McCain's Radical Plan To Gut Employer-Based Health Coverage

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This is from The Jed Report

Sun Jul 6, 4:33 PM Pacific


McCain's radical plan to gut employer-based health coverage


Employer-provided health insurance is about as American as apple pie, but if John McCain had his way, we'd scrap it all together.

It would be one thing if he were proposing a single payer system to take its place, but that's the last thing in the world that John McCain wants. In his ideal world, when it comes to health care, each American would be on his or her own.

You see, when McCain looks at the health care system, he thinks that it is a huge problem that 177 million Americans receive insurance through their job (47 million have no insurance and the rest get it individually or through government programs).

Talk about being out of touch.

McCain proposes to solve the "problem" of employer-based coverage by offering a recycled version of a Bush's health care plan: individual tax credits of $2,500 per individual or $5,000 per family (indexed for inflation) and elimination of the tax subsidies that support employer-based health insurance.

What this means is that under McCain's plan, employers could choose to continue offering employer-based health plans, but employees would be responsible for paying tax on the full value of those plans.

Not only would McCain's plan lead to a huge tax increase for those who maintain employer-based plans, but it would also dramatically widen the gap between health care haves and have nots without doing a thing to lower costs or improve the quality of coverage.

A tax increase


Assume for a moment that every employer who currently offers health care coverage continues to do so, and that every employee who receives it also continues to do so. Although most families wouldn't see a difference initially, McCain's plan would quickly become a huge tax increase.


Here's why: health care costs are rising at 7% per year. McCain's tax credit increases at the rate of inflation overall, which is far lower than the rate of inflation in the health care sector.


The problem is that under current law, the tax benefits for employer-based health insurance increase at the same rate as health care costs. Since they would increase far more slowly under McCain's plan, taxes would actually go up now that employees have to pay taxes on the full value of their health benefits.

An even bigger problem


McCain's campaign would argue that the assumptions in the tax increase scenario are flawed. They would say that under McCain's plan, employers would stop providing health care benefits to some or all of their employees, and that most if not all employees would buy their own health insurance individually.


Under McCain's theory, employers would pass along the full value of the health benefits to employees. (McCain says that one of the problems with the current system is that it lowers wages.)


Even if you accept the notion that employers would pass along the full value of any health benefits packages to employees who elect to purchase their own plans, McCain's plan could create a nightmare for the health care system.


The problem is that the workers who would be most likely to leave the system are those that are younger and more healthy. They would join individual health plans which are more able to be selective in who they take on as customers. (In other words, they discriminate against higher risk patients.)


The consequence of this is pretty obvious: for some people, health care might indeed get cheaper, but for others, health care costs would likely grow even faster than they do today.


Now, one solution to this problem would be to say "tough luck" to those whose could no longer afford health care coverage under McCain's plan. But most people won't be willing to do this, a fact McCain seems to recognize by proposing what he calls a "Guaranteed Access Plan" which would be some sort of insurance plan for those who couldn't get it anywhere else. But McCain's GAP plan does not come with any details; in fact, it's not really a plan, but rather a promise to work with states to do something. I wouldn't be surprised if it ended up as just another unfunded mandate of some sort or another.

But if McCain was serious about his GAP plan, the money for it is going to come from somewhere -- and it would most likely come from the very same people who had saved money by taking individual plans.


In other words, it's just pushing piles of money around. Either that, or McCain is proposing that tens of millions of Americans lose access to health care care.


I suspect that the ultimate outcome of McCain's plan would be a combination of both: millions would lose health insurance, and while many would initially pay less for their own coverage, new taxes -- perhaps at the state level -- would be imposed to care for those booted out of the health care system by McCain, since those people would still ultimately receive treatment in emergency rooms.

At a minimum, McCain's plan fails to keep costs under control, doesn't improve the quality of care, and won't expand coverage, and it may very well have the opposite effect for millions of Americans.

The bottom-line is that he's on the wrong-side of a critically important issue, and it's one that Obama should hammer him on in the remaining months of the campaign.



Resources

The Kaiser Health Foundation has a side-by-side comparison of the Obama and McCain health care plans.

The Center for American Progress assesses the tax and health market implications of what it calls "McCain's Radical Prescription for Health-Care."

McClatchy:"McCain, Obama offer vastly different health care plans."

So, just in case someone tries to tell you that there's NO difference between electing Obama and McCain, you can click on the links, educate yourself, and explain how health care would be vastly different under the candidates.