McCain and Healthcare.

In his column today, Bob Herbert cites a new study by a bunch of independent economists that says McCain’s healthcare plan will make it even harder for people to keep their insurance.

Under the McCain plan (now the McCain-Palin plan) employees who continue to receive employer-paid health benefits would look at their pay stubs each week or each month and find that additional money had been withheld to cover the taxes on the value of their benefits.

While there might be less money in the paycheck, that would not be anything to worry about, according to Senator McCain. That’s because the government would be offering all taxpayers a refundable tax credit — $2,500 for a single worker and $5,000 per family — to be used “to help pay for your health care.”

You may think this is a good move or a bad one — but it’s a monumental change in the way health coverage would be provided to scores of millions of Americans. Why not more attention?

The whole idea of the McCain plan is to get families out of employer-paid health coverage and into the health insurance marketplace, where naked competition is supposed to take care of all ills. (We’re seeing in the Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers and Merrill Lynch fiascos just how well the unfettered marketplace has been working.)

Taxing employer-paid health benefits is the first step in this transition, the equivalent of injecting poison into the system. It’s the beginning of the end.

When younger, healthier workers start seeing additional taxes taken out of their paychecks, some (perhaps many) will opt out of the employer-based plans — either to buy cheaper insurance on their own or to go without coverage.

That will leave employers with a pool of older, less healthy workers to cover. That coverage will necessarily be more expensive, which will encourage more and more employers to give up on the idea of providing coverage at all.

A question for any economists out there: besides screwing over lots of employees (the study guesses that about 20 million people will lose their insurance) isn’t a rise in the cost of healthcare and a decrease in the cost of people who opt for insurance actually detrimental to the insurance companies themselves? Am I missing something?

G.D.

G.D.

Gene "G.D." Demby is the founder and editor of PostBourgie. In his day job, he blogs and reports on race and ethnicity for NPR's Code Switch team.
G.D.

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  • quadmoniker

    I’m going to pull on my semester of “Economics of the Public Sector” from Univ. of London to say that yes, it is bad, but then insurance companies do things to protect themselves, like raise their premiums and co-pays, limit the things they cover and prevent people from signing up for coverage to mitigate the costs. That’s why private insurance markets ALWAYS fail: if everyone is acting rationally, ‘good risks,’ or relatively healthy people, opt out of the market because it would be cheaper for them to save up on the off chance that something does happen, leaving the pool of those insured more likely to be the ones who get sick. That costs insurance companies more money than they would guess if they looked at the average likelihood that, say, a 50-year-old man will have a heart attack this year, driving insurance costs up.

    McCain’s health care plan won’t do anything to address that, especially if the benefit comes in the form of tax credits. A young, healthy person is much less likely to buy insurance if it means that they will only get a credit on their taxes at the end of the year. It’s money now vs. money later, and we all just need to look at our nation’s credit card debt to know that that never works.

    When employers offer insurance, it creates a pool that somewhat prevents the loss of ‘good risks’ and evens things out. If you do away with that, and leave everyone to the free market, I can’t imagine that companies WON’T raise their premiums, co-pays, etc. even more. So you would have people lose their workplace insurance and be less likely to be able to buy it privately, I would guess. The companies will do things to protect themselves.