Senator Kerry's health plan was written in the spring of 2003, long before the first presidential primaries.  It was intended to appeal to Democratic partisans hungering for a big push toward universal health coverage.

However, the Kerry plan mostly avoided the pitfalls of past Democratic health proposals.  The plan wouldn't over-regulate the health system.  It doesn't attempt to guarantee universal coverage on the cheap.

Taken as a whole, the Kerry plan is very expensive.  But three parts of the proposal -- the subsidies for high-cost cases, the small business pools, and the public coverage for below-poverty adults -- would be a relatively inexpensive start.  These provisions would have a particularly high value; they would help correct glaring inefficiencies in the health system.  Moreover, they could be modified to make them less expensive and to build bipartisan support.

For larger expansions of coverage, Kerry at least offers a plausible funding mechanism:  repealing tax cuts for high-income people.  That funding source won't be popular with conservatives, but it is not a gimmick. 

By contrast, past health reform proposals have seemed too good to be true.  Sweeping proposals from both the right and the left assumed we could cover the uninsured virtually pain-free, by restructuring the health sector and redistributing all the money that is already in the system.

Voters intuitively believe these sorts of "restructure-redistribute" reforms might work in theory.  But in practice, they would create losers, and people rarely want to give up health benefits.  The legislative track record of large-scale restructure-redistribute health reforms is nil.

This report outlines the Kerry proposal and offers an interpretation for policymakers.  It emphasizes the areas where bipartisan support would be most likely, and offers some ideas for converting the campaign proposal into a more detailed policy plan.

Lessons Learned from the Clinton Health Plan:  Historically, Democratic health reform proposals failed because they overreached.  

Now, a decade after President Clinton's unsuccessful health reform effort, there is a renewed clamor for large-scale health reforms.

Insurance premiums have soared in recent years, the number of uninsured is growing, and funding is scarce for public-sector insurance programs like Medicaid.

Business and labor groups are stirring, and attention to the health cost and coverage problem is bubbling up to the CEO level.  Small businesses face enormous pressure to maintain coverage for their employees.  Politicians are beginning to take notice.

In past times of crisis, Democrats tended to believe the private health system was broken beyond repair.  Historically, Democratic health reform proposals tilted toward government control, alienating Republicans and thwarting enactment.

Ironically, voters agreed that the health system was in crisis during Clinton's reform effort in 1993 and 1994.  They now recognize that we are approaching a similar crisis in 2004.  When health costs are rising and coverage is slipping, polls often show solid support for sweeping reforms.

But when people are confronted with the details of reform proposals, they have tended to back off.  At a gut level, Americans don't like anything that threatens their current health coverage or their local health providers.

There are two key lessons from the Clinton health reform effort:

First -- Don't mess with the health coverage people already have.  The Clinton plan would have given most people better choices of coverage.  But the architects of the Clinton's new "health alliances" underestimated voters' and businesses' hesitation at being required to do something different.

Second -- Don't mandate much.  The Clinton plan mandated the coverage insurers had to offer and the benefits companies had to provide.  Clinton's health alliances were given the authority to regulate the prices hospitals or doctors could charge.  This was too much government control for the public's comfort.

The Kerry proposal is very ambitious, but it would not dramatically change current coverage.  For the most part, the Kerry plan would improve the health system using incentives, not dictates from Washington.  New regulations would not be overly disruptive.

To be sure, the Kerry plan makes several nods to Democratic orthodoxy.  It contains large expansions of public coverage for near-poor and lower-middle income families, and a politically expedient, populist approach to drug prices. 

Because they are very expensive and politically contentious, Kerry's public program expansions for people above poverty are probably not feasible any time soon.  The drug pricing provisions reflect hot-button political forces that might moderate over time, as cooler heads prevail.

Aside from those orthodox provisions, however, the Kerry proposal has a decidedly centrist appeal.

Interpreting the Kerry Proposal:  Senator Kerry's health proposal is multi-faceted.  To evaluate it, we need to know which parts are likely to be discarded and which are likely to receive serious consideration in Congress.

The main components of Kerry's plan are:

•  federal subsidies for the highest-cost enrollees in health plans, the "premium rebate pool"
•  group health insurance "pooling" under a federal employees-style system
•  tax credits
•  expansions of public sector health programs
•  proposals designed to address health care quality and costs
  

The Kerry proposal would allow businesses and individuals to purchase health insurance via a look-alike version of the Federal Employees Health Benefits (FEHB) program.  Health plans offering coverage through this "Congressional Health Plan" or through employers would get the "premium-rebate" subsidy, designed to reduce their premiums by 10 percent.

Kerry proposes to expand public sector coverage for three groups:  (1) adults under poverty not currently eligible for Medicaid, (2) children up to 300 percent of poverty, and (3) parents of eligible children up to 200 percent of poverty.

There are four tax credits -- for low-income individuals, small businesses, people aged 55-64, and unemployed workers.

Kerry's quality and cost proposals include modest malpractice reforms and several initiatives intended to encourage quality and technology improvements.

Finally, Kerry's plan includes a handful of populist proposals intended to rein in prescription drug costs, including state-based Medicaid prices for the uninsured and "price imports" from Canada or other countries.
 
Policymakers should evaluate this plan from four angles:

1.  Political Follow-Through -- Presuming Kerry is elected, would his administration make a big push to enact and implement his health plan?

2.  Bipartisanship -- Regardless of who wins the election, would various parts of Kerry's plan help jump-start legislative activity in Congress?  Would some of Kerry's ideas be co-opted by Republicans in a second Bush term?

3.  Cost -- Which sections of the proposal could be "paid for" and how difficult would it be to agree on the necessary funding?

4.  Converting Basic Concepts Into Detailed Policies -- Is there sufficient flexibility in Kerry's plan, so that policymakers from both sides of the aisle could help mold its details without causing intractable political conflicts?

Sometimes, campaign proposals are merely a placeholder -- inserted to please important constituencies or to fill a policy gap -- and vigorous legislative follow-up is not really intended.  (President Bush's health coverage proposals qualify for the "placeholder" characterization.)

Even with a determined political push, however, some campaign proposals fail to attract bipartisan support, making them harder to enact.  (President Clinton's health reform plan failed this test.)

If they do become law on party-line votes, partisan proposals are less likely to achieve lasting political support.  (The Medicare drug benefit is suffering for this reason.)

Likewise, cost problems can haunt even consensus proposals, both before and after they are enacted.

Finally, Kerry's plan is conceptual -- it will have to be translated into policy.  Several of Kerry's basic ideas should be broadly acceptable to both political parties.  The question is:  Will the partisan stalwarts on both sides start attacking each other on particular issues before compromises on the details can be worked out?

In general, it would be a mistake for Senator Kerry (if he is elected) to insist on exactly how his proposals are translated into policy in Congress.  The best approach would be to try to forge agreement on the basic concepts, and then ask conservatives to help design many of the specifics.

Likewise, conservatives would make a mistake by nitpicking Kerry's campaign proposal in its preliminary form.  Regardless of whether he wins the election, this type of health plan is likely to endure in the political debate.

Kerry's plan shares several important features with Senate Republican leader Bill Frist's proposal.  Both are ambitious, but neither would fundamentally restructure the health system.  The Kerry and Frist approaches are likely to remain popular politically throughout the decade.

Three High-Value Priorities.  If he is elected President, Senator Kerry is likely to make a vigorous push ahead on at least three main parts of this agenda:

(1) the "premium rebate" subsidies for health insurance costs of the highest-cost patients,
(2) the group pooling arrangements for small businesses, and
(3) the expanded public sector coverage for adults under poverty who are not currently eligible for Medicaid.

These policies would help stabilize the health system.  In theory, the premium-rebate subsidies would reduce health insurance premiums in two ways:  by the simple fact of the subsidy, and by trimming the "risk premium" insurers sometimes factor into their premiums.

The federal employees-style group purchasing pool would make insurance easier for small businesses to obtain, eliminating a key barrier to health coverage.

Public health insurance for the poorest adults would ease pressure on "safety net" hospitals and health providers.

These components of Senator Kerry's plan are likely to receive a closer examination from both parties, regardless of November's outcome.  They could be co-opted by Republicans under a second Bush term.

However, to attract bipartisan support, these proposals would probably need significant modification. Campaign proposals are designed to make political points and illustrate conceptual policies.  But the cliché that "the devil is in the details" is true.

For example, the premium-rebate subsidies for the highest-cost enrollees in health plans should be more flexible.  Kerry's campaign proposal suggests the government subsidize 75 percent of the cost of a patient's covered health spending that exceeded $50,000 a year.

This specification is fine for campaign purposes -- it clearly explains his policy idea.  People "get it."

However, the campaign design would be too simplistic in practice.  It is unnecessarily rigid and could be too expensive. 

Setting a specification based on a dollar threshold such as $50,000 a year could lead to disputes between the government, patients, and insurance companies about health benefits.  Would the government begin scrutinizing each health plan's discounts, networks, and benefits before deciding to pay?  That sort of intrusiveness in the design of health benefits will alarm conservatives.

Senator Frist has suggested a more flexible approach.  Frist's "Healthy Mae" initiative -- a government-sponsored enterprise to help health plans reduce the risk of enrolling the highest-cost patients -- would be more workable in practice, and more likely to attract bipartisan support.   (The name is borrowed from "Fannie Mae," the public-private organization that bundles home mortgages for investors, thereby helping mortgage lenders manage their risk.)

Frist proposes health plans should decide among themselves what the thresholds and reimbursement amounts should be.  Health plans would hash out the details of how to spread the money for the highest-cost enrollees.  (Of course, Frist's suggestion would be more difficult to explain in a political campaign.)

Likewise, Kerry's proposal to create a national purchasing pool based on the federal employees' system is easy to explain.  But in reality, we would probably need multiple pools formed at the state and sub-state levels.  Strictly speaking, one pool with national rates would create a distortion:  small businesses in high-cost areas would rush to join, but businesses in low-cost areas would get a bad deal.  (It might be possible to compromise by creating one national risk pool with premiums that could vary locally.)

Finally, Democrats should accept modest progress toward full public coverage for people under poverty, even if it is less than they want. 

Kerry's proposals to expand public coverage to children and their parents above the poverty line were targeted toward liberal Democratic primary voters.  These proposals were a rite of passage for the Democratic contenders hoping for early endorsements from unions like the Service Employees' International Union (SEIU), which are desperate for expanded health coverage for their members.

But Republicans worry that this sort of legislation is a not-so-subtle attempt to expand public-sector coverage into the middle class.  They figure Democrats will start with sympathetic groups like children, and gradually fill out eligibility over time.  Even if Democrats retake control of Congress, it would be very difficult to ram these provisions through the Senate, where 41 Senators can band together to block most legislation. 

However, conservatives generally concede that people under the poverty line need public-sector health coverage.  Tax credits or other public-private arrangements would be less effective for people who are very poor.

Although most children under poverty are already eligible for public coverage, there are plenty of opportunities to fill in gaps in coverage for adults with incomes below the poverty line.

The details of exactly how to expand coverage for poor adults will be difficult to work out, but a consensus on the right policy is not out of reach.  The larger hurdle for public coverage of the lowest-income adults will be getting agreement on a funding level.

To his credit, Kerry's campaign has signaled a willingness to modify his proposals to build bipartisan support.  This is important.  Democrats in the past drew lines in the sand -- for example, President Clinton insisted that anything short of universal coverage was unacceptable.  Unwillingness to compromise usually leads to legislative failure.

Finding Funds for Larger Coverage Expansions.  By themselves, Kerry's three highest-value priorities would not be enough to dramatically reduce the number of uninsured.  To do that, we will probably need substantial tax credits for lower-income people and larger expansions of public coverage.

Senator Kerry's staff has pronounced his support for the "pay-as-you-go" approach to legislation.  As President, he would insist on budget cuts or tax increases sufficient to offset the full cost of his health proposals.

Kerry assumes that the larger push to cover the uninsured would be funded by rescinding tax cuts for people earning over $200,000 a year.  That is theoretically possible, and perhaps even appropriate.  But it is not politically likely with Republicans in control of Congress. 

Even if Congress switched to Democratic control, Kerry would have to negotiate for additional funding.  One approach would be to veto extensions of tax cuts scheduled to expire.  That would force a debate on tax priorities, which Kerry could extend to health care.

Other funding mechanisms might be possible.  Senator Frist's plan suggests limiting the tax exclusion for employer-paid health benefits as a means of funding expanded coverage for the poor and near-poor.  This idea has merit, but it would have to be crafted carefully to avoid hurting employer-paid coverage.

Switching the exclusion for employer-paid premiums into a refundable tax credit that could be used for job-based coverage would be fair.  People in high tax brackets with generous employer-paid benefits would lose part of their current tax break.  But people with low incomes and stingy employer-paid benefits would get a net tax break.  Overall, more people would be able to afford health coverage.

However, the idea of switching the health tax break will be opposed by some large companies and by unions that have negotiated excellent health benefits for their members.  Although that opposition could probably be damped over time as the details were explained, the chances of quick enactment of Frist's funding idea are slim.

Finally, Medicare savings may be proposed as a funding mechanism for health coverage.  But despite their complaints about the Medicare drug benefit, Democrats are unlikely to cut the federal subsidy for seniors' drugs. 

The future of the drug benefit is very uncertain, and it makes sense to assume it will be modified, perhaps significantly, no matter which party wins the elections this fall.  But it seems very unlikely that either Republicans or Democrats would line up to "take away" a benefit that senior citizens are now expecting, in one form or another.

Health Quality and Cost Containment Proposals.  Senator Kerry's cost and quality proposals can be separated into three categories:

Quality and Technology.  The health quality and technology ideas in Kerry's plan are already shared by President Bush and conservative leaders:  (1) fostering disease management programs and improving care for people with chronic, long-term illnesses, and (2) improving health safety through electronic prescribing and electronic medical records.

These proposals are not controversial.  The issue isn't ideology or partisanship.  The question is:  How?  Kerry proposes to use federal subsidies and require government programs -- Medicare, Medicaid, and the federal employees' health system -- to implement advanced technology systems.

That might help.  But to be fair, neither party has put forward a foolproof set of procedures or incentives to make dramatic improvements in health care quality.

In the long run, well-executed quality and technology initiatives would reduce inefficiencies in the health system, and would almost certainly save money.  Government spending to encourage these efficiencies could save money within the federal budget as well.

But for budgeting purposes, it makes sense to plan for additional spending for these purposes over the next 10 years.  The savings would be a bonus.

Drug Prices.  Senator Kerry's proposals to rein in prescription drug prices are highly controversial. 

First, importing low-priced foreign drugs has a huge popular appeal.  Despite opposition by Republican leaders, some form of drug importation is likely to be enacted by Congress, regardless of who wins the next election.  Several Republicans are in favor and few Democrats are opposed.  The pressure from voters is very strong and proponents will force the issue as an amendment to virtually every bill.

However, widespread importation of drugs would make it more difficult for the Food and Drug Administration (FDA) to monitor their proper handling and safety.  The idea that drug imports could be limited to other rich countries, such as Canada, seems flimsy.  If large-scale drug importation became a reality, middlemen would purchase cheap medicines in poor countries and ship them (possibly through rich nations) to the U.S for sale at higher prices.

On balance, U.S. prices would fall a little, but drug prices would gradually rise in less developed countries or rich nations with strict price controls.  Those countries might then feel public pressure to limit their drug exports, to preserve their lower prices.  Alternatively, drugmakers could restrict the supplies available outside the U.S.  In either case, the ultimate impact on drug prices would probably be less than people expect.

Kerry's second drug pricing proposal would allow states to require that people without insurance could purchase drugs at the same rates paid by the Medicaid program -- the federal-state health insurance system for the poor.  These sorts of proposals are contentious from a legal point of view.  Essentially a state or group of states would declare that drugs have to be made available to all comers at a government-set price.  Then, the lawsuits would begin over which link in the supply chain -- drug manufacturers, distributors, or pharmacies -- had to bite the bullet.

Both of these proposals revolve around a core issue:  Do we want government price controls for health care products that are difficult for uninsured or under-insured people to afford?

Drug importation is really the importation of other nations' prices.  Extending Medicaid prices to people not covered by the program would also amount to the government setting a price in the larger economy.  (Proponents use the term "government-negotiated" prices).

These sorts of indirect price setting proposals would be unnecessary if all Americans had decent health coverage, with insurers bargaining for good prices on their behalf.  If Kerry's larger health plan (or Senator Frist's, for that matter) led to better coverage and significant reductions in the number of uninsured, popular pressure for price controls would be diminished.

Here is the problem.  Health providers -- whether drug companies or hospitals or doctors -- are often in a position to charge whatever they want.  Sick people and their families are in a poor position to shop for the best prices.  Likewise, there may be no substitute for a needed medication.

As a result, health providers "price discriminate," attempting to extract as a great a payment as possible from each buyer.  In practice, this means that hospitals and doctors and drug companies usually charge high fees or prices, and then offer discounts based on the negotiating power of a patient's insurer.  In the absence of countervailing market power from an insurer, health care consumers will face escalating costs.

In general, centrists would prefer to improve private markets for health care, rather then jumping straight to government intervention to solve a problem.  Government price setting in health care -- however indirect -- can have long-term negative side effects that consumers in search of instant gratification may not perceive or comprehend.

Ultimately, this is the choice for conservatives:  Either work very hard to make sure everyone has health coverage or some sort of agent bargaining for good prices on their behalf, or face popular pressure for price controls on expensive health products.  This will take a considerable discipline -- are continued tax cuts really more important than preserving private sector health care?

Liberals also face a dilemma.  They want price controls and universal coverage, but which is their top priority?  In the past, insisting on government control of the health sector has led to legislative stalemate and a failure to expand coverage.  Wouldn't it be better to help conservatives improve private markets within the context of coverage expansions, rather than taking the chance of continued inaction?

Kerry's third drug proposal would require that pharmaceutical benefit managers (PBMs) -- which manage drug distribution for health plans and employers -- disclose the discounts they receive from drug manufacturers.  However, economists quickly pointed out that this proposal would raise, not lower, drug prices, and its momentum in Congress immediately dissipated.

Liability Reform.  Finally, Kerry proposes some modest malpractice reforms.  The most important reform would require that states make non-binding arbitration available before a lawsuit could proceed to trial.

In general, the fight on malpractice reform is over caps on damage awards:  Republicans want them, Democrats don't.  Both parties seem comfortable with this stalemate.

However, Kerry's plan for mandatory arbitration offers a modest opening for compromise.  Senator Frist has proposed "health courts," a specialized legal system for malpractice claims that would be the first step in any claim.

The health courts' decisions would not necessarily be absolute -- claimants dissatisfied with their decisions could still seek a regular trial.  However, the findings of the health courts would be public information, and judges and juries would probably have a good deal of respect for their opinions.

Kerry's proposal for arbitration before trial is conceptually similar to Frist's proposal, especially if the arbitrators' findings or logic would be available to either side in subsequent proceedings.

Table 1 shows the main features of the Kerry's plan, along with their prospects for bipartisanship and their potential costs.  (Here is Table 1 in .PDF format, which is easier to print.)

Table 1.  Kerry Health Proposal -- Key Features

Policy	Prospect for Bipartisanship	Concerns, Costs and Compromises
"Premium Rebate" Pool.  Goal:  Reduce premiums for participating employer plans by 10%. Method:  Reinsurance for highest-cost cases. Governance:  Unspecified, but sounds like a federal entitlement administered nationally.	High.  Compares with Republican Senate leader Bill Frist's "Healthy Mae" proposal.	Republicans may want self-governance by health plans (perhaps via states), block grants instead of entitlements, to allow individual insurance plans to participate, and limitations on the size of firms eligible to participate.  One source of both savings and political compromise would be to limit eligibility for the subsidies to small businesses offering coverage through a group purchasing pool.  Cost:  $250 billion over 10 years for full Kerry plan.  Could be adjusted to fit the budget, perhaps $50-$100 billion would be plausible.
Congressional Health Plan. A national group purchasing pool for businesses and individuals patterned after the federal employees system.	High.  Conservatives have historically supported using the federal employees' system as a model for group purchasing.	Unsubsidized group purchasing pools with "community" rates don't work well.  Therefore, unless all of Kerry's tax credits are enacted, this pool would need to have age-rated premiums.  For practical purposes, it would also need local premium adjustments to be fair to areas with low health costs.  Republicans may insist on state-based administration.  Cost:  $10-20 billion for start-up costs, risk management.
Public Coverage for Adults Under Poverty.  Kerry's plan implies that this would be standard Medicaid coverage.	Fairly High. Republican Congressional leaders have acknowledged that public coverage is necessary for really poor people.	Practical issues would dominate the discussion of how to actually implement this policy.  Fiscal hawks will prefer a block grant tied to coverage improvements, rather than an entitlement that states might ignore.  Cost:  $150 billion over 10 years for full entitlement.  A reasonable block grant would be $5 billion a year -- roughly $50 billion.
Quality and Technology Initiatives.  Kerry suggests grants for improved technology and would require health providers and plans participating in federal health programs (Medicare, Medicaid, federal employees system) to use advanced systems.	Very High. Bipartisan consensus to do something already exists (Bush-Kerry, Gingrich-Kennedy)...	...But nobody really knows what to do.  Cost:  It makes sense to budget for $10-$20 billion in new spending for demonstrations, pilot projects, and so on.  Savings are likely, but are difficult to estimate and cannot be counted on.
Tax Credits for Small Businesses using the Congressional Health Plan.  The tax credit is "up to" 50 percent of small employers' contributions toward premiums for low- and moderate-income workers.	Considerable. Both parties face strong grass roots political pressure from small firms trying to maintain health coverage.	Since this tax credit is tied to using a group purchasing system with individual choice of coverage, conservative objections to tax credits for employers do not really apply.  Cost:  Perhaps $60 billion over 10 years.
Tax Credits for Unemployed Workers.  This proposal would give a tax credit of 75 percent to unemployed workers, so they could purchase COBRA continuing coverage from their ex-employers or other health insurance.	Some. Bipartisan agreement on similar tax credits was reached in 2002. But the so-called TAA tax credits (for workers displaced by trade) had such limited eligibility that the idea didn't really catch on.	Republicans want such subsidies to apply to all types of coverage (not just COBRA), which is fine with most Democrats.  Some conservative economists worry this would make unemployment more attractive, but that's a very marginal concern that can easily be worked around by limiting the time period in which the credit could be used.  Cost:  About $35 billion over 10 years.
Malpractice Reforms.  The most significant reform would be to require states to make nonbinding arbitration available before permitting a lawsuit to proceed to trial.  Kerry's plan would attempt to deter unwarranted lawsuits.	You Never Know. Specialized "health courts" might be a possible area of bipartisan agreement.	Republicans insist on capping damage awards -- Democrats insist they remain unlimited.  However, Kerry's proposal to require arbitration is similar enough to Sen. Frist's Health Court proposal that a compromise might be possible.  Cost:  Low, maybe $5 billion over 10 years.
Tax Credits for Low-Income Individuals.  Kerry's proposal suggests tax credits for health insurance premiums that would otherwise exceed 6 percent of family incomes.  This proposal (probably) applies to people without employer-subsidized coverage.	A Little.  Kerry's specification is too vague to really evaluate (and may be unworkable in practice.)   The workability problems can be solved, but the high cost of tax credits remains a big problem.	Republicans say they're in favor of tax credits, but only for individual coverage, which is unfair to low-income people with employer or group coverage.  However, since Kerry would subsidize group coverage through employers and group purchasing pools, a tax credit for people purchasing coverage individually would not necessarily be unfair.  Republicans did not allocate funds for this purpose in the 2004 budget.  Cost:  Anywhere from $100 billion over 10 years for small tax credits to $200 billion or more for generous tax credits.
Public Coverage for Parents of Eligible Kids up to 200% of Poverty.	Not Really. These expansions of public programs were "rites of passage" in the Democratic primaries, but are not expected to be enacted.	Moderate Republicans have supported this idea in concept, but the depth of support is limited.  Republican leadership fears the underlying purpose is larger expansions of public coverage into the middle class.  Sen. Frist's idea of a generalized system of tax credits that could be used toward the purchase of private or public coverage might be more acceptable.
Public Coverage of Kids up to 300% of Poverty.  The Kerry plan envisions a "swap," with the federal government picking up more of the cost of children, and the states the cost of adults.	Not Really.	There is little enthusiasm among Republicans for extending public sector health coverage this far into the middle class.  The swap idea is not practical.
Drug Price Importation.  Kerry's main health plan doesn't mention this policy, but his speeches and campaign book feature it.	This is a populist proposal. Generally, the less you like drug companies, the more you like this proposal.  Thoughtful people don't have much of a chance to explain the disadvantages of this idea.	Republican leadership in Congress opposes, out of fear of backdoor price controls and because drugmakers are "friendly" politically.  The Bush Administration has learned many policy reasons why this is a problematic idea in HHS hearings:  safety, inability to track true origin, impact on (poor) exporting countries.  However, extraordinary grassroots pressure makes this an ongoing political possibility, despite the practical concerns.
State Medicaid Drug Prices for Uninsured People.	Not Really.	A Kerry Administration is likely to pursue this by regulation (legislation may not be needed).  In the long run, it could effectively raise the prices paid by some state Medicaid programs.
Tax Credits for People Aged 55-64.  Kerry proposes a tax credit worth 25 percent of the premium for people in this age range.	Not On Anybody's Radar.	This proposal would only be attractive if Congress enacted a group purchasing system that used "age-rating" -- which allows higher premiums for older enrollees -- in place of large subsidies.
Close Loopholes Allowing Rx Patent Extensions.  Kerry proposes to ensure drug companies don't use gimmicks or inappropriate legal maneuvers to extend patents and delay the entry of generics into the market.	Yes, but...	This issue has mostly been resolved through regulatory action by the Bush Administration and 2003 legislation.
Pharmaceutical Benefit Managers (PBMs) Must Disclose Discounts Received.	Not Applicable. Congress dropped this idea like a stone when experts pointed out that it would have the effect or raising drug costs for health plans.	This was a particularly goofy idea, reflecting Democrats' general lashing out against any sort of company associated with the term "pharmaceutical."  PBMs are essentially distributors with relatively thin profit margins in a fairly competitive, if confusing, industry.  If employers and health plans don't value the PBMs' services, they will not continue to buy them.

Options for Bipartisan Compromise:  Health reform proposals are not like tax laws or appropriations bills.  With tax and spending decisions, Congress can add a little of this, or subtract a little of that.  The decisions are discrete -- one policy usually doesn't depend on another.

By contrast, health reforms should be considered as a complete package.  With health care, you can't take a bunch of ideas that aren't meant to work together and mash them together into a coherent, workable system.

Robert Reischauer, the former director of the Congressional Budget Office, warned Congress about the pitfalls of health reform along these lines:  "You can't take a Ford engine from one health reform proposal and attach it to a Chevy transmission from someone else's proposal, and put it on to a Toyota chassis from a third proposal and expect the resulting car to drive efficiently or well."
 
For example, a given package of policies may not work with insufficient funding.  Likewise, policies that are essential when funds for subsidies are scarce may be unnecessary if funds are plentiful.  Without sufficient scale, even the most carefully constructed health reforms can fail to achieve a "critical mass" of enrollment.

Structure matters too.  Generous tax credits for low- and moderate-income people may allow managers of purchasing groups to use a "community-rated" premium system -- that is, a system in which older and younger people would pay the same amount for a particular plan. 

However, in the absence of large subsidies to entice young and healthy people into purchasing groups, Congress will have to allow "age-rating," where premiums are higher for older people.  (Age-rating gives younger people an incentive to sign up for health insurance.  Since young people usually have lower health expenses, persuading them to purchase health insurance helps balance purchasing pools, keeping overall premiums at a reasonable level.)

Low Cost Package -- Reduce Number of Uninsured by 5-8 Million.  With some adjustments to the group purchasing system, the core elements of Kerry's plan can be scaled up or down to fit the budget.

For example, Table 2 (below) shows a complete, workable health reform package costing a little over $200 billion over 10 years.  This package could reasonably be expected to reduce the number of uninsured by between 5 and 8 million people.

This low-cost package would include state-based purchasing groups using age-based premium rates.  Age-rating would be necessary because the subsidies would not be large enough to ensure widespread enrollment of younger (and healthier) people.

Subsidies for high cost cases would be restricted to health plan offering coverage to small businesses (sized 100 employees or less) and individuals through the purchasing groups.  This would cost about $75 billion over ten years.

The package would budget $15 billion for startup and administrative costs, and $60 billion for tax credits to entice small employers to use the purchasing groups.  These costs could be reduced over time as enrollment in the groups grew and the pools stabilized.

Medicaid coverage of low income adults would be budgeted at $50 billion over 10 years, which would be enough to ease the problem, but not enough to ensure complete coverage. 

Finally, the plan would spend about $5 billion setting up a new system of expert health courts, to serve as the first choice for the resolution of malpractice claims.  This low-cost budget also sets aside $10 billion to foster quality and advanced technology programs.

To be sure, a full health plan would contain additional elements, such as specific quality and technology measures, chronic care or disease management initiatives, savings or revenue provisions designed to "pay for" the proposal, and possibly other things.  Nevertheless, the low-cost package shown in Table 2 illustrates the core components that would be the major subjects of bipartisan accommodation.

Table 2.