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Below is a side-by-side comparison of the views of Senators John McCain (R-AZ) and Barack Obama (D-IL) on various issues. Of course, whichever candidate wins the presidency (and theodds favor Obama), Congress will still have its imprint on any legislation that makes its waythrough the process. Sometimes those views will differ from the president’s, especially if thewinner is McCain and Democrats maintain control of Congress.

McCain Obama

Taxes

Capital GainsKeep the current rate on capital gains, 15%. Supports increasing the capital gains tax rate (to25%-28% compared to 20% if the Bush tax cutssimply expired).

Taxes

DividendsKeep the current rate on dividends, 15%. Would increase the tax rate on dividends forthose in the restored 36% and 39.6 % taxbrackets, presumably at 25%. Dividendsreceived by those in lower tax brackets wouldcontinue to be taxed at 15%.

Taxes

Marginal RatesKeep current marginal rates. Would raise the tax rates of the two highestbrackets to 36% and 39.6%.

Taxes

Payroll TaxesKeep current rates. Proposes to apply the Social Security tax toincome exceeding $250,000. At present, this6.2% tax (matched by employer) only applies toearnings up to $102,000 (2008). No tax wouldapply to income between these levels.

Taxes

Corporate TaxRateFavors cutting the corporate tax rate from35% to 25%.Proposes broadening the corporate incometax base to raise $30 billion per year.Opposes taxing “carried interest” at marginalrates.

Supports a permanent tax credit equal to10% of wages spent on R&D.

Wants publicly traded financial partnerships topay the corporate income tax.Wants to codify the economic substancedoctrine (requiring that transactions qualifyingfor tax benefits have economic justificationbeyond those benefits).

Supports taxing “carried interest” at marginalrates.Make permanent the R&D tax credit.

Taxes

Estate TaxMake permanent the estate tax, with $5million exemption and 15% rate.Make permanent the estate tax, with $3.5million exemption and 45% rate.

Taxes

SimplificationCreate optional alternative tax with two ratesand larger standard deduction andexemptions. Could be negative news for

H&R Block

(HRB-$25) and

JacksonHewitt

(JTX-$16).

Provide taxpayers with simple returns theoption of pre-filled tax forms to verify and sign.Proposes elimination of income tax for retireesmaking less than $50,000 a year. Could benegative news for

H&R Block

and

JacksonHewitt

Taxes

Misc.Favors doubling the personal exemption foreach dependent from $3,500 to $7,000.Proposes a universal mortgage interest credit of 10% for homeowners who make under $50,000a year.

Joe Lieber,

202/756-7704

August 13, 2008

McCain and Obama on the Issues

NALYSIS

ASHINGTON

Election Update

Washington Analysis

August 13, 2008

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McCain Obama

Healthcare:

UniversalCoverage

Does

not

support universal coverage as aneed. Rather, supports greater coverage viatax incentives for individuals to purchasehealth insurance; removal of favorable taxtreatment given to employee-sponsoredplans; association health plans; statederegulation of insurance markets; ability of insurance plans to be purchased across statelines and multi-year products; tort reform;and portability of coverage. For thoseindividuals that can’t buy private insurancedue to illness and/or pre-existing condition,allowance to buy insurance through high-risk pool.He specifically mentions that thegovernment should encourage greater accessto walk-in clinics in retail outlets[

Walgreens

(WAG-$37),

CVS-Caremark

(CVS-$38),

Wal-Mart

(WMT-$59)].

Positive for

managed care space

sincepolicies encourage more purchases of coverage without strings attached.Continued interest in encouraging

healthsavings accounts.

Any expansion of coverage would benefit

providers,

particularly

hospitals

byreducing their bad debt despite the lowerpayment for uncompensated care; and

clinical labs and lab test makers

. Alsowould lead to greater usage of

medicaldevices

and

drugs

, even though volumesmight be offset by deeper discounts on priceor reimbursement.Supports universal coverage but

would requireonly children to have coverage.

Aims foruniversal coverage by 1) allowing individual tokeep current plans; 2) creating “National HealthInsurance Exchange” where private plans canbe purchased; 3) creating public plan thatuninsured can buy; 4) incentivizing employersto provide coverage; and 5) expanding SCHIPand Medicaid. Requires employers to provideinsurance or contribute part of payroll to cost of coverage.

Supports state reform of insurancemarkets but can’t conflict with federal law.Managed care faces negative headline risk butthose that are better insulated from headlinerisk include diversified insurers or those withsmall Medicare biz [i.e.

Aetna

(AET-$44),

Cigna

(CI-$42),

WellPoint

(WLP-$56),

UnitedHealth

(UNH-$31)] and MedicaidHMOs [i.e.

Amerigroup

(AGP-$26),

Centene

(CNC-$23),

Molina

(MOH-$32)]. In fact, wethink expansion of coverage would be

neutral if not slightly positive

to the above names dueto greater enrollment offset by mandatedcoverage, limits on use of premium dollars, andguaranteed issue on a renewable basis.Any expansion of coverage would benefit

providers,

particularly

hospitals

by reducingtheir bad debt despite the lower payment foruncompensated care; and

clinical labs and labtest makers

. Also would lead to greater usageof

medical devices

and

drugs

, even thoughvolumes might be offset by deeper discounts onprice or reimbursement.

Healthcare:

Federal Limitson Premiums andthe Use of Premium Dollarsin Managed CarePlans

Does not support any limits. Supports forcing insurers to pay a “reasonableshare” of premiums on patient care in marketslacking in competition, but does not define“reasonable.” Requires insurers to disclosepremium percentage for patient care and to justify above-average premium hikes. Requirespreventive services, mental health, and diseasemanagement.

Healthcare:

TaxIncentives toPurchase HealthInsurance

Supports tax credit to buy insurance, withany excess to be deposited into HSAs; andsupports reform of the tax code to eliminatebias favoring employee-sponsored healthinsurance. No premium subsidy to employerfor employee coverage. Would require statesgetting Medicaid to create financial “risk adjustment” bonus for high-cost & low-income as a supplement.Supports income-based federal subsidies thatcan be used to buy into public plan or privatehealth care plan. Supports reimbursingemployer plans for percentage of catastrophiccosts as long as savings are used to decreasepremiums. [

Not clear if reimbursements or subsidies are through tax code

Washington Analysis

August 13, 2008

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McCain Obama

Healthcare:

Medicare &MedicareAdvantage

(MA)

Unlikely to support MA changes. Has calledMedicare a “fiscal train wreck.” Supportsindexing Part D premiums.Positive for Medicare Advantage plans[

Humana

(HUM-$50),

Coventry

(CVH-$38),

WellCare

(WCG-$42),

UniversalAmerican

(UAM-$13),

HealthNet

(HNT-$28). But negative for

hospitals, nursinghomes, home health agencies

oxygensuppliers

, and other providers, which wouldbe at risk for smaller reimbursementincreases or freezes.Supports cutting Medicare Advantage planpayments to parity with fee-for-serviceamounts.Negative for

Medicare Advantage

names.Less risk of smaller increases or freezes for

hospitals, nursing homes, home healthagencies, oxygen suppliers

and other

providers

Healthcare:

DirectNegotiation of Medicare Part DDrug Prices

In the past, supported allowing directnegotiation, but not requiring it. He has nottalked about it as part of healthcare platform.Negative risk for

pharma

and

biotechmakers

and

pharmacy benefit managers(PBMs)

. Much depends on bill and CMSregs. Also puts long-term pressure on drugpricing in commercial insurance space.Potentially positive for

generics

due togreater volumes despite lower rates.Supports direct negotiation of Medicare drugbenefit prices but doesn’t requiring it.Negative risk for

pharma

and

biotech makers

and

pharmacy benefit managers (PBMs)

.Much depends on bill and CMS regs. Also putslong-term pressure on drug pricing incommercial insurance space. Potentiallypositive for

generics

due to greater volumesdespite lower reimbursements.

Healthcare:

Drug Reimports

Supports reimportation

drugs are safe andprices lower outside U.S.Supports reimportation

drugs are safe andprices lower outside U.S.

Healthcare:

Follow-onBiologics(FOBs)

Supports faster introduction of generics andbiologics. Positive for

Teva

(TEVA-$46),

Novartis

(NVS-$57),

Barr

(BRL-$67), and

Momenta

(MNTA-$17),

which woulddevelop FOBs; however, we suspect that hewould push for biotech to get long marketingexclusivity periods.Supports pathway for FOBs, which would be apositive for

Teva

Novartis

Barr

, and

Momenta

. Separately, supports the use of generics and prohibits tactics (reverse patentdrug settlements) to prevent generics fromcoming to market. Mixed for

generics

andnegative for

brand-name pharma.

Energy:

Climate Change

Supports a 60% reduction in greenhouse gas(GHG) emissions by 2050 through a cap andtrade mechanism. The plan also calls for theU.S. to reduce GHG emissions to 1990levels by 2020.Negative for

Arch

(ACI-$46),

Consol

(CNX-$61),

Foundation

(FCL-$54),

Peabody

(BTU-$54) and

Massey

(MEE-$57).Supports an 80% reduction in greenhouse gases(GHG) by 2050 through a cap and trademechanism. The plan also calls for the U.S. toreduce GHG emissions to 1990 levels by 2020.Negative for

Arch

Consol

Foundation

Peabody

and

Massey

Energy:

Biofuels

Opposes ethanol subsidies and wants to liftthe tariff on foreign ethanol. Negative for

Archer Daniels Midland

(ADM-$27),

Aventine