Wednesday, April 30, 2008

John McCain's health care disaster

John McCain rolled out his health care plan yesterday. For the tens of millions of Americans who currently receive their benefits through their employers, it promises to be a total disaster, as the average family’s premiums will more than double. From the New York Times:
Mr. McCain’s health care plan would shift the emphasis from insurance provided by employers to insurance bought by individuals, to foster competition and drive down prices. To do so he is calling for eliminating the tax breaks that currently encourage employers to provide health insurance for their workers, and replacing them with $5,000 tax credits for families to buy their own insurance....

Democrats and some experts said the proposal might lead some employers to stop offering health insurance, and questioned whether the tax credit would cover the cost of private insurance.
There is no “might” about it, the proposal will cause many employers to drop health care insurance altogether or significantly roll back their offerings. The tax break that employers get is the most significant incentive for them to offer insurance to their employees. Without it, the only incentives to an employer are intangible. For instance, more competitive benefits help attract better workers, and healthier employees are more productive. But how many companies will continue to shell out $7,000-8,000 per family per year for coverage if they are not able to deduct those costs? Probably not that many.

Based on the most recent statistics, the tax credit will not nearly cover the cost of private insurance. According to the National Coalition on Health Care, the total cost of the average family health insurance plan is $12,100. Of that the average family pays $3,300 in premiums with the rest covered by the employer. Under McCain’s plan, that average family would receive a $5,000 tax credit to offset the cost of the plan, leaving the family to cover the remaining $7,100 in premiums.

The average family who pays $275 per month for health insurance would see their premiums rise to $592 per month under McCain’s plan, a 115% increase.

(I am very lucky that I have an employer that offers a better than average plan and asks me to pay less than the average. Applying McCain’s proposal to my situation, if my employer decided it would be cheaper for them to drop employer-sponsored coverage, my monthly cost for the same plan that I am in now would more than triple from $225 per month to $750 per month.)

McCain suggests that his plan will “foster competition and drive down prices,” but the retail price of the average plan would have to drop from $12,100 per year to $8,300 in order for the average family to see no premium increase. In an era where medical premiums have nearly doubled in the last seven years, can anyone rationally expect that health insurance costs will drop 31% as a result of McCain’s plan? No.

While the promise of a $5,000 tax credit will sound like a great plan to many voters, it is nothing more than another device to shift the cost away from corporations and onto the backs of the working and middle-class. The McCain plan is a loser for ordinary Americans.

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