McCain Grapples With Gaps in Health Plan

April 28, 2008 — -- Sen. John McCain is proposing to create a subsidized high-risk insurance pool for Americans with pre-existing conditions as part of his plan to overhaul the nation's health-care system.

"We're not leaving anybody behind," the Arizona Republican recently told ABC News' "This Week With George Stephanopoulos."

"We will, as part of our plan, have a special Medicaid trust fund set up to help care for those people who have pre-existing conditions," he said.

As the GOP's presumptive presidential nominee prepares to flesh out his health policies during a Tuesday speech in Tampa, Fla., his critics charge that pre-existing conditions are his Achilles' heel.

McCain Plan Lacks Guarantee of Coverage

Unlike plans offered by Democratic presidential candidates Sens. Barack Obama and Hillary Clinton, McCain would not require insurance companies to cover individuals without regards to pre-existing conditions.

Elizabeth Edwards, the wife of former North Carolina Sen. John Edwards, has personalized her criticism by invoking her own battle with breast cancer as well as McCain's history of skin cancer.

"John McCain and I have something in common," Elizabeth Edwards recently told National Public Radio, "neither one of us would be covered by his health-care policy."

In an interview with ABCNEWS.com, McCain's senior policy adviser said that the Arizona senator's critics are unduly "scaring people," and argued that they are overlooking the safeguards in his plan.

"The key is to make sure there is more money on the table in this contract between the insurer in this higher cost risk pool and the individual," said McCain adviser Douglas Holtz-Eakin. "Whether that money comes first to the individual and then heads over to the insurer, or if the federal government simply directly gives it to the insurer, is an administrative detail."

"The important thing," he added, "is that there is help and that the policies are widely available."

While McCain has begun to outline his plan for Americans with pre-existing conditions, he has not made a final decision as to who would qualify for help.

"The senator is still working through the details of the exact cut-offs and eligibility requirements," said Holtz-Eakin. "The senator is going to make his final decision on eligibility criteria coming up in the next couple months."

Funding Depends on Medicaid Savings

One possibility floated by Holtz-Eakin would be to subsidize the private insurance of Americans with pre-existing conditions earning less than $41,600 per year or $88,800 per year for a family of four.

"Individuals, at say 400 percent of the federal poverty line or below, would get increasing amounts of help in order to afford these policies," said Holtz-Eakin.

McCain's top policy adviser says that the federal government and states will pay for the new subsidies for people with pre-existing conditions by achieving savings in Medicaid, the federal-state health-care program for the poor.

"McCain's proposal will be to use some of the savings that would come out of the Medicaid program, because people are now in private insurance, and to develop a federal backstop -- a program that would give high cost individuals an insurance policy," said Holtz-Eakin. "Insurers that participate in the program would receive higher premiums."

McCain's health plan would end the tax deduction for employer-provided health insurance and replace it with a refundable tax credit worth $2,500 per individual and $5,000 per family.

The Arizona senator aims to make health insurance more affordable by allowing insurers to sell slimmed-down benefit-packages across state lines.

He also is hoping to lower overall health-care costs by shifting Medicare payments away from "episodic service care" and toward a system that rewards "care coordination."

It is unclear whether the Medicaid savings McCain envisions would put enough "money on the table" to persuade insurers to accept those with pre-existing conditions at an affordable price.

"Regardless of how you set up the trust fund you have to fund it appropriately and for me that will be the biggest issue," said Mohit Ghose, a spokesman for America's Health Insurance Plans, a trade group representing insurers. "There has to be some money as an upfront investment."

Dems Plan to Target McCain's Lack of Specifics

Democrats have not yet settled on a presidential candidate, but a spokeswoman for the Democratic National Committee vows to make pre-existing conditions an issue this fall.

"This is a major vulnerability for McCain," said the committee's communications director Karen Finney. "He is going to be the fiscal discipline candidate and they can't tell you how they are going to pay for it and they can't tell you how it would work. That's obscene."

ABC News' Jacqueline Klingebiel and Talal Al-Khatib contributed to this report.