Analysis Reduces Cost of Kerry Health Plan

A new analysis reduces the estimated cost of Democratic presidential candidate John Kerry's health care plan by more than one-quarter by accounting for savings the government might achieve from a more efficient system of medical care.

The assumptions, if correct, would take some of the pressure off Kerry to raise taxes quite so much to pay for his plan. But they do not fill all the missing pieces in an economic platform that promises, at once, to cut the deficit and middle-class taxes (search) while expanding health care and other programs.

Kerry's proposal to extend health coverage (search) to most uninsured Americans and make premiums more affordable for others would cost $653 billion over a decade, down from nearly $900 billion, said Kenneth Thorpe, who teaches health policy at Emory University, in a study issued Friday that revises his earlier finding.

The difference comes from including savings that could be achieved by better disease prevention (search) and treatment, electronic filing of claims and other steps.

Thorpe said he could not account for savings in his original analysis last year because Kerry's proposals lacked details that have since been given to him. "They wanted me to look at the savings," he said of the Kerry campaign. "They were concerned it wasn't the full picture."

The Kerry campaign and Democrats generally have described Thorpe's independent analyses as authoritative. President Bush's campaign has cited his work approvingly, too -- but to make the point that Kerry would have to impose whopping tax increases to pay for his proposals.

Despite the lower estimate, Bush campaign spokesman Steve Schmidt said Kerry's numbers don't add up. "Senator Kerry has proposed at least $1.7 trillion in new spending, leaving a trillion-dollar tax gap that means tax increases for middle-income Americans," he said.

Kerry insists he would reduce taxes on middle-income Americans and raise them only on those with annual salaries of $200,000 or more.

Thorpe, who was in charge of financial estimates for the health care proposals of the Clinton administration a decade ago, said in an interview that Kerry's proposal to raise taxes on the top 2 percent of taxpayers should yield more than enough money to cover the estimated $176 billion cost of the health plan in its first five years.

Overall, Thorpe estimates Kerry's proposals would extend coverage to 27 million more Americans over 10 years -- two-thirds of the uninsured -- through a system of insurance pools, cost caps, tax credits and subsidies for children, small business, the unemployed, older workers and more.

Under the new analysis, the costs would start in 2006 and add up to more than $940 billion -- higher than originally estimated -- before savings. Thorpe said these savings would bring the net cost to $653 billion:

--A 10 percent saving in government costs for heart disease and diabetes due to expanded care for chronic ailments, yielding more than $116 billion in 10 years.

--More than $80 billion from requirements in the Kerry plan that many claims be filed electronically instead of on paper.

--A more than $80 billion reduction in bad debt and charity hospital care for low-income people who don't have coverage now.

--More than $14 billion saved by eliminating certain financial incentives for HMOs (search) in the new Medicare drug benefit.