Tuesday, October 07, 2008

McCain health insurance plan: Pay more, get less

Policy details can be complex and difficult to understand for the layperson. On the other hand, sometimes you can get right to the gist of policy proposals. The McCain proposal on health insurance is a good example. It will tax Americans for their employee supported health plans as income but provide tax credits those who can afford to purchase health insurance. If you are presently insured, young and healthy, there is some advantage to the McCain plan…that is, until health care inflation completely erodes those advantages. If you are insured but not young and less healthy then there is no advantage presently to you and potentially great disadvantages to you in the near future under this plan. As comprehensive group policies and the advantages they represent in lower costs are dropped by employers more and more Americans will be forced into the nightmare of negotiating for their own individual and more costly health insurance. Basically, they will be paying more and receive less in return.

And, of course, if you are uninsured regardless of health and age, any advantages you may get from a tax credit are offset by the fact you need to come up with the big bucks to pay your premiums up front – assuming you can find a plan you can afford.

Here is Jane Bryant Quinn's assessment of McCain’s plan in Newsweek:

If you think that "The Market"—whatever market—always works for the best, you'll love John McCain's version of health insurance reform. It uses the tax code to shove you toward individual policies (more "choice!") and away from comprehensive, employer supported plans. The nonpartisan Tax Policy Center puts the cost of his proposed subsidies at $1.3 trillion over 10 years.

But a funny thing happens on the way to spending that much money. Almost all of the subsidy goes to people who have health insurance already, says Sherry Glied, a professor of health policy at Columbia University. The Tax Policy Center figures that, after 10 years, the plan cuts the number of uninsured by only 1 million, out of 45.7 million now. Barack Obama's $1.6 trillion plan would take 34 million off the rolls of the uninsured.

McCain's idea is pretty simple. Tax the value of employer-paid health insurance as part of your regular income (62 percent of the nonelderly are in these plans). In return, he'd give everyone a refundable tax credit—$2,500 for individuals, $5,000 for family coverage—to offset the cost of any health policy they choose. Here's how the McCain plan falls out:

Initially, most of the people in employer plans would get a bonus from the government. Their new tax credit would exceed the amount of extra taxes they owed. For the young and healthy, the bonus could be quite large. Older workers with health problems might get a minimal bonus but still do OK. Over the years, however, the value of the credit would be eroded by health-care inflation, and your tax cost would rise.

If you already buy your own health insurance, the tax credit would chop your premium cost by $2,500 or $5,000. The self-employed lose the deduction they get for health-insurance premiums but would generally still come out ahead (again, until inflation intervened).

If you’re uninsured, the tax credit helps you purchase coverage. The only hitch—a big one—is that you have to be able to afford the premiums up front. The tax credit comes later. The government will send it to the insurance company, which will apply it to your account.

To see how much the McCain plan helps, I asked Scott Leavitt, president of the National Association of Health Underwriters, to price typical policies for healthy singles, couples and families in the Chicago area. It appears that the credit could pretty much cover the premium in your 20s and 30s, even early 40s, making it a good deal. At 55, however, a couple might pay more than $12,000—difficult for older people with modest incomes.

The Tax Policy Center estimates that 20 million workers will leave the employer-based system, not always voluntarily. Midsize and smaller companies are likely to drop their plans and tell you to use the credit to buy a policy yourself.

It’s a shock to move from group plans into the harsh world of individual insurance. You get "choices" (rah, rah). But the policies cost more and cover less than company plans do—especially for women, older people and those whose health is less than perfect.

That is, if you can find coverage at all. In 2006, the Commonwealth Fund studied working-age adults hunting for individual policies. One fifth were charged more or rejected for health reasons. More than half found it hard or impossible to secure a policy they could afford.

Conservatives love health plans that throw more of the costs on you. When it's hard to pay the bills, you see the doctor less. Through the "magic of the marketplace," that's supposed to slow the rate of increase in medical costs.

Friends, there's zero evidence that that works. In the long run, tax credits will raise your costs without changing the game. And we still won't have helped most of the uninsured.

It is worth noting even Republicans are distancing themselves from the McCain health proposal.


Anonymous said...

Many of us Republicans here in Virginia are unafraid to agree with and even support Democratic candidates when they are right on the issues.

Virginia has a long tradition of "blended politics."

On the issue of a National Health Service, Democrats and Republicans who support such a proposal, have the right idea.

Just as roads, water systems and refuse collection are part of our government services, we as a nation, should have a National Health Service.

By providing a NHS, businesses and citizens would be freed of the yoke and uncertainty currently placed around our citizens' necks by the medical insurance industry. Contrary to the position of NHS critics, it is the insurance companies who "ration" health care. One simply never knows when a procedure or prescription may have its coverage altered or canceled.

With an NHS, other civilized Western-style republics have done very well by their citizens. Even many of the poorer countries have much more accessible health care than we have for the rank and file.

I was reluctant to watch Michael Moore's video documentary on health care, "SICKO" because the title sounded flippant to me. However, I found the video to be very informative and in accord with my own observations of health care systems while visiting other countries. The video is at most libraries here in Virginia and even if you think you are against a National Health Service, it is well worth your time to view it.

From a small business owner perspective, I can attest that an NHS would lift a terrible burden. It would allow more businesses to replace part-time with more full-time jobs; thereby improving the quality and professionalism at many businesses. It would also ELIMINATE the blatant discrimination against older employees and those with existing medical problems, since the businesses would no longer risk loss of medical insurance for one catastrophic loss from a single employee.

Had we not spent $700 BILLION to line the pockets of Bush's banker buddies, we could have started a first rate National Health Service. Had we not pissed away a trillion dollars on Iraq, we could have a fully funded National Health Service that would have been the best in the world.

Democrats and Republicans MUST unite to create a National Health Service. It will be good for our People and good for our economy.

Biased Girl said...

I could not disagree with this article or the comments that follow more. While our health system is not perfect it is far better than that being offered in Canada and Europe. Why the rush to socialism? Why can't free market work? Competition amongst Insurance companies will create better coverage for lower premiums. Currently I am "covered" through my employer. The coverage is awful and I pay almost $400 a month as my 'part' of the premium. My employed by their own admission only pays 3785 a year, so the $5000 credit offered by McCain would cover the money currenlty being paid by my employer and I could choose (I thought liberals loved Choice!) to use what ever provider offer the best coverage for me at a price I could afford.

Who wants all hospitals to operate like the VA Hosptials? That's government run health care for you.

Comrade Kevin said...

This bailout shows that the free market and the invisible hand are exploded theories. I have never believed the system regulates itself and I totally don't believe it now.

Anonymous said...

Watch the video, or visit Canada, England or one of the other Western countries with National Health Services. You will see readily available health care that the citizens nearly take for granted, just as we presume that roads, water systems and sewerage, will be maintained by the government.

As for the false accusation that an American Health Service would look like the Veterans Hospitals, that is as unlikely as us having a third rate military, which, by the way is the best in the world and it too, is a "government program." We seemed to have done pretty well in the area of defense with our "socialist" ideas; that being a federal military force dedicated to our national defense.

If we Americans decided to move forward with a National Health Service, I have absolutely no doubt that within a few years, it would be the finest in the world.

Then people would look back and wonder why we let those crooks in the medical insurance business twist our nuts for so long.

Biased Girl said...

I hope the rearch video you are referring to is something other than the mockumentary "Sicko" by comedian Michael Moore.

I have visited many other countries and based on those experiences I have no desire to so much as catch a cold outside America let alone have as you do a romanticized version of socialistic health care.