mandates have led to significant cost increases in other states.
Governmental and business leaders in New Jersey and Utah, where dependent-coverage requirements have existed for several years, said they haven’t noticed a negative impact on employers.

In New Jersey, a 2005 directive that employers offer dependent coverage through age 29 resulted in 10,000 to 15,000 young adults getting coverage, according to Marshall McKnight, spokesman for the New Jersey Department of Banking and Insurance.

Health Care: To Tax or Not To Tax

Forget the economy, forget Russia, forget even Fannie and Freddie. If you're looking for your first full-time job, or you're between employers, or if you work now for a small company that offers no health plan, your main concern might be how to get health insurance.

Would you prefer a $5,000 tax credit toward buying a family health insurance policy and more competition among insurance providers (McCain), or a national public health care plan and additional regulation of insurance markets (Obama)? Do these plans raise or lower your taxes?
To the extent that voters decide on issues as well as party and personality, how Americans react to these two proposals could affect who wins the election.

Senator McCain's plan would cost less than Senator Obama's and would raise fewer taxes. Yet it is Mr. McCain's plan that is being demonized as a tax increase. In speeches last week in Pennsylvania, Senator Biden, Mr. Obama's choice for vice president, repeatedly said that Mr. McCain's health care plan would amount to a tax increase — without mentioning the new tax credit.

Here's what the two plans would do.
Mr. McCain would give Americans refundable tax credits of $2,500 per individual, $5,000 per family, to buy health insurance. He would pay for this by changing the current tax status of employer-provided insurance, and including employer-paid health premiums in workers' taxable income. The proposed tax credit would wipe out the new tax liability for nearly every worker.

Workers in the 25% tax bracket pay an extra $5,000 in tax on an additional $20,000 of income. So a $5,000 credit would offset the federal tax on employer-paid premiums up to $20,000 — and an average plan only costs $12,000 per year, according to the bipartisan National Coalition on Health Care.

The tax credit would also be available for individuals — employed, self-employed, unemployed — who buy health coverage independently, although not to seniors on Medicare. People with pre-existing conditions who could not get health insurance would be insured through new state Guaranteed Access Plans.

With the tax advantage shifting to individuals from employers, people would not have to worry about losing their insurance when they change jobs — just as they aren't concerned about losing their auto or home insurance.

The tax credit would be "refundable," meaning that it would go to people who don't owe tax. If it exceeded the cost of a plan, the individual would get the difference credited to a Health Savings Account, whose balances could be used to pay for insurance premiums and other health care costs.

The McCain plan would knock down state-line barriers to private health insurance plans and expand Health Savings Accounts. The combination of tax credits, nationwide insurance, and savings accounts would lead to increased competition among insurance companies, potentially driving down premiums.

Some people in upper income tax brackets with generous employer health plans would find that the new tax credit does not offset the tax liability — the extra tax they owe from including employer-paid premiums in their income.

But this would be a relatively small group. Under Senator McCain's plan, families whose marginal tax rate is 40% or less would see a tax decrease. Since the top federal rate is 35%, families would pay 40% only because of state taxes.

Senator Obama would set up a new health insurance plan, similar to the Federal Employees Health Benefits Program. It would be open to all, with "affordable" premiums and co-payments.
In addition, he proposes a new National Health Insurance Exchange to regulate private insurance underwriters by "creating rules and standards for participating insurance plans to ensure fairness and to make individual coverage more affordable and accessible." Those who could not meet the standards would close.

Private insurance plans would have to offer coverage as generous as the public plans, including "preventative, maternity, and mental health care."

In a third Obama provision, some employers who offer health insurance now would have to pay higher premiums in order to raise benefits to the level of the new public plan. Those employers who don't offer health insurance would be required to pay into the new plan. These obligatory payments can be described in one word — taxes.

Mr. Obama estimates the cost of his plan at between $50 billion and $60 billion, including prospective cost-saving ideas, which he plans to pay for through higher income taxes on those making more than $250,000.

This estimate is clearly unrealistic. The insurance program for federal employees is of a higher quality and more costly than typical private-sector coverage. Extending it to allow 300 million Americans to participate would likely cost far more than $60 billion and need additional sources of revenue.

Americans know that health insurance needs to change to be easily accessible and portable, like auto and home insurance. Do we get there through higher taxes and regulation, or by tax incentives and individual choice?


Ms. Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.

Humana Completes Acquisition

Humana has completed the $14 million purchase of MetCare Health Plans a subsidiary of Metropolitan Health Networks, based in West Plam Beach Florida.

Metropolitan is a growing health care organization in Florida, providing comprehensive health care services for Medicare Advantage members and other Florida health insurance customers.

Metcare's AdvantageCare provides Medicare beneficiaries in South and Central Florida with access to comprehensive health care coverage.

The acquisition increases Humana's Medicare Advantage membership by more than 7,000 members.