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What Should Our Next President Do About Health Care Costs?

AARP's Public Policy Institute sponsored a Solutions Forum on June 13, 2008, to look at policy options for dealing with rising health care costs. Julie Rovner of National Public Radio moderated a discussion among John Rother, executive vice president of AARP; David Cutler from Harvard University, an advisor to the Barack Obama campaign; and Tom Miller from the American Enterprise Institute, an advisor to the John McCain campaign.

There is widespread agreement among policymakers and the public that the rise in health care costs is affecting government budgets, business, and families. Both presidential candidates have proposals for slowing the rise in health care costs and getting better value out of the dollars we already spend.

Dr. Cutler estimates that Senator Obama's plan would save the typical American family about $2,500 a year through reduced out-of-pocket expenses associated with better coverage and less unnecessary care, lower premiums that employers face, and savings in public-sector programs. The Obama plan would offer a guaranteed level of benefits that is roughly equivalent to a Medicare plan or the federal health benefits program but would have more medical management.

Mr. Miller made a general criticism of the Obama plan, saying that elements of the proposal-a national plan option and a national health insurance exchange- would encourage people to take up public coverage because it would increase regulatory burdens on private plans and would provide financial incentives for people to enroll in the national plan option. By contrast, the McCain plan would save individuals money by giving them more control over their health care dollars through tax credits that would go directly to them and their families.

Dr. Cutler stated that one of the biggest differences between the candidates is that Obama is willing, in the short term, to put more money into medical care. The funds for that will come from the expiration of the high-income tax cuts. Mr. Miller noted that we have a health care system that costs too much and delivers poor value, so it does not make sense to put more money into it. The only way to really pay for changes to health care is to have an evidence-based approach to reform that squeezes out waste and pays for care that is worthwhile. (6 pages)