McCain’s Fuzzy-Math Health Care Plan

The New Republic: The Ariz. Senator Is Supposed To Keep Taxes From Going Up, But It May Not Work Out That Way

(The New Republic)  This column was written by Jonathan Cohn.

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If there's one thing we all know about John McCain, it's that he's not the candidate who's going to raise taxes. But is that really so? A new paper out, from the Center for American Progress, suggests otherwise.

I haven't had a lot of time to look at it — or to vet it with other sources or get a response from the McCain campaign. (Hope to do so in the coming hours and days.) So what follows should be taken as a very tentative reading, until I learn more. (I'm blogging about it since the conclusions do make sense upon initial reading.)

The paper, by James Kvaal, Peter Harbage, and Ben Furnas, looks at what McCain's health care plan will do the tax burdens of various Americans. As you may recall, the McCain has indicated he wishes to change the tax treatment of health insurance. This sounds like an archaic, technical tweak but, in fact, it could have profound importance.

The government currently makes premiums for group health insurance — that is, health insurance you get from your employer — exempt from personal income and payroll taxes. McCain has suggested he would get rid of that exemption. (I say "suggested" for a reason, but more on that in a second.) In its place, he'd offer a tax credit worth $2,500 to individuals and $5,000 to families, good for the purchase of any insurance policy. It'd be a refundable credit, so that people too poor to pay taxes could simply take the credit as cash (assuming they spent it on health care).

The existing tax break, like most deductions that apply to income taxes, is regressive. If your tax rate is higher, then the deduction is worth more. And, at least initially, McCain's policy would look more progressive, since it'd be worth the same amount to all taxpayers, regardless of income. In principle, that's a good thing.

But note the key word there: "initially." McCain's advisers say that the credit would grow at the rate of inflation — that is, it'd get more expensive at approximately the rate of other goods (or, at least, how the government measures the price increases of other goods). Health care expenses, of course, keep going up faster than other expenses, mostly because of medical technology and the (largely unrestrained) demand for it. So if people kept paying for the same level of insurance, the tax credit would quickly fall behind: They'd end up paying more in taxes. According to the report, "In 2009, the credit will cover 36 percent of an average employer-provided family policy (based upon CBO projections). By 2018, however, the credit will cover only 24 percent of the cost of the same policy."

(This is all in addition to the fact that, for many families, the credit will not be enough to buy a policy — even now — because health care for families costs a lot more than $5,000 a year.)

Now, to its proponents, this feature of the tax credit — the fact that it increases so slowly — is a feature, not a bug. It's designed to encourage people to be more thrifty in their purchase of insurance. Ideally, they'll go for less generous policies — ones that don't subsidize so much wasteful care.

But this is where we run smack into the real problem of the McCain plan. (Well, one of them.) This is an incredibly crude and ineffective way of controlling costs. It puts the entire onus on the consumer — basically, it says to everybody "spend less on health care" without doing anything to make sure that people can actually get decent health care at that price. There's no guarantee of minimum benefits, in terms of services covered or limits on out-of-pocket expenses; nor is there any guarantee of available coverage for people with pre-existing conditions. (Folks with pre-existing conditions could still get coverage through employer policies. But, of course, as the tax deduction goes away, employers will have less incentive to give such coverage in the first place.)

The better way to control costs is with a variety of approaches that starts with a guarantee of coverage to everybody. But, of course, to do that, you need to create some sort of new insurance arrangements — a government-regulated pool of plans or a government-run plan like Medicare. That's what Democrats (and some Republicans) have proposed. But McCain dismisses that as "big government."

So changing the tax treatment of health insurance, as McCain has suggested he would do, is a worthwhile endeavor — *if* you do it as part of a broader package of reforms. But outside of those reforms, it's a rather clumsy and potentially dangerous way to reduce people's health insurance coverage (or to raise their taxes). Either way, it's not such a hot idea.

OK, and now to that caveat I promised at the beginning. Unlike Barack Obama, McCain hasn't been clear about exactly how he proposes to change the tax treatment of health insurance. And there are rumors around that they might not get rid of the existing deduction entirely, preserving it at least for payroll taxes. It's not clear how that'd affect the paper's conclusions, since the paper assumes the entire deduction goes away. But, of course, if McCain keeps some of the existing tax break, then either his plan won't have as dramatic effect period — or it will run up a higher deficit.

[paris1969]

McCain has got the game ... like it or not ... the Dem super-delegates can''t dictate who the president will be!!

[joyous88]

tait2;

you are a republicon LIAR, what you are putting out is a LIE,

why don''t you fascist dogs return to your right wing

computer rooms and shut the ***** up.

McBushSame has exactly the same economic plan that his daddy bush has,

and look what it has done to your country

republicons are the new NAZI''s

[shippg-2009]

Paul Zane Pilzer wrote a book about how to fix the health-care mess. He pointed out how employer-provided insurance was unfair to begin with.

His solution involved tax credits for everyone (like this article), but also ending employer-provided-perks, changes in the amounts doctors charged, how insurance companies worked, and all kinds of things. I do not think it is possible yet, because these parties have competing interests (all related to money).

Pilzer''s solution was not a government hand-out, but an overhaul of everything. The system is broken from the ground up.

[samthetvcat]

Is McClueless even going to be able to push through Congress the revocation of the employer tax credit for healthcare? If he brings on Romney who''s successfully enacted universal healthcare at the State level to do the same on a Federal level to first drive down healthcare costs as a way to triangulate, he could probably better campaign on repealing the tax credit. Otherwise, yeah not sure the revocation covers the redistribution to individuals who would then take advantage of the credit to purchase insurance.

Geez, he''s so out of it though - I really think he''d need Romney''s clout to give his campaign the edge over the Dems.

[samthetvcat]

PS So McClueless is searching for a ''message''? How about branding himself as a check and balance on Congress? Saying he''s going to ''fight hard'' for a Conservative Supreme Court nominee because the Dem controlled Congress is likely to fight hard just as hard back (point being to libs that he really doesn''t have the power at all, and point being to conservatives that he will in fact go to bad for them - he could even go so far as to throw some names of some REALLY far right people out there to force Congressional Dems to show their hands).

We all despise Bush but it''s the abuse of power we despise - Barack who''s all about the power, coupled with a Dem Congress and a Dem Supreme Court is liable to raise alarm bells in swing states. And don''t numbers show that the economy does better when Congress and the President are from different parties?

[wayne081]

joyous88 needs some joy in its life. What a shmuck!!! This article my Cohn should never have been published. He admits "he has not had time to look at it." So don''t believe a word of it. Obama doesn''t have a clue as to what his health care plan will cost. In fact he doesn''t have a clue about much of anything. Obama is just a typical politician, pandering to anything and anyone. He flip-flops on most issues and is vague about the rest. Beware of this dude!!

Somebody please pass Joyous a couple of Valiums...

[brianbwb-2009]

Regardless of who is president, trying to enact health care reforms without regulating the costs of the most common vital procedures, is just more Reaganesque "trickle down", taking tax money, and pouring it into the pockets of those least in need, the rich.

For the working class, and the poor, tax credits make no sense at all, unemployed people cannot pay for the health care first, as they don''t have the money. McSame uses the word "refundable", which is to tell people who don''t have money to pay first, then they would be reimbursed, what a crock.

McSame''s plan is all sound and fury, signifying nothing.

[hungry1968]

Why do they keep calling this "McCain''s Plan"?

This is the IDENTICAL plan, doomed to failure, that Bush put out just a few months ago. The ONLY difference is that Bush''s doomed plan, offered $3000 in tax rebates.

Raising MY TAXES, isn''t going to get these people health insurance. People that are poor CANNOT afford $12,000 / year (or more) for health insurance, whether they get a tax rebate or not.

Once the "worth of my benefits" becomes taxable, and NO ONE is getting that tax money as rebates, where does it go? Into the national treasury? Doubtful - likely there will be a loophole in McCain''s lobbyist inspired law, (AGAIN), that will allow the HMO''s to take that money, whether they provide the benefits or not - all at tax payer expense.

[omnibus66]

McCains ''plan'' is a total sham. It doesn''t provide enough to buy good insurance, and does nothing to control what the insurance companies can charge. It throws the individual at the mercy of the market, and if you have a pre-existing condition, it will not be covered.

Another Republican giveaway to big business, nothing more. $crew the people.

[babooph]

"Fuzzy math", a Bush term -the propaganda system left out that arithmatic ,even on a grammar school level is all fuzzy to the idiot.

[joyous88]

Jtait2,

republicon fascist, is Obama the president now?,
or is this still the problem of McBushCain and
the Nazi republicon evangelical party?

get the truth for once BUSH and his cabal Leiberman and McSame created this mess,

[joyous88]

jtait2 is from the republicon noise machines computer banks,

he get on here a spins the truth like a good republicon

he is just another LIAR, like a good republicon

[elz523]

Heres the thing, employers who are stuggling to maintain coverage in the current environment will find it even more difficult when the government takes away the tax break for doing so. This will cause more people to lose insurance coverage through their employer and eventually require everyone to buy their own coverage. As the article mentions, McCain is only going to cover 1/3 to 1/2 of the cost of coverage in a tax deduction (and this goes down if healthcare inflation remains high). So in the short-term more people will be covered that is currently the case, in the longer-term, fewer will people will have coverage and those who do will have poorer coverage.

This just reinforces the idea that McCain has a short-term focus and his ideas, like Bushes before him, will be disastrous in the long-term.

[elz523]

In this time of crisis, we need the Best.
We need Experience. We need Hillary and Bill.

Under the Clinton administration, the average income went from $43,000 to $49,000 a year. The budget was balanced and inflation, including oil and gas prices, were kept in check.

We can still have Hillary.
It IS up to US. All we have to do is let it be known that Hillary backers are NOT going to vote for Obama under any condition. Thats all it takes. If we don''''t play thier game with them, there is no game and the candidate that most Democrats cast their votes for in the Primary will be the next President of the United States!

Write in Hillary''''s name on the November ballot. Call your local voting place,
(on your registration card) and find out if you have to do anything special to receive a write in ballot. In some states you have to be registered as an
Independent. Do this before October 1st.

REMEMBER!! Obama is just the "presumptive" Democratic Candidate. The Super Delegates, who can change their votes right up until the last minute, can still make Hillary Clinton the Democratic Candidate at the Democratic National Convention in August.

LET THEM KNOW YOU WANT HILLARY!!!!!


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Posted by JTait2 at 07:58 PM : Jul 05, 2008

You are not a Democrat. No Democrat is this stupid. If you support Clinton''s ideas you would also support Obama''s. Clinton does.

[smurfcrusher]

JTait2 is just another republicon trying to fool Democrats into diluting their vote.

Apparently, he thinks Democrats are as stupid as Republicans, if he thinks that ploy will work.

[soldat44]

''McCain%u2019s Fuzzy-Math Health Care Plan''

Everybody''s health care plan is and has been fuzzy. Mr. McCain is not the first or last.

[elz523]

JTait2 is just another republicon trying to fool Democrats into diluting their vote.

Apparently, he thinks Democrats are as stupid as Republicans, if he thinks that ploy will work.


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Posted by smurfcrusher at 10:51 AM : Jul 06, 2008

I agree. Given JTait''s focus on only couple issues and how little it strays from its script, I am guessing it is paid by the RNC to blog with the purpose of suppressing Democratic votes. Sounds like another brain cramp of Karl Rove.

[joyous88]

any one remember reagannomics?

Fuzzy math (really the same as LYING) is just one more trick in the republicon bag of ROVIAN tricks,

Reagan started it and it has continued to this day,

want to see the result of republicon math, go buy a gallon of gas.

[joyous88]

elz523,

right on!

the republicon noise machine is in full action these days