McCain's Healthcare Plan: looking under the hood

With less than 2 weeks before the general election and with McCain and the GOP flinging more feces than a hundred chimps on PCP, it seems like a good idea to look at some of the proposals these family values people are promoting. Top on a lot of people's agenda is healthcare and McCain has been out stumping for his plan. Back in April Business Week published this glowing article and the plan remains essentially untouched.

“The last of the three remaining Presidential candidates to unveil a detailed health proposal, McCain's is also the least radical. He is against mandates, instead proposing universal coverage would emerge through the use of tax credits and a more competitive insurance marketplace. McCain wants to do away with the tax exemption on employer-provided insurance. Instead, he would give a $2,500 annual tax credit to individuals, and $5,000 to families, to purchase their own coverage.

McCain's plan is meant to encourage individuals to purchase their insurance and free companies from the heavy cost of providing coverage. His theory is that employees would take their tax credit and flock to the open market, where they could shop around for the plan that best meets their needs. Insurance companies would have to become more competitive to win their business.”

Wow – so a guy who attacks Obama for being a socialist proposes to fix health care costs by redistributing tax exemptions for healthcare from higher to lower income workers. Who'd have thought?

McCain proposes to reform healthcare through the use of a refundable tax credit which is essentially the same for all levels of income. Since healthcare benefits are no longer tax exempt you would have to declare the value of your benefits, then write the total check to the IRS. In theory this means that the taxpayer could get back more money than they put in but if you go to his website it should be noted that this tax credit never goes to the taxpayer but instead goes to the insurance company of your choice. From MCain's website comes this:

“the credit goes to the insurance company that the American family chooses to get coverage from, anywhere in the nation. The power of choice lies with the family – not government bureaucrats or insurance companies.

Putting Families In Charge: Under the McCain Plan American families will not only decide where the tax credit should be directed for their coverage needs but any additional money left over after purchasing coverage will be controlled by the family in a portable health savings account.”

Well, sorry John but you just said that government bureaucrats will graciously send the money to the insurance company of my choice, hmmm. I guess not many visitors to your site actually read it... YOU DON”T GET TO KEEP THE MONEY!!! He's right – you are in control – if you can convince an insurance company to cover you and afford the price tag.

Now keep in mind that according to the Kaiser Family Foundation the amount payed by the combination of employer and employee for health coverage was $4,479 for a single person and $12,106 per family in 2007 which means that for many people the tax credit will not be enough to actually pay for coverage and they don't have an employer who ponies up part of the bill. This is of course assuming you can get coverage in the first place which is an issue that McCain's plan defers until after he “works with the states to set up some sort of plan to create risk pools for the uninsurable”. Also directly from his website:

“ John McCain believes that no American should be denied access to quality and affordable coverage simply because of a pre-existing condition. As President, John McCain will work with governors to develop a best practice model that states can follow – a Guaranteed Access Plan or GAP – that would reflect the best experience of the states to ensure these patients have access to health coverage. There would be reasonable limits on premiums, and assistance would be available for Americans below a certain income level.”

So in other words he'll get back to us on this one if he is elected... Thus far all his proposals in this area fall far short of what is needed to cover these costs.

McCain claimed in a speech in Tampa that people with employer-sponsored policies could keep them and that their policies "would be largely untouched and unchanged." The message here is that for the majority of Americans life would go on as usual. But would it? Ok let's look at this from the perspective of employers whose biggest worry is ever rising healthcare costs. The Republicans hand them an early Christmas present that eliminates the tax credit for healthcare coverage which was the original incentive to provide coverage in the first place – employees got a nontaxable benefit in place of a higher taxable income. Now why wouldn't the employers go to their workers and say 'Hey we would be paying $7000 for the rest of your coverage so we'll just give you $8500 and call it even – you go get the coverage on the open market.” Why not? Hey then when coverage goes up and up the employer no longer shoulders the costs, HR gets easier – WOOOHOOO! Keep in mind that now 61 percent of the non-elderly population in the U.S. had insurance through their jobs (2006 Kaiser Family Foundation). What will happen to collective bargaining or risk pooling if this number changes?

And what about that competition on the open market. Yeah buddy. I'm sure all those companies are going to be competing for all those overweight smoking diabetics who had group plans. And don't sweat the fact that coverage and cost vary from region to region and that you are now part of a risk pool of one... For the healthy people, insures will line up to give them coverage that would cost below the rebate line and channel the rest into those insurance-run healthcare accounts. Insurers will love those accounts as they lower their future risk. So young healthy people will have less incentive to be part of larger risk pools making the remaining higher risk people more of a burden to the employer. Until they decide to stop paying any of it which is what most market analysts predict.

Next he would eliminate restrictions that states have enacted so that insurance companies could more easily cross state lines to provide coverage. Sounds good until you realize that most of those pesky road blocks that states have erected prevent insurers from cherry picking clients and help spread the risk over the general population. You have to love the GOP's dogged support of state's rights unless a supporter sees a dollar across state lines...

So in essence this is just a rehash of what W wanted to do before. Privatize! Use the power of free enterprise to solve the problem that free enterprise created in the first place. I don't know about you but after watching the DOW fall faster than a soufflé' in a percussion section, my confidence in free enterprise is a bit shaky. Sounds like a sound policy to me, but hey what do I know – I'm voting for the other guy...

------------------
Addendum because GHE is correct: If anyone wants to post a dissenting opinion or a critique of the Obama plan, let me know. I will promise to post it.