What Obama's Health Care Plan Means for You - and What's Next

Successful heath 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.

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.

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.