An Analysis of Senator Kerry's Health Plan

Abstract

In May 2004, Senator John Kerry (D-MA) proposed a significant expansion of the federal government's role in providing and paying for health care. The goal of the plan is to directly or indirectly provide health coverage for a range of people through a series of new spending proposals and tax credits. This study reviews the key elements of the plan as they have been detailed thus far and discusses the potential impact such a plan would have.

The proposals to expand health coverage in the Kerry health plan would have a total cost exceeding $1.6 trillion over the next ten years, according to two separate, independent analyses. These analyses also estimate that the plan would realize cost savings of between $116 and $415 billion, indicating a net total cost of between $1.2 trillion and $1.5 trillion. The available evidence suggests that the key cost saving provisions in the Kerry health plan are unlikely to cover even one-quarter the expected costs.

The Kerry health plan would effect other changes beyond an increase in federal outlays. First, the plan would greatly increase the role of the federal government as the payer and manager of health care, moving the U.S. closer to a single-payer health care system. Second, as currently crafted, the plan creates enormous liabilities for the federal government in terms of commitments to pay, directly or indirectly, for health care. Third, the plan does not address key drivers of health care costs, such as medical liability or the third-party payer system of financing health care. Finally, the Kerry health plan's expansion of public health insurance would crowd out health coverage currently provided by the private sector.

Keywords: health care, medical liability, reform, federal spending

JEL Classification: I18