McCain’s Health/Tax Plan Scrutinized

The Dallas Morning News has a look at McCain’s proposal to tax employer health benefits as income. It’s just the start of the publicity this will get, I think. It’s also the kind of thing that can turn an election.

North Texas employers are not saying they would drop employee coverage altogether if Mr. McCain’s plan were enacted.

But some do say the plan, which Mr. McCain detailed in July, would encourage young and healthy workers to forgo company coverage, purchasing insurance on their own rather than paying income taxes on the benefit. That would leave employers with only the costly sick workers to insure.

And that, they said, could eventually lead to the death of company-provided health plans.

Health care economics is an almost impenetrable morass, but the debate starts with risk pools. You need healthy people in the pool to balance out the costs paying for the sick.

Bob Queyrouze, who oversees benefits for 1,200 workers at the Federal Reserve Bank of Dallas, calls Mr. McCain’s plan “radical.” “Long term, it would be destructive to the system,” Mr. Queyrouze said.

He adds that he doesn’t think the health insurance industry could respond quickly enough to handle a large influx of individuals looking to buy their own, more affordable policies.

I’m not exactly seeing that myself. These companies are bureaucratic. They don’t turn on a dime.

McCain supporters say the tax credits were intentionally set lower than the amount typically spent on employer-provided health plans. That is to encourage individuals as well as employers to shop for less expensive policies, said John Goodman, president of the Dallas-based National Center for Policy Analysis, a conservative think tank, and a health policy adviser to Mr. McCain’s campaign.

This would help rein in the nation’s ballooning health care costs, Mr. Goodman argued.

Some of the inflation in the health care market clearly is happening because too much money is chasing too few services. But only some, and while I get the theory, in practice there’d be a lot of short- and medium-term pain as people go through the transition.

The tax credit “would not subsidize bells and whistles [marriage counseling, acupuncture, etc.] as the current system does,” Mr. Goodman said in an e-mail.

I don’t know what kind of health plan this guy has, but mine doesn’t cover any of that.

Lawrence Louie, a 40-year-old Plano telecommunications worker, is one of those. He doubts the McCain tax credit will be large enough to buy insurance on the open market for himself and his wife.

“Basically, I would be forced to choose between paying the increased taxes [on the company-paid premium], or pay at least $4,000 out-of-pocket per year for private insurance, after adjusting for the value of the tax credit,” he said.

“Anyone with good insurance is not going to find this acceptable.”

Nope.

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