NCPA - National Center for Policy Analysis


July 24, 2008

Sen. Barack Obama (D-Ill.) has repeatedly vowed that he will lower the country's health care costs enough to "bring down premiums by $2,500 for the typical family."  Whether Obama can deliver is a matter of considerable dispute among health analysts and economists, says the New York Times.

A number of health policy experts have questioned whether the $2,500 projection is either fiscally or politically realistic, says the Times.  Reducing health care costs, the experts emphasized, means taking money from someone's pocket and rationing care that Americans have come to expect, a recipe for stiff resistance.

According to Obama's health plan:

  • He wants to cover the country's 47 million uninsured by requiring insurers to accept all comers, regardless of their health status, and by providing generous tax credits to low-income workers.
  • The tax credits could be used to buy into a new federal health plan or private plans marketed through a government exchange.
  • The subsidies are expensive, estimated at well over $100 billion.
  • Other components of the Obama plan also bear up-front costs, like a pledge to spend $50 billion over five years to speed the computerization of health records, $6 billion a year on tax credits to small businesses that provide coverage to workers, and an unspecified amount to buffer businesses from high-cost insurance claims.

The source Obama has identified to pay for his plan -- the repeal of President Bush's tax cuts for those making more than $250,000 -- would cover only about half, says the Times. 

The dollar values Obama has attached to individual components of his plan are also beginning to attract scrutiny:

  • The Congressional Budget Office issued a report in May questioning the amount to be saved from the computerization of health systems.
  • The Commonwealth Fund published a study projecting that a robust overhaul consisting of 15 broad initiatives would generate savings of only 6 percent after 10 years.

Source: Kevin Sack, "Health Plan from Obama Spurs Debate," New York Times, July 23, 2008.

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