Kerry Plan Could Cut Insurance Premiums

The cost-shift charge prompted an irate response from Kerry, who called it "a completely bogus, completely illegitimate, false argument." Such criticism, he said, does not account for the likely efficiencies of scale and more efficient administration of a federal reinsurance pool. Nor does it factor in his other ideas for controlling spiraling costs, such as electronic medical records and disease management, which relies on early intervention for chronic illnesses.

Emory University health economist Kenneth E. Thorpe estimates the reinsurance program would save businesses and employees $288 billion in premiums over a decade but cost the government $257 billion because of administrative reductions. His computer model projects the catastrophic proposal alone would result in 3 million of the 44 million uninsured Americans getting coverage.

Hubbard and two colleagues calculate that for each percentage-point rise in the price of health insurance, the number of uninsured increases by 300,000.

Still, the Kerry team concedes it has chosen how to use tax dollars, opting to "provide relief" to workers and businesses that buy health insurance rather than giving the wealthy larger tax cuts, said domestic policy adviser Sarah Bianchi. That decision, Kerry says, would help U.S. companies compete in the global marketplace.

The idea is to "go after the big dollars," said Stuart Altman, a health policy expert at Brandeis University who helped develop the plan. In today's health system, less than half of 1 percent of private insurance claims hit Kerry's $50,000 catastrophic threshold. Yet this small fraction devoured 15 percent of all medical services provided in 2000, according to data collected by the federal Medical Expenditure Panel Survey.

It is not a new concept. Presidents Dwight D. Eisenhower and Richard M. Nixon considered reinsurance pools for the most extreme medical cases. Today, the federal government serves as the ultimate reinsurer for natural disasters and terrorist attacks.

Like Kerry, Bush is attuned to public distress over escalating medical bills. With the backing of the National Federation of Independent Business, he is touting a proposal allowing small firms to form larger insurance pools, known as association health plans.

"Small businesses should be able to band together and negotiate for lower insurance rates, so they can cover more workers with health insurance," Bush said in his State of the Union address.

Doug Badger, the senior health policy aide in the White House, said Kerry's approach would create "perverse incentives on effective disease management" because once the government began covering 75 percent of costs, there would be no financial reason to manage care or costs.

Anticipating that critique, Kerry said he would require employers to pay the remaining 25 percent "so they won't game the billing."

Mindful of the Clinton health care debacle in 1993-94, Kerry said he devised his health package to build on the current system rather than create an entirely new one. "There is no new bureaucracy; this is not a government plan," he said.

Kerry's approach, however, does envision a larger role for government in determining whether employers taking advantage of the catastrophic reinsurance had met the requirements to offer insurance to all workers and implement effective disease management. He has said he wants to leave the specifics to medical experts and lawmakers, though many corporate and legislative leaders say it is precisely the details that will determine the success of such a change in policy.

In Avon Lake, however, Arth, a self-described libertarian who voted for Bush in 2000, had a different perspective.

"In this environment, it is certainly worth looking at," he said. "Nobody would turn their back on this kind of relief, even if it only lasted a few years."