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 down
the cost of health care and expanding coverage. To achieve both, Obama has proposed
expanding Medicaid eligibility to cover low-income adults while also creating a National
Health 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. It
could be argued that one tried a bit harder at it than the other, but there's little question
that the issue will command a significant amount of Barack Obama's attention after he's
sworn into office--in large part because the people who elected him care so much about
it.

Though 62% of voters ranked the economy as their chief concern, according to exit polls
conducted Tuesday by the Associated Press and major television networks, 9% of voters
listed 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 has
set the tone for a debate about how to cut rising costs while providing insurance to 45
million Americans. While certain elements of Obama's proposal could be modified, at its
core are principles that would change health care delivery and coverage in the U.S.
"Obama's put out a framework for how he would tackle health care reform," says Diane
Rowland, executive vice president of the Henry J. Kaiser Family Foundation, a Menlo
Park, Calif., nonprofit health policy organization. "Now it's up to the policy wonks to
take the elements of that framework and put them into a proposal that can get past the
U.S. Congress."

The Key Points

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

Consumers currently with insurance would face no change in their status, unless their
company chooses to stop providing employer-sponsored insurance and instead
contributes to the national exchange. Small businesses would be exempt from mandatory
coverage or contributions and would receive a tax credit of up to 50% on health care
premiums for employees.

"The Obama plan is actually quite traditional," says John Sheils, senior vice president of
the Lewin Group, a health care policy research company in Falls Church, Va. It's very
similar 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 care
proposals, 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 and
procedures instead of incentives to keep patients healthy.

Sheils' analysis found that Obama's plan would decrease the number of uninsured by 26.6
million beginning in 2010. The estimated federal cost of enacting the plan is $1.17 trillion
from 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 next
decade. 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 to
explain how he intends to finance health care reform or what size of businesses qualify
for tax credits and which would be taxed. Rowland says many of the specifics will be
tackled as Obama drafts a budget, which is traditionally presented by new presidents in
late March or early April.

Experts in health care policy have already begun educating U.S. representatives' senior
staff members through bipartisan briefings and seminars hosted by nonprofit policy
organizations like the Robert Wood Johnson Foundation and the Alliance for Health
Reform.

Rowland says the Clinton administration's experience with health care reform taught
experts 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, including
prominent Democrats and Republicans like Ted Kennedy, Chuck Rangel, Orrin Hatch
and Ron Wyden, present their own plans.

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

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

For some of these programs to be truly effective, Sheils says, Obama may have to add
financial incentives like under-payment for unnecessarily expensive procedures or lower
co-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. But
there will also be opportunities for compromise as both parties look to modernize health
care administration and technology.

"I think you should be prepared for the possibility that the plan that they'll come out with
will 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 drug
prices directly with drug manufacturers; a pay-for-performance incentive plan to keep
patients healthy; and a comprehensive disease management program. However, some of
these initiatives have had mixed results. Last year, the Rand Corp. conducted a
comprehensive study and found little evidence that disease management programs save
money.
Controversial Ideas
John Sheils, senior vice president of the Lewin Group, a health care policy research firm
in Falls Church, Va., says Obama's plan is actually quite traditional in that it advances
few new or groundbreaking ideas. Sheils says the controversy will happen over ideology-
-those who support privatization and deregulation of health care will find little to like
about Obama's plan.

How It Works
As the proposal currently stands, consumers with insurance would face no change in their
status, unless their company chooses to stop providing employer-sponsored insurance and
instead contributes to the national exchange. The uninsured could apply for expanded
Medicaid eligibility or purchase a policy from the national exchange. Some lower- and
middle-income consumers will receive a premium subsidy to help offset the cost of
purchasing a plan through the exchange.

What It Means for Small Companies

While Obama's plan does give small employers a tax credit to help defray the cost of
health insurance, the proposal does not yet specify which companies will receive the
credit. The credit will cover up to 50% on premiums paid for employee health care. The
Lewin Group has estimated that this tax credit will probably apply to firms with no more
than 25 workers.

What It Means for Midsize to Large

Companies
Under Obama's proposal, medium- to large-size employers must provide a "meaningful
contribution" toward health care coverage for their workers. If they decide not to, the
alternative is paying a not-yet-specified payroll tax that would be spent on the expansion
of government-administered policies. However, the Obama plan has not identified which
medium- to large-size employers would be subject to this rule, or what type of coverage
is required for a "meaningful contribution."

Potential Consumer Savings

Obama has argued that his health plan will save consumers up to $2,500 per year in
medical costs. The Lewin report estimated that all families would spend less on health
care each year under Obama's plan, but the figures differ depending on income. For
families 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 in
passing health care reform. There will be a contentious
debate over ideological differences, but more practically,
Obama will have to lay out how he intends to pay for the
plan. Neither candidates put forth a concrete spending
plan during the campaign, but this will be even harder to
do as the country grapples with mounting deficits.

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

JPMorgan Chase
The House of Dimon is poised to emerge as dominant
after the credit crisis, and it's betting on an Obama win
with $475,000 donated to him, versus $200,000 for
McCain.
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 is
McCain's biggest supporter. Because of the financial
crisis, that makes Bank of America McCain's largest
campaign supporter.

Morgan Stanley
A McCain win should boost prospects for Morgan
Stanley, McCain's third-largest backer with donations of
a quarter million dollars. Can a come-from-behind
McCain win overcome the dilutive effect of Morgan
Stanley's $9 billion deal with Japan's Mitsubishi UFJ?

AT&T
AT&T likes McCain and has delivered him $180,000 in
contributions. Both candidates supported AT&T by
voting for telecom immunity when the FISA laws were
revised this summer. But telecom companies are
always worried about regulation. A McCain presidency
just might work out for AT&T, the only telecom to
make either candidate's top 20 list.
Microsoft
Last time there was a Democratic president, the justice
department tried to break up Microsoft into two
companies. But bygones are bygones. Microsoft goes to
Obama with $430,000 in donations.

UBS
Irony of ironies, UBS goes for Obama with donations
totaling $420,000. Most observers would have
guessed UBS would wind up in the McCain camp,
since McCain's economic adviser, Phil Gramm, is a
senior vice president and registered lobbyist for the
Swiss bank.