McCain Health Care Plan

I recently responded to a co-worker's saying McCain wants to raise taxes on health plans with this:

Your contention and Obama's (in the debate he said this, and I guess it's a talking point) that McCain's health care plan means higher taxes isn't exactly true, though it has enough truth to be semi-credible.

What McCain proposes is that the employer tax deduction for health care costs paid for employees be repealed. This means, of course, that should employers decide to continue to offer employer-negotiated health care for their employees, the employee would be on the hook for the taxes for that portion of their income, at whatever income tax rate they pay.

What you and Obama fail to tell people, is that McCain's plan also includes a $5000 tax credit to either allow those without health insurance to defray some of it's cost,or pay for it all, or for those in employer-provided plans to pay their costs, including this tax.

This New York Times article, http://www.nytimes.com/2008/05/01/us/politics/01mccain.html, does actually a fair of pointing out that only those with "gold-plated" policies would see their costs go up.

If you believe, as I do, that competition, and more consumer awareness of how much health care actually cost, is the key to solving this problem, then this is a plan that goes down that path,along with the increase in availability of Health Savings Accounts.

I know people like to say Obama's plan isn't government sponsored,single-payer health care, and, at least initially, it isn't. But, as it pits private health care plans against a massive government-run system (government as insurer), the end result will be employers abandoning their plans in favor of the government plan.

From an analysis by Health Policy Consultant James Capretta:

"Businesses would be forced to either offer coverage and pay a substantial portion of the premium or else pay a tax to the federal government. \

"Under his plan, employers would find it increasingly attractive to drop their company-sponsored plans in favor of paying the tax. The tax would be based on wages, not health care, and wage growth has lagged far behind health-care cost inflation for more than three decades. Over time, without other reforms, paying the tax would almost certainly be less expensive for most businesses than organizing coverage themselves. And with the government making other options available, employers would finally be able to drop their insurance plans without simply abandoning their workers.

"As more and more employers chose to "pay" instead of "play," millions of workers would be pushed into the national insurance exchange, where they would, in theory, have a choice between private insurance and the new, publicly run option. Obama and other Democrats like to say this structure would foster healthy competition between the public and private sectors. But this would not be real, market-style competition. The government would run the new, public insurance option just as it runs Medicare and Medicaid, with plenty of price controls and cost shifting. Doctors and hospitals would have no choice but to accept the government-dictated fees imposed by a federal bureaucracy. These below-market fees would allow the public option to charge premiums considerably lower than those charged by private insurers. And with these artificially low premiums, the public insurance option would become the de facto plan of choice for millions of workers. A
recent analysis of an Obama-like plan projected 40 million new enrollees in the public option in Year One. That would be like doubling the size of Medicare — overnight.

"Once the plan had been set in motion, the momentum toward a full government takeover would be impossible to reverse. Congress would have every incentive to cut doctor and hospital fees further, to control the costs of the new insurance subsidies promised by Obama. It would not be long before private insurers, lacking this ability to control their costs by fiat, abandoned the marketplace entirely. "