Two parties, two remedies for healthcare

If John McCain becomes president, Americans would be steered toward buying individual health insurance policies, and job-related coverage eventually could decline. If Barack Obama or Hillary Rodham Clinton wins, more people would get their insurance from the government -- with many workers offered the equivalent of Medicare and employers facing new coverage mandates.

In the past, voters sometimes have complained that there was little difference between Republicans and Democrats. That’s far from true in the 2008 campaign, at least where healthcare is concerned. On this issue, which many voters rank near the top of their concerns, the two parties offer clear choices.

The Democratic and Republican candidates espouse similar goals: making medical insurance more available and more affordable for more Americans. But their strategies for achieving those goals are fundamentally different. So are the ways in which, over time, the nation’s healthcare system would change.

McCain, for example, says he would give individuals more freedom of choice; critics say he could destabilize the employer-based system that the middle class has relied on for more than half a century.

Clinton and Obama, meanwhile, say their fairly similar strategies would give better and more affordable coverage to more -- eventually all -- people; critics say they would march the country toward socialized medicine.

For the approximately 60% of Americans covered by employer-provided health insurance, none of the plans would bring dramatic changes overnight. But over a period of years, employer-based coverage could decline.

McCain’s way is to de-emphasize job-based insurance and encourage people to choose their own coverage in a yet-to-be-created national marketplace; he would offer tax credits to help them pay for such coverage.

The Democrats’ approach is to shore up the kinds of large pools that traditional insurance programs rely on -- using the premiums of the many who don’t file claims in any given period to pay the claims of the relatively few who do.

They would also put the insurance industry on a tighter regulatory leash.

“The specifics can be sort of mind-bending, but on the very broad choices, McCain emphasizes a vision where individuals get more choices in the marketplace and are less reliant on employers and government,” said Robert Blendon of the Harvard School of Public Health, an expert on public attitudes about healthcare reform.

“The Democrats are emphasizing that people need employers and government to create large pools so that they can get group rates for much less than as individuals.”

He added: “There’s a big debate about which way would you do better.”

On the problem of the 47 million uninsured, Clinton’s plan would have the most dramatic effect, all but eliminating it, said John Sheils, vice president of the Lewin Group, a prominent consulting firm. McCain’s plan would probably cover 20 million or so of the uninsured, he estimated, whereas Obama’s would be somewhere in the middle.

“Clinton’s plan would cover the most people because it’s a mandate,” Sheils said.

She is the only candidate who would require all people to get coverage, through an employer or government plan or on their own.

Ideology is not the only thing that divides the candidates. In a practical sense, they view the problem differently.

For McCain, the main problem is cost: Bring healthcare costs under control, and more people will get coverage. For the Democrats, the main problem is lack of coverage: Unless everybody is in the risk pool, spending can never be brought under control because different players will try to shift the costs of caring for the uninsured to one another.

Some economists think that one of the main reasons U.S. healthcare costs have grown so rapidly is that Americans are not aware of what they spend on healthcare. That insight is the starting point for McCain’s plan.

Since many people get healthcare as a tax-free fringe benefit, relatively few are aware of what it actually costs -- about $12,000 a year, on average, for family coverage and $4,500 annually for an individual plan.

Critics also argue that making health insurance tax-free for employees -- that is, not counting the value of the insurance as income for tax purposes -- is unfair because similar benefits are not available to people who are self-employed.

McCain would change that by taking away the tax breaks for employees. But companies could keep deducting their costs to provide employee healthcare as a business expense.

He would give everyone a tax credit of up to $5,000 for families and $2,500 for individuals. Those who earn too little to owe any taxes would still get the credit.

For many self-employed people, that could be a sizable down payment for insurance. But it might only be enough for a bare-bones plan for low-wage workers who don’t get coverage from their employers.

McCain’s credit is “not realistic in terms of the amount,” said Christine Ferguson, a professor at George Washington University and a former senior health policy advisor to Republican lawmakers at the federal and state levels. “McCain would have to step up a little more.”

How McCain’s plan would affect people who have job-based coverage is a matter of dispute. His advisors say the effect would be negligible, since the credit would be enough to wipe out the new tax liability for most employees. But some workers would end up paying higher taxes, especially well-paid ones with comprehensive coverage.

Independent analysts say that over time, McCain’s tax credit would not keep up with healthcare inflation. Younger, healthier workers would be tempted to buy low-cost coverage on their own. That might help squeeze wasteful spending out of the healthcare system, but it could leave employers stuck with older and sicker workers, and those companies might stop providing benefits.

Then everybody would be pitched into an individual market that traditionally has been unforgiving for people with health problems. For example, cancer survivors often find they cannot get coverage as individuals or, if they are offered a policy, the price is out of reach.

“McCain is talking about Wild West competition where there are no limits,” said economist Len Nichols, who directs the health policy program at the New America Foundation and served as an advisor in the Clinton White House.

But McCain, who has been treated for melanoma, says he recognizes that there is a flaw when it comes to coverage in today’s individual market, and he would work with states to craft effective protections for people in poor health, such as special risk pools and basic standards for insurers.

And his aides predict that membership organizations such as AARP -- the seniors lobby -- and labor unions and religious denominations would sponsor health insurance, creating new pools and taking the place of employers. Then, they say, workers could switch jobs without fear of losing coverage.

In contrast to McCain, Clinton and Obama would not make any major changes in the tax treatment of healthcare benefits.

Instead, they would concentrate on closing gaps in the insurance system. Both envision a shared responsibility among employers, individuals and government -- although the public role would become markedly stronger.

The federal government would provide a new insurance option -- a public plan that middle-income workers could join -- as well as boost funding for a program that insures children in low-income working families.

Washington would work with the states to set up insurance purchasing pools through which individuals and employers could buy private plans that agree to operate under new pricing and coverage rules.

Critics fault the Democratic plans over the increased role for government -- and also their cost.

Clinton’s plan would cost $110 billion a year, Obama’s between $50 billion and $65 billion. And critics say the Democrats may be lowballing their cost estimates and lack a viable long-term financial base.

“They sort of see a traditional model continuing, even though, in my view, it’s a broken model,” said Stuart Butler, a prominent health policy expert with the conservative Heritage Foundation.

In any event, Butler said, whoever is elected in November will have to move carefully.

“Americans have shown over and over again that they are nervous about big changes in healthcare,” he said. “They want it to be gradual.”

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ricardo.alonso-zaldivar@latimes.com