Why Not McCain?

One of the most extraordinary facets of this campaign is that a major-party candidate can offer no plan to improve American health care.

Oh, John McCain does have a health care plan. In the third presidential debate, the Arizona senator declared "I'll give them (families) $5,000 to take with them wherever they want to go, and this will give them flexibility." However, Uwe E. Reinhardt, a health care economist and professor at Princeton University, notes

According to a highly respected annual survey of employer-sponsored health insurance in America, conducted by the Kaiser Family Foundation and the Heath Research Educational Trust, the average annual premium for the type of insurance employers provide is $12,600.

That includes the employer's and employee's contributions to the premium, but not the family's out-of-pocket costs, which have been rising steadily in recent years. According to the Milliman Medical Index, based on millions of privately insured Americans, average medical costs for the typical American family when out-of-pocket spending is included are $15,600.

A $5,000 subsidy would be inadequate to cover the cost of private insurance in most cases in part because a pre-existing health condition- cancer, diabetes, heart disease, or in some instances a less serious ailment- would greatly boost the premium for an individual or a family. Couple this with McCain's plan to tax employer-paid health insurance plans, and more consumers will be sent into the private market, with a subsidy inadequate to purchase insurance but sufficient to drive up the cost of private insurance. As Barack Obama said in Asheville, N.C. on October 4, "It's a shell game. Senator McCain gives you a tax credit with one hand- but raises your taxes with the other."

The consumer would be entitled, Senator McCain proposes, to buy health insurance across state lines. That likely would be counter-productive, as Judith Graham found when she interviewed Sandy Praeger, insurance commissioner for Kansas and president of the National Association of Insurance Commissioners. Praeger believes

Insurers will set up shop in states with few regulations and market low-cost policies to people across the country. These policies will offer minimal coverage and appeal primarily to younger consumers.

“It will be a race to the bottom,” Praeger said, and there will be “very few consumer protections. … You’ll have plans that don’t cover the benefits that people need. … And healthy people are going to buy those less costly plans, because they don’t think they need [the protection].”
That may be a good deal for young people who don’t have health problems, but it would probably become a bad deal for everyone else, Praeger said. The policies that sell comprehensive coverage would draw a sicker, older customer base, becoming more and more expensive.

The end result will be a segmenting of the insurance market into the “haves and have nots,” Praeger said. One segment of the market will become more affordable, but the other segment will become less so, disadvantaging those who need coverage most.

Finding that relatively healthy employees have fled their coverage to obtain it on their own, companies will boost premiums, decrease coverage, or find that their ability to survive against competitors has declined because of steadily increasing costs.

And elderly persons, poor families, and the disabled? They will not be spared distress by this plan. On Tuesday, October 6, 2008 the Wall Street Journal reported "Douglas Holtz-Eakin, Sen. McCain's senior policy adviser, said Sunday that the campaign has always planned to fund the tax credits, in part, with savings from Medicare and Medicaid."

John McCain's health care plan might be successful- for insurance companies. For most of the rest of us, it takes a flawed system and makes it worse.