Wall Street Journal - April 30, 2008
Laura Meckler, laura.meckler@wsj.com

TAMPA, Fla. -- Sen. John McCain laid out his vision for the U.S. health-care system Tuesday, rejecting universal health insurance and embracing a system with fewer regulations in which consumers shop for coverage on their own rather than get it from an employer.

His plan, parts of which are similar to a failed effort by President Bush last year, embraces a Republican approach to an issue long dominated by Democrats. Sen. McCain aims to introduce more competition into the system, giving people more choice in insurance and the ability to keep it when they change jobs.

"The key to real reform is to restore control over our health-care system to the patients themselves," Sen. McCain, the likely Republican presidential nominee, said Tuesday at the Moffitt Cancer Center and Research Institute. The address offered few details beyond the scant outline Sen. McCain first offered in October.

The plan isn't expected to make a major dent in the number of uninsured Americans, and questions remain about how the plan would help older, sicker people who can't find insurance on the open market.

The McCain health plan contrasts with Democratic plans, which propose spending $110 billion a year toward universal coverage. Both Sens. Hillary Clinton and Barack Obama would set up government-run insurance markets in which private companies and a government-run plan would compete. Democrats also would bar insurance companies from denying care or charging sicker people more, a proposal Sen. McCain rejects.

Sen. McCain dismissed the Democrats' plans as one step toward "a nationalized health-care system."

"They urge universal coverage, with all the tax increases, new mandates and government regulation that come along with that idea," Sen. McCain said. He called their approach a "government monopoly."

The Democrats were just as hostile to his approach. "John McCain is recycling the same failed policies that didn't work when George Bush first proposed them and won't work now," said a spokesman for Sen. Obama. The Service Employees International Union, which backs Sen. Obama, began running a TV ad slamming the McCain plan as well.

Sen. McCain aims to decrease regulation, partly by allowing health insurance to be sold across state lines. That would let insurers bypass regulations they find costly and cumbersome by setting up shop in another state. It would also allow for national competition that would give people more choice, Sen. McCain said.

The most sweeping aspect of his plan would eliminate a tax break on health insurance that only goes to those who get insurance from an employer and replace it with a refundable tax credit for anybody with insurance. The credit would be $2,500 per individual or $5,000 per family, a sum comparable to the existing tax break, and the proposal is intended to be budget neutral.

It is a modified version of a plan President Bush offered last year. That went nowhere in the Democratic-controlled Congress. The approach has been estimated to reduce the number of uninsured in the U.S., now at 47 million, by three to nine million.

The idea is to move people to the individual market, where they would have greater choice of plans and wouldn't have to change insurance companies when they change jobs. Experts believe that large employers in particular are likely to continue offering health benefits, at least at first, while some small- and medium-size employers may drop coverage and give workers the cash they would have spent on health benefits.

That could be problematic for older people and those in poor health, who are routinely denied health insurance on the individual market, or charged very expensive premiums, because insurance companies know they will be costly to care for.

People with problems as modest as acne or allergies are sometimes denied coverage or told that these conditions won't be covered when they try to buy health insurance on their own, said Karen Pollitz, a researcher at Georgetown University Health Policy Institute. She said those with cancer, diabetes, heart disease, HIV, epilepsy and other more serious problems are rejected outright 99% of the time.

Part of Sen. McCain's answer is to create state-run high-risk pools -- a "Guaranteed Access Plan" -- to serve people below a certain income who have expensive health-care needs. Sen. McCain has said little about how this would work or who would qualify. The pools are unlikely to include everyone who meets resistance in the market. Douglas Holtz-Eakin, Sen. McCain's senior policy adviser, said he anticipates they would cost about $7 billion and said the new pools would be modeled after the best state-run pools now in place.

Ms. Pollitz, who worked on health overhaul for the Clinton administration, said the existing pools haven't been effective, partly because the premiums are very high and partly because they don't cover treatments related to the pre-existing condition that made someone ineligible for private insurance in the first place. She added that $7 billion is "not even close" to enough to make this work.

Mr. Holtz-Eakin acknowledged that there will be people who can't get affordable insurance in the existing marketplace and also might not qualify for the pools. But he said over time, insurance companies will adjust their practices to capture this large segment of business. In the meantime, he said, critics are too quick to focus on the potential problems. "Let the plan develop and solve problems when they arise," he said.

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