During the Republican primaries it was important for McCain to present a conservative and traditional Republican approach to health care reform. His outline for a health care system controlled by individuals and portable from one job to another can be a workable one. But McCain's plan it is not workable until he answers some very important questions and closes some very important loops:
- How will older and sicker people get coverage in an individual health insurance system that today excludes the sick and charges very high prices to the older?
- McCain calls for deregulating that same individual health insurance market even more. But these regulations grew out of market abuses and limit such things as medical underwriting, pre-existing conditions provisions, and age rating. How will he deregulate the market even more and still be able to cover everyone who wants to be covered?
- McCain says he will not raise taxes to expand health insurance. The source of his funds will be taking one tax break and exchanging it for another. McCain would end the current personal income exemption for employer provided health insurance and replace it with an individual tax credit for those who have health insurance. But there are tens of millions who are not covered today and do not have access to an employer contribution for health insurance and therefore don't have a personal exemption that can be reshuffled into a personal tax credit. I understand where he will get the money for his tax credit for those who today have the benefit of the employer tax exemption. But what will the source of his funding be for those who today don't have the benefit of the employer exemption but would be eligible for the tax credits?
- Moving the tax benefit of health insurance from the workplace to the individual as McCain does will likely encourage employers to drop their health programs and instead just give the health benefit contribution they were making to the worker in the form of wages. This move from a defined benefit to a defined contribution structure pushes the health care trend risk from the employer to the employee--the employer's cost now grows at the wage rate rather than the much higher historical health care trend rate. With the employer cash in hand, as well as the tax credit, the employee would be well positioned to pay for their own health insurance--at least in the early years. But it may not be that simple. If the employer gave every employee the average cost of their health insurance in the form of wages, the young would get far more then they needed and the old far less in what would be an individual market where rates presumably vary by age. Would McCain require employers to age-adjust their payments in lieu of benefits?
The final phase of the campaign is still months away but it has already started.
Elizabeth Edwards took the first shots:
- She criticized McCain's proposal to move the regulation of health insurance from the states to the feds pointing out the recent policy rescission controversy in California and asking why consumers should want fewer consumer protections.
- She pointed out that if consumers see their coverage move to an individual responsibility how will they get coverage in an individual market that rates by age, that medically underwrites and that excludes people with preexisting condition's provisions.
- Edwards argues that McCain’s health plan would give insurance companies carte blanch to sell whatever they want at whatever price by whatever sales tactics get them the greatest number of healthy policyholders.
- Finally, she says that neither she nor McCain--both Cancer survivors--would be able to get coverage under his individual-based health plan because of their pre-existing conditions.
Well, neither do I.
John McCain's general health plan framework can work and it can provide the structure on which we can build an effective health insurance system. But, he doesn't tell us enough about how he is going to deal with these practical problems that his individual system of insurance would need to overcome.
He better do it soon or the very effective criticism Elizabeth Edwards just made will be something we will be hearing all over the political playing field in the coming year.
Detailed analysis of the Clinton Health Plan
Detailed Analysis of the Obama Health Plan