Presidential candidates John McCain and Barack Obama are offering ambitious, comprehensive and expensive health care reform plans. Both would greatly expand health insurance coverage for millions of Americans.

Examining the key elements of these two competing plans, one can discern clearly two very different visions of America’s health care future. They are polar opposites. The Obama health plan would centralize power over health care financing and delivery in Washington. The McCain health plan would decentralize control over health care financing and decision-making among individuals and families, while retaining authority in the states. This is not a judgment; it is a fact.

The Obama plan is comprehensive in scope, but sparse in detail. He proposes four major steps to expand coverage:

  1. The creation of a new national health plan (a government health plan) that would enroll those who do not have employer based coverage or who are ineligible for existing government health programs, such as Medicaid and SCHIP
  2. The creation of a national health insurance exchange, which would serve as a regulatory “watchdog” to enforce federal rules and standards on both the new federal health plan and those private health plans permitted to compete with the new government health plan.
  3. An employer mandate, whereby employers either offer a government-approved health benefits package of unspecified value or pay a new federal tax of an unspecified amount, which would finance coverage in the new government plan.
  4. An expansion, again unspecified, of existing government health programs, particularly Medicaid and SCHIP, along with new regulatory initiatives governing the delivery of medical care by physicians and other medical professionals.

Independent analysts expect that Obama’s creation of a new national health plan within a federally run “health insurance exchange” would lead to a rapid erosion of private coverage in general and employer-based coverage in particular. The Lewin Group, a prominent econometrics firm based in Virginia, estimates that the Obama plan would result in a net reduction of the uninsured by 26.6 million. But the composition of American insurance coverage would change. 22.5 million Americans would lose their employer based coverage, according to the Lewin analysis, and an estimated 48.3 million more Americans, including those who lost employer-based coverage, would be enrolled in government health care programs.

The McCain plan is also comprehensive in scope, and likewise lacks some critical details. He proposes three major steps to expand coverage:

  1. The replacement of existing federal tax breaks for employment-based health insurance (specifically, the employees’ tax exclusion, not the employer’s deduction) with a universal health care tax credit worth $5,000 for a family and $2,500 for an individual, annually indexed for inflation.
  2. The creation of a national market for health insurance (quite unlike Obama’s national health insurance exchange), where individuals and families could buy state-regulated health insurance plans anywhere in the country, not just in the state where they happen to live.
  3. A “guaranteed assistance program,” whereby federal authorities would financially assist state officials in providing affordable insurance coverage for the estimated 2 million to 5 million Americans who are “uninsurable” or hard to insure because of medical conditions. This would be accomplished through state-based high risk pools or similar mechanisms. Like Obama, McCain would also promote changes in the delivery of medical care to secure greater value for health care dollars.

Independent analysts generally see McCain’s proposal as a bold and innovative change in health care financing. Powered by a universal health care tax credit, the tax policy change would result in a rapid expansion in private health insurance coverage and a decrease in dependency on government programs. While some critics imply that McCain’s proposal to tax health benefits to finance the tax credit amounts to a tax increase, the indisputable truth is that it is a major tax cut, particularly for the middle class. Urban Institute analysts, for example, estimate that the typical family would come out roughly $1,200 ahead annually. The Lewin Group estimates that the McCain plan would result in a net reduction of the uninsured by 21.1 million. Likewise, the composition of American insurance coverage would change. An estimated 26.5 million persons would gain private insurance coverage, according to the Lewin Group, and 5.4 million Americans currently on Medicaid would secure private health insurance coverage.