McCain Campaign: Our Health Plan Doesn't Work

Another admission from the McCain campaign that their health care plan is nothing more than a bunch of right-wing platitudes thrown together without any real serious thought as to how to solve the health care crisis. From CNN:

Changing the tax treatment wouldn't hurt the employer-sponsored system and would allow more of the uninsured to buy their own coverage, [the McCain campaign says]. Also, his advisers say a McCain administration would keep an eye on the credit to make sure it didn't lag behind the cost of coverage, while also working to lower the rate of medical inflation.

Younger, healthier workers likely wouldn't abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain's senior economic policy adviser.

"Why would they leave?" said Holtz-Eakin. "What they are getting from their employer is way better than what they could get with the credit."

Got that?

The entire premise of McCain's health care plan is that people can do better on the free market. That's why you get a tax credit. That's why you would be able to buy insurance across state lines. The market supposedly makes health insurance cheaper, makes your health insurance company offer better coverage, and makes buying the insurance you need easier. And things like tying health insurance to employment are anti-free market, which is why the McCain plan taxes employer health benefits to encourage people to get insurance on the individual, free-er market.

Of course, tying health care to employment is the way we've done things in America for generations, and it turns out it's also pretty popular. (Not to mention that insurance companies have to cover you through an employer health care plan, while they can deny you for pre-existing conditions on the individual market.) And so, in the face of political pressure, you have Douglas Holtz-Eakin admitting the truth.

Faced with the fact that destroying our employer-based health care system isn't exactly a priority for most Americans, he argues that the McCain plan wouldn't actually destroy the employer-based system. Why? Because the tax credit McCain is offering wouldn't buy a decent health care plan, even for the young and healthy!

Let's unpack this a little bit more. According to Holtz-Eakin, John McCain doesn't actually want to dismantle the employer-based health care system. But, McCain's plan would tax any health benefits you'd get through work. So, if Holtz-Eakin is right in saying you'd get better coverage through work than you'd get with the tax credit on the individual market (and he probably is), and if he's right in saying most workers won't drop their employer-based insurance for the individual market because they're getting a better deal at work, then John McCain is simply proposing a tax on your current health care benefits without giving you anything in return. That's the worst kind of tax increase.

Shorter Douglas Holtz-Eakin: John McCain's health care plan won't destroy the employer-based insurance system because McCain's plan doesn't work.

Remember John McCain: Less jobs, more war? Well now it's John McCain: More tax, less benefits.

(also posted at the NOW! blog)

Follow Jason Rosenbaum on Twitter: www.twitter.com/j_ro

Comments

[LemonMeringue]

Senator McCain, if you get your way and make me pay tax on the health insurance my employer provides me, I will not be able to afford the premiums.

It costs a fortune now and it hardly covers anything.

[Opt1musPr1me]

Its things like these that makes me wonder why in the world would former John Edwards, Clinton, Obama speech writer Wendy Button would switch to vote for McCain. I am guessing she got an offer she couldn't refuse or she is just delusional. read her ridiculous article here:

http://www.thedailybeast.com/blogs-and-stories/2008-10-28/so-long-obama/

She is basically voting for McCain because she said the Democrats got too negative..­....Do you see where i am going with this?

[Wal2009]

This health Care Plan from McCain is another joke plan and the people who will be penalized are the elders and sick.

All healthy and young employees will go on individual plan and the only people on company plan will be elders and sick. With the high risk in the group, the premium will be very high to afford. They will see the premium going up and up.

I don't see why 72 years old can penalize old people with this recipe of disaster.
Seniors should vote against McCain.

[Teeninchee]

He is not impacted by it. He gets socialized medicine via medicare, veterans benefits

[brynn6]

I doubt he enrolled in Medicare, he has his Senate plan and the VA.

[MinuteMan]

> I don't see why 72 years old can penalize old people with this recipe of disaster.

You forget that there's a difference between 72 year olds who have government paid healthcare­—and are rich anyway—and normal folks. McCain is an "elitist" of the "let them eat cake" variety!

[JLJL]

All politicians are enjoying a great healthcare plan with all preexisting conditions covered and a real low deductible. If the GOP retards were give $5,000 and their insurance taken away from them, they would change their tune in a heartbeat about the value of McCain's healthcare proposal.

[Kynn]

McCain's grand brilliant cure for the health care industry is to tax the working and middle class and businesses.

Nothing else, no hocus pocus, no aid for the down trodden. Just screw everyone over in the hopes that they can bring in more profits for the insurance companies.

[Teeninchee]

we were wa rned.

[phoebie]

As a business owner of 20 years, we made a commitment to our employess that they would have health care paid in full by our company. Consider the following if we will be required to report this benefit on their W-2s as income per McCain's plan.

This is pure speculation on my part but following the current procedures, this is what may happen. Let's say your health insurance costs your company $5,000 per year and you get a $5,000 credit on your annual taxes. For a $5,000 dollar increase in your paystub per year, another $382.50 will be withheld from your paychecks annually just for the FICA - not taking in consideration the increase of federal and the state withholding. Your company would also be paying another $382.50 a year for you as we match FICA withholdings to the IRS. Increased FICA payments are not refunded.

This is only if your health benefits do not cost more than $5,000 per year. If the cost is more than that, the extra will be taxable income on your part.

I've yet to see anyone comment on McCain's proposal from this aspect. I am certainly not a tax expert and could be totally off base, but I would appreciate any comments to see if the above would actually happen.

[Carolab]

There was a discussion on Thom Hartmann's show about this. People are going to be forced to go out into the market to buy their insurance, they are going to be discriminated against and they are going to be refused or it's going to cost them so much they won't be able to afford it. The plan is for the insurance companies to insure the youngest, healthiest people. They don't care about anybody else.

[philko]

Dont confuse "tax credit" with "tax deduction". McCain proposes a credit, which means that people's total TAX BILL will go down by $5,000. If it were a deduction, your analysis would be essentially correct (although, I've heard some waffling about whether the insurance "income" would require FICA taxes or not).


For people whose employers will continue to provide insurance, McCain's plan should result in a net benefit. (Example, you provide $5k worh ot health insurance, your employee reports it as income and pays, say 25% income tax on it, for a total of $1250 extra taxes. Then, the $5k credit comes in and the employee comes out ahear $3750.)


The problem is, the prevailing analyses predict that one result of McCain's plan is that many employers will stop offering insurance to their employees. Most of them probably won't bump up the employees' wages to compensate, so there's going to be a LOT more people who are going to have to find insurance for themselves, pay much more for it than if their employer was buying it and, as a final insult, run into that whole "preexisting condition" thing that insurers are forbidden from taking on to group policies, but is rampant on the individual side of the market.


So - it ain't really the economics of McCain's plan. It's the unintended consequences. (yeah, I know, I'm really giving them the benefit of the doubt with that "unintended" stuff).

[Jason Rosenbaum - Huffpost Blogger]

The other problem is McCain says the tax credit goes directly to insurance companies, so there's no way extra money finds its way to your pocket.

[LeftRight]

On the other hand, the increased taxes that I would be paying on my insurance premiums would result in an increase in my taxes of over $5,000!

[SailFree]

Well, if YOU made the commitment, why expect THE GOVERNMENT TO PAY FOR IT BY GIVING YOU TAX CREDITS?

Why don't YOU give the extra money to the employees as SALARY and let them decide what THEY wish to do with it?

[Gotowarmissagnes]

While there are many problems in Mccain's plan, I think there is one problem in focusing on the plan to tax employer provided benefits. That problem is that the current system is INCREDIBLY unfair and unjust. Because benefits are supported through tax deduction, the LARGEST subsidies for health insurance in the U.S. go to the RICHEST people. I just wish Obama-Biden could better position their criticism of the MCcain plan to allow any reforms they plan to address this gross inequity in the system. Any change should, at a minimum, cap the tax deductibility for health insurance (in effect, tax employer provided health benefits) for the most well-off and channel that tax income into subsides for poorer people.

[SailFree]

Tax employers to dissuade them from getting into the health bureaucracy business. Does anyone CARE that one of the reasons GM and Ford and other EMPLOYERS OF LOTS OF PEOPLE teeter on the brink of bankruptcy is health care costs? Is a company that has gone out of business of much benefit to the former employees, either in providing salaries or health plans?

ALLOW EMPLOYEES to purchase and own and manage their own health care. That's the most efficient way, the American way.

[LeftRight]

That might work, except for the minor fact that more than 3/4 of Americans CANNOT AFFORD INDIVIDUAL HEALTH INSURANCE PLANS!!!!

[Jeans]

The sad thing is, only inmates in America have a constitutional right to adequate healthcare. You can not buy health insurance as the big insurance companies dictate all the rules and make up more for their profit as they go along. Any pre-health conditions you're just screwed. One has to figth tooth and toenail for every penny you can get out of the health insurance. Now McCain wants us to tax the health insurance (either individual or employer? not sure how that works) putting us in higher tax bracket? Cindy's in a lower tax bracket than I am now and I made $110 thousand last year, and she had a cool 4 mill taxabe. Something is not right with this whole picture.

[lihartke]

She's not in a lower tax bracket -that's ridiculous who told you that? Our system taxes people based on the net income. There's no way Cindy pays a lower bracket than you. She probably paid hundreds of thousand in taxes how much did you pay? Her family earned that $ and she pays for way more in this society than you or I ever will or have. Without Cindy a lot of people wouldn't have a job. I'd love to see all these business just close their doors and tell everyone that "hates them sooo much" to kiss off and fend for themselves. Without business this country is nothing. Which is where Barrack will take it.

[lucite]

Please don't be blind. The tax loopholes offered to the higher income bracket is obscene. Financial crisis? Research who pays what taxes and who carried the bigger burden in ratio to earnings and tax payments. The fact of the matter Bush's tax plan created a big deficit on what was collected yearly by the federal government. People like Cindy have cut and run from this country to avoid tax payments and insure higher corporate profits. How UNPATRIOTIC

[Carolab]

Well, she certainly doesn't want anyone to know. Nor does the McCain campaign want you to know how much "campaign" money came from "Cindy's money" and for which she was reimbursed. The FEC has some issues with that.

http://mediamatters.org/items/200805080011

[DIdaho]

It's not a question of brackets. Anything under 100K pays FICA, nearly 16% when you consider it's half paid by the employer (from your check) and has 2%+ medicare on top of social security, before you pay any income tax. Capital gains, on the other hand (from which Cindy probably derives most of her income) is 15% and exempt from FICA. So yes, she pays less.

I've been in business for more than 30 years, don't tell me that tripe about how the McCain plans "helps small business." It's a tax system that rewards mega-companies at the expense of "real" small businesses that's a bigger problem. How many small breweries did Budweiser run out of business? How many smaller distributors would there be in Phoenix if Cindy didn't have a monopoly? And don't give how much Cindy earned it. Her father did, but she didn't. And she doesn't "give" anybody a job.

In addition, it's not rich people who buy beer. Giving a middle-class tax break will probably earn her more money than cutting her own taxes.

[SailFree]

Health care cannot logically be A RIGHT! A right is something which you have and which other people cannot take away and which does not impose on anyone else.

Defining health care as a right creates a situation of involuntary servitude, slavery, in other people who must have their money, their property, their time, their effort, taken away in order to provide what you demand.

Health care is not a right.

[Jason Rosenbaum - Huffpost Blogger]

Health care is not a right per se, but good health should be. Free speech is a right, and then we have laws to protect free speech. If good health is a right, then we will have laws (health care for all) that protects that right.

[JLJL]

McCain never really wanted to do anything about the healthcare plan in the first place. He has been dragged into this by Democrats making healthcare an election issue. Republicans have always confused this issue by stating that "America has the best healthcare in the world" while the rest of us are really trying to bring up the "healthcare accessibility" issue. No one is disputing we may be technologically advanced. Rudy (9-11 guy) was the worst one in confusing this issue, but the rest of the GOP crowd don't really care about this issue in a serious manner either. They are just hoping that people will fall for this gimick.

[lihartke]

McCain know his supporters want healthcare for everyone legally in this country and he will get it done!

[BannedFromCommenting]

so, meaning what? Healthcare like his??? Wait he is on Medicare right?? Socialized program yes??

[lucite]

Try spending 4 hours in a waiting room only to leave in anger and never seeing a doctor. How about being billed for $684 for an emergency visit that never happened? We do have the greatest health care system in the world. It is great for a chosen few.

[BuzzEGreen]

A big problem with tying health insurance to employment is that people can become chronically ill or permanently disabled through no fault of their own. They lose their jobs. COBRA runs out. And then they're forced out onto the market, on their own, with not only no income but huge medical bills. I've seen this happen to two healthy, hardworking friends of mine -- one has an incurable disease and the other became a quadraplegic after a tree fell on his car.

As a liberal, who is proud to pay taxes and who cares about my fellow citizens, I want to live in a society where we take care of people like this (and children and the elderly), like other civilized countries.

[NM Moderate]

This is what bugs me about the media coverage of this election. I have been suspicious about McCain's health care plan for precisely this reason, yet no one in the media has pressed McCain for details of his plan. It is so frustrating to think that this buffon may get elected without anyone actually understanding what it is he is proposing on health care, taxes, education, etc..!!!!!

[DeniseD]

We all know that John McCain's health plan is going to raise our taxes. I just wish that Obama would talk more about this on the campaign trail. He should be saying "I won't raise your taxes, but Senator McCain will."

[gwismyhero]

What the heck is going on? These guys are purposely trying to make McCain lose. Da.mn, when he went against his own party, he sure pi$$ed 0ff a few people.

[paulfree17]

As a business owner I can certainly take umbrage to the statement that Employer based health care has certainly worked for us.

While McCain has stated that we lose jobs overseas because taxes are lower the fact is that jobs often move overseas because health care costs are lower. The third largest expense my company has after payroll and raw material is healthcare. Even in a failry profitable year we pay far more in healthcare costs then we do in taxes.

The countries to which American companies are exporting jobs all have some form of social health care system. This puts US companies at a worldwide disadvantage in a global economy when we compete against companies that do not have to provide employer paid health insurance to their workers. This is not an insignificant reason for the loss of manufacturing jobs in this country.

[DrVeruju]

"The countries to which American companies are exporting jobs all have some form of social health care system. "

These systems have to be paid for and often the employer has to match the compulsory deduction imposed on the employee. The bottom line is that the profit is taken out of health care insurance when it is a universal government-based system. (But, in turn, you have to be ruthless in rooting out the inefficiencies in the bureaucracies that develop.)

[paulfree17]

The fact that health insurance companies are "for profit" is one of the resons that health insurance is so expensive. After all, the premiums we pay have to cover the profit and the administrative cost of the insurance provider. It is true that there can be inefficiencies in the the bureaucracies that develop and these have to be controlled and corrected. But to think we do not pay for inefficiencies in the for profit insurance market is also naive.

[biglover]

paulfree17 is a man who understands what is really happening in this country.

[Ritmo67]

Not entirely true.

In China, labor is virtually in the general category of 'slavery'. There are no benefits for the rank and file. If you get injured on the job, for example, you're quickly and easily replaced. You're simply out of a job. That's their incredible advantage - labor that is truly a disposable asset, and will continue to be for the foreseeable future! Just look at the ripple effect of the financial meltdown on factories in China. Many factory workers simply and summarily locked out and left to argue about wages owed.

No, I see good health care as a mark of civilized society. Granted, there may be many factors to be balanced, not the least of which is that of human nature to take anything 'free' for granted. It is about time to stop treating insurance as a luxury. And if you are one of those unfortunate souls who cannot afford it you might as well buy a lottery ticket to financial ruin and hope you never win - because that is a sure-fire recipe for disaster.

[foxbat]

From the article,

"Why would they leave?" said Holtz-Eakin. "What they are getting from their employer is way better than what they could get with the credit."

Guess there's no more room under the Straight Talk Express to throw Doug under. He should have been one of the early ones. Wonder if he's McCain's nephew?!?!

[bygollymissmolly]

It must be said again, because it's still true. We are the only industrialized nation that considers health care to be a privilege and not a right.

[jolebo]

Hear Hear

[biglover]

Canadians are fighting now to keep their universal coverage because there are those who want to privatize their care. Lots of money to be made with private health care as we know in this country. Unfortunatley, the only ones making more are the insurance companies.

We need a system like France, Norway and Sweden. I have a friend who lives in Denmark and they have excellent coverage. Unfortunately he contracted Cancer and he can never move back to the US because his condition would be considered pre-existing. There is no such thing in countries with socialized medicine.