Kerry Unveils Health-Care Overhaul Plan

Sen. John F. Kerry of Massachusetts on Friday joined the competition among Democratic presidential candidates over health care, releasing a plan that attempts to significantly expand coverage for the uninsured while placing a greater emphasis than his rivals on restraining costs.

“Focusing on coverage without reducing the costs of health care for all Americans is treating the symptoms and ignoring the cause,” Kerry said in a speech here.

To increase coverage, Kerry would rely mostly on a major swap of responsibilities -- with Washington assuming all the cost of insuring the poorest children if states agree to pick up part of the cost for covering millions of working-poor families. Kerry would also provide small businesses tax credits to subsidize half the cost of covering their workers.

In the plan’s most distinctive element, Kerry would commit the federal government to paying most of the bill for patients whose health costs exceed $50,000 a year. Relieving insurance companies from the burden of paying those catastrophic expenses could lower premium costs for others by as much as 10%, Kerry’s campaign has calculated.

With his proposal, Kerry joined Rep. Richard A. Gephardt (D-Mo.) and former Vermont Gov. Howard Dean in offering plans to provide health insurance to almost all of the 41 million Americans without it. Kerry said his plan would cover nearly 96% of adults and virtually all children.

Like Dean and Gephardt, Kerry said he would pay for his plan by repealing major portions of the 2001 tax cut won by President Bush, as well as other reductions Congress is likely to approve soon.

Kerry’s plan is somewhat similar to Dean’s -- which also relies primarily on tax credits for small businesses and a differently structured expansion of public insurance programs.

Gephardt takes a different approach, proposing a generous tax credit that would subsidize employers for most of the cost of insuring their workers. Rep. Dennis J. Kucinich (D-Ohio) has proposed a plan in which government would take over all health-care costs.

In a conference call with reporters Friday, Gephardt said the Kerry and Dean proposals were inadequate because they did not guarantee coverage to enough of the uninsured.

However, independent analyses of the three plans have suggested the difference in coverage wouldn’t be as great as Gephardt implies -- although the disparity in cost is substantial.

Emory University professor Kenneth E. Thorpe, a former Clinton administration official who has analyzed the plans, concluded that Gephardt’s approach would reach roughly 30.4 million of the 41.2 million Americans the Census Bureau says lack health insurance.

Thorpe found that Dean’s plan would also reach about 30 million of the uninsured (a study conducted for Dean’s campaign put the number at almost 31 million), and that Kerry’s would cover 26.7 million.

In an analysis conducted for Gephardt’s campaign, Thorpe found the congressman’s proposal would cost $2.5 trillion over the next decade -- and $371 billion annually by 2013. Thorpe projects that Kerry’s plan over the next decade would cost about $895 billion, and Dean’s tab would reach about $932 billion over the same period.

Gephardt has said his plan costs so much more because it would also stimulate the economy by providing grants to cash-strapped states and tax breaks that employers can use to invest in new facilities or increase wages.

But Kerry, after his speech, argued that his plan was more efficient because he targeted his spending more precisely on the uninsured, while Gephardt proposed to spend more than $100 billion annually increasing the federal tax subsidies to employers who already provide insurance.

Kerry’s plan relies on two principal mechanisms to reduce the number of uninsured. The most important is what he called “a new compact” between Washington and the states.

Today, the states split with the federal government the cost of insuring low-income children under Medicaid. Kerry proposed that Washington assume responsibility for all of the nearly 20 million children, at an annual cost of about $15 billion.

In return, states would have to agree to share with Washington the cost of guaranteeing health insurance through the existing Children’s Health Insurance Program to all children in families earning up to about $55,000 a year and all parents in families earning up to about $37,000 annually. By 2008, Kerry would require them to also share with Washington the cost of insuring single and childless adults earning up to the poverty level of about $9,000 for an individual.

Over the next few years, this swap would save states about $5 billion annually, which Kerry touted as a form of fiscal relief.

Like Dean, Kerry would create a new insurance pool modeled on the plan that provides benefits for federal workers. He would allow large and small businesses to buy into that pool and provide companies with 50 employees or less a tax credit to underwrite half the cost of insuring their workers.

Again like Dean, Kerry would provide expanded tax credits to help subsidize continued coverage for laid-off workers.

The most innovative parts of Kerry’s agenda may be the efforts to hold down costs. Health insurance premiums have skyrocketed in each of the last two years, and most experts agree those rising costs have encouraged more businesses to drop coverage, increasing the number of uninsured.

Kerry said he would attack the problem with measures to restrain the costs of prescription drugs, federal payments to help hospitals save money by modernizing their information systems, and new limits on medical malpractice cases.

Most important, Kerry proposed that Washington create a “reinsurance pool” to remove from health insurance companies the burden of the most expensive cases.

In all, Thorpe estimates Kerry’s plan would cost nearly $145 billion by 2013. Kerry said he would fund his plan by repealing the reductions Congress approved in 2001 in income tax rates for the top two brackets -- and perhaps the top three -- as well as more generous treatment of personal exemptions for the affluent. He’d also reduce the tax break planned for estates.

Peter Orszag, a tax expert at the Brookings Institution, a think tank, said those proposals would save about $80 billion to $90 billion a year by 2013. That wouldn’t be enough to pay for Kerry’s health-care plan, much less the other initiatives he is considering.