Editore"s Note
Tilting at Windmills

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October 28, 2008

MCCAIN'S HEALTHCARE CONTRADICTION.... How bad is the McCain healthcare plan? So bad that the McCain campaign is now undermining its own proposal.

Douglas Holtz-Eakin, McCain's senior economic policy adviser, told CNN that younger, healthier workers probably won't give up their employer-sponsored healthcare plans because they would have no incentive to change. "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."

That's true. Taking a credit given by a McCain administration onto the open market would be very unappealing, especially those who are getting "way better" employer-sponsored healthcare.

But here's the thing: this isn't supposed to be the McCain campaign's argument. As Ezra explained:

Young workers are cheap. They don't need much health insurance. The theory of the McCain plan is that because of this, they will take their tax credit and head over to the individual market, either purchasing very cheap health care or no health care at all. This, in theory, will bring down total spending.

Holtz-Eakin is saying the theory may not work. The individual market sucks. You can be eliminated for preexisting conditions. Administrative costs are sky-high. There is no protection against the whims of your insurer. The same policy you had with your employer will, for these reasons and others, cost $2,000 more on the individual market. As such, young people may not exactly want to throw themselves into that situation.

Moreover, what young folks get from their employers is much better than what they'd receive on the individual market. Employer-based coverage plans are not aimed at young people who don't need much in the way of health care. They're aimed at older workers, and workers with families, who do. If the young workers, who are the good insurance bets, can't get better coverage on the individual insurance market, imagine how much worse the coverage will be for those who actually need to avail themselves of health care services.

Quite right. And what makes McCain's plan so striking is that it would discourage employers from providing the "way better" healthcare, precisely so workers would take McCain's credit onto the open market. "Why would they leave?" Holtz-Eakin asks. Because McCain wants them to.

"What they are getting from their employer is way better than what they could get with the credit," Holtz-Eakin argues. Well, sure. The next question, though, is why Holtz-Eakin's boss believes the smart thing to do is to push Americans away from their "way better" healthcare, taking inadequate credits that the McCain campaign now concedes are worse than the status quo.

Update: Atrios' summary is far more straightforward than mine: "So, the [McCain] plan is to increase taxes on people with decent health care plans and provide a tax credit for people to buy shitty ones. That's some wealth spreading we can believe in, my friends!"

Steve Benen 1:20 PM Permalink | Trackbacks | Comments (17)

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They won't have any choice because the employers will simply stop providing health insurance.

Employers have a financial incentive to do this. The employee's health benefit is to be taxed as ordinary income (employers' contribution to health coverage) This "income", the health benefit, will revert to the employer if health insurance is not provided.

I don't favor continuing work based coverage but the McCain plan is an incidious shell game that will leave fewer people covered with inferior health insurance--that's the nature of the open insurance market.

Posted by: Cycledoc on October 28, 2008 at 1:28 PM | PERMALINK

The next question, though, is why Holtz-Eakin's boss believes the smart thing to do is to push Americans away from their "way better" healthcare, taking inadequate credits that the McCain campaign now concedes are worse than the status quo.

Oooh, oooh, I know! Pick me!

Because McCain wants employers to be able to drop employer-provided health care without providing a government-funded safety new instead?

(Because, after all, a successful single-payer insurance would reveal conservatives' faith-based belief system to be even more unsuited for 21st century reality than appears now...)

Posted by: Gregory on October 28, 2008 at 1:31 PM | PERMALINK

Since the McCain campaign is so unencumbered by facts, accountability or media challenge, I can't understand why they don't come up with a fountain of youth proposal and stick to it.

Posted by: Danp on October 28, 2008 at 1:38 PM | PERMALINK

It doesn't matter how fit the young people are. If they work out, or play sport, they will want health coverage.

Posted by: royalblue_tom on October 28, 2008 at 1:41 PM | PERMALINK
As such, young people may not exactly want to throw themselves into that situation.

Grumble, grumble. I wish people wouldn't use "as such" to mean what it doesn't mean. Grumble.

And get off my lawn, you damn kids.

Posted by: noncarborundum on October 28, 2008 at 1:47 PM | PERMALINK

So, McCain's health care plan is a non-starter for single people. Imagine how bad it will be for families - particularly families with those special needs kids for whom Palin has expressed so much concern.

Posted by: Dennis - SGMM on October 28, 2008 at 1:48 PM | PERMALINK

One thing to remember - really the most expensive people (until you get to much older or retiree health) are women in their late 20's early 30's. The baby making years are expensive and almost nothing is as expensive as a premature delivery.

Posted by: GroupHealth on October 28, 2008 at 2:10 PM | PERMALINK

This has always been obvious. The McCain plan, by taxing benefits, discourages those benefits. QED.

It's not a bug, it's a feature.

What the corporate health care insurance industry wants is to a) get more dollars in premiums paid in, and b) reduce dollars going out to cover illnesses.

How convenient that a REPUBLICRAT health care policy would do just that.

Problem? People right now are a little irked at the "free market" and at "big corporations."

People actually WANT employers to cover health care, and they WANT affordable health care if they are self-employed or if their employer won't buy it.

I've said for many years (especially when I, with a pre-existing condition, was self-employed) that all I wanted was to "buy in" to the federal "group," which is so large that it can actually negotiate with insurance companies to get great rates. That's Obama's plan and it is genius in its simplicity.

When everyone has the choice to buy into the federal plan, you'll actually see some competition for individual purchasers.

It is so obvious that even Holtz-Eakin can't pretend it isn't true.

Posted by: Cal Gal' on October 28, 2008 at 2:11 PM | PERMALINK

5,000 dollar tax credit.

What if my income is such that I don't owe close to $5,000?

Does the balance become a "stimulus check?"

If so, that sounds like a redistribution of wealth.

Taxing my employer-based healthcare is great. It will be how McCain finances his school voucher plan.

In short. It's a plan doomed from the start. No one, from any tier
benefits, except the employers who would quickly have a sicker and poorer workforce!

Posted by: Tom Nicholson on October 28, 2008 at 2:30 PM | PERMALINK

Okay, but what is the strategy behind revealing this at this point after having promoted the plan as the answer to rising costs?

I am beginning to think that the GOP has offered such garbage to the electorate so as to make their 2012 offering appear like a garden of roses.

Posted by: ThatGuy on October 28, 2008 at 2:31 PM | PERMALINK

Even if an employer decides to keep the same coverage for employees, at the same price, the employer's costs will go up! The employer half of the FICA tax will tack on about 6% to the benefit.

Worse is the nightmare that will occur for anyone who changes jobs or changes their private policy during the year. The government would become intimately involved with your insurance provider since they have to write them a check.

Overall, a very complex accounting system will be required to track the dollars.

Posted by: tomj on October 28, 2008 at 2:52 PM | PERMALINK

I think there are some merits to what McCain is *trying* to do, which is to reduce the unnatural link between employment and health insurance. However, employers aren't that keen on this, because they actually have a vested interest in their employees' health.

I also think that Obama's plan is going to end up way more expensive than what is currently projected. While I do think we need to solve this problem, some sort of hybrid approach may be needed.

There was an article in USA Today over the weekend about just this sort of plan: apparently Senator Wyden has a bill with bipartisan support that perhaps the winner of this year's Presidential election should take a good look at. I don't know much about it except what USA Today suggested. But what I *do* know is that Obama's and McCain's plans are somewhat flawed.

Posted by: Franklin on October 28, 2008 at 3:08 PM | PERMALINK

Because I'm in a particularly curmudgeonly mood (link at my name will take you to yesterday's post and refreshing the site will take you to today's frosty missive), I'll add that I reported that months ago.

But McCain isn't the sole numb-nut in healthcare policy. Kennedy and Enzi are busy meeting with disparate power brokers and are crafting healthcare legislation to roll out at the beginning of the 11th Congress. Professional nursing has been left out in the cold. Building universal healthcare from the bottom up with essential preventive and public health concepts is an empty shell without professional nursing - it provides 95% of ALL reimbursed healthcare services.

Nursing is grossly underrepresented in media reportage, in BLOGOSPHERE reportage (Steve and Hilzoy - are you reading?), in health policy debates, and in health care decision making.

Yet by statue and professional ethics, nursing is charged with serving as the patient's advocate and for specifically addressing the health and well-being of all patients. It is an independent profession, but it is accorded second or third class status.

I've just spent the past months trying to get nursing issues heard by anyone - the Obama Campaign, the McCain Campaign, Kennedy, Kerry (who just published an op-ed about the use of evidence-based medicine to drive Medicare reimbursement), and many others.

No one seems to give a damn.

So when nursing fails as a profession - and it is on the brink of that for a variety of reasons, you will get things done to you, but you will not be cared FOR by professional educated to provide comprehensive assessments, to address your individual health needs, to empower you with the resources and tools you need to successfully manage your health challenges, and to support you when you are ill, injured, disabled, or dying.

What I just don't understand is why no one gives enough of a damn to at least have a listen and pay attention to the three million people who are literally killing themselves trying to take care of you against all odds.

Posted by: Annie on October 28, 2008 at 3:24 PM | PERMALINK

What the corporate health care insurance industry wants is to a) get more dollars in premiums paid in, and b) reduce dollars going out to cover illnesses.

BINGO!!!

Until this is openly acknowledged by everyone as a FACT that complicates our current system, no meaningful long term reform is possible.

The theoretical value add of insurance is the ability to spread risk over a large pool. There is no other value-add possible for insurers to add to the system. All individual based models for buying health care are fundamentally flawed when you are forced to add a middle man that does nothing but add cost. It might work if all insurance agencies were not-for-profit organizations that served their members by managing the premiums and the risk pool. Instead, their fiduciary duty is to maximize returns. The only way to do this is to reduce claims paid and increase premiums collected as the previous poster noted.

Wake up America.

Your insurance company does not provide health care. They collect money from you and then decide how much they can get away with keeping.

Do the math.

And... the administrative expense your health care practitioner builds into her costs to you increases when there are multiple private insurers, each with different reimbursement schedules, forms to fill out, etc.

Posted by: lobbygow on October 28, 2008 at 4:28 PM | PERMALINK

Sigh ... yet another attempt to buttress the argument for keeping "employee benefits" as-is!

Folks, it began as a way to get around wage/price controls, and was kept intact so they could justify not raising salaries to their proper levels. They have thus been insulated from any real "market reform" (even most unions have sought better benefits in lieu of wage increases).

Meanwhile, it's created a HUGE "customer-base" for insurance companies, who have thus not had to innovate and offer wider (and narrower) selections to smaller groups, or individuals seeking "coverage" -- and made it even harder to rein in the costs of medical services.

Finally, it's allowed "healthcare pricing" to continue to exist in Fantasyland: (1) no connection to actual costs, since almost nobody pays them; (2) no accountability for overruns (insurance pays, or denies based on technicalities; caregivers/physicians/hospitals charge based on what the insurance will pay, not the actual cost of the service; most patients never see anything but the huge bill they DIDN'T pay, thanks to insurance; etc.); (3) no pressure to bring down costs, just a cry for "universal healthcare" -- funded by tax-increases, run by government, watched over by government, etc. (anyone consider how "effective" such agencies as the FDA have been ... how 'bout Homeland Security, or the Treasury and SEC ...?)

read my blog for more thoughts, not all of which are my own ...

Posted by: Steve Trinward on October 29, 2008 at 2:53 PM | PERMALINK

OK here's a fix to start.

1- All insurance polices are the same benefit package (Insurance companies now compete with FINE PRINT) There could be 26 different polices or more, say A-Z. No matter who you buy your insurance from its the same benefits per policy (A is always A etc)
That allows insurance companies to compete with internal efficiencies.

2- No one knows what anything costs. To allow Providers and Facilities to compete fairly (Capitalistic way) all providers and facilities who accept any insurance or government payments, MUST post all fee's charged. These fee's are NOT discountable no matter who pays for them.

3- Create a board of medical professional ( all members must be active in providing medical care, NO administrators) to rate medical services with a specific criteria for all.

4. The only negotiation allowed is the price for prescription drugs. Any Drug company that accepts government research money, must sign over all patents to the Government. The same or similar group that judges medical need for the drug and a fair ROI for the research done and NOT Government funded. Any patent that is an improvement on a current drug, does NOT increase the length of time that the original paten protects drug company profits.

We now have competition among providers, facilities and drug companies to deliver the highest quality services and products at the lowest possible price.


I believe this to be a way to maintain private insurance and give all universal health care.

If we choose we could fund this with a Value Added Tax. Since these taxes trend to hurt lower income people we could factor and might make the first $20,000 per year no taxable.

We already spend enough money with premiums co-pays, deductibles and co-insurance to do all the above, we just don't spend it wisely.

Posted by: Bill on October 29, 2008 at 5:18 PM | PERMALINK

OK here's a fix to start.

1- All insurance polices are the same benefit package (Insurance companies now compete with FINE PRINT) There could be 26 different polices or more, say A-Z. No matter who you buy your insurance from its the same benefits per policy (A is always A etc)
That allows insurance companies to compete with internal efficiencies.

2- No one knows what anything costs. To allow Providers and Facilities to compete fairly (Capitalistic way) all providers and facilities who accept any insurance or government payments, MUST post all fee's charged. These fee's are NOT discountable no matter who pays for them.

3- Create a board of medical professional ( all members must be active in providing medical care, NO administrators) to rate medical services with a specific criteria for all.

4. The only negotiation allowed is the price for prescription drugs. Any Drug company that accepts government research money, must sign over all patents to the Government. The same or similar group that judges medical need for the drug and a fair ROI for the research done and NOT Government funded. Any patent that is an improvement on a current drug, does NOT increase the length of time that the original paten protects drug company profits.

We now have competition among providers, facilities and drug companies to deliver the highest quality services and products at the lowest possible price.


I believe this to be a way to maintain private insurance and give all universal health care.

If we choose we could fund this with a Value Added Tax. Since these taxes trend to hurt lower income people we could factor and might make the first $20,000 per year no taxable.

We already spend enough money with premiums co-pays, deductibles and co-insurance to do all the above, we just don't spend it wisely.

Posted by: Bill on October 29, 2008 at 5:18 PM | PERMALINK




 

 

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