Health Care

Health Affairs offers assessments of both the Obama (.pdf) and McCain (.pdf) health care plans.

Both plans will radically change the current employer-based coverage model.  McCain proposes to make the employee health insurance benefit taxable and offset that tax increase with a refundable tax credit for people who buy private insurance.  From the abstract:

Senator John McCain's (R-AZ) health plan would eliminate the current tax exclusion of employer payments for health coverage, replace the exclusion with a refundable tax credit for those who purchase coverage, and encourage Americans to move to a national market for non group insurance. Middle-range estimates suggest that initially this change will have little impact on the number of uninsured people, although within five years this number will likely grow as the value of the tax credit falls relative to rising health care costs. Moving toward a relatively unregulated non group market will tend to raise costs, reduce the generosity of benefits, and leave people with fewer consumer protections.

As noted by DeLong et al, the loss of tax deductibility represents a tax on jobs:

The immediate consequences of the McCain plan are even worse. The McCain plan is a big tax increase on employers and workers. With the economy in recession, that's the last thing America's businesses need.

Obama has his own proposal to upend the employer-coverage model, and his approach, known as "pay or play" will drop a disproportionate burden on low-wage jobs (do Obama backers know this?)  From the abstract:

Heavy regulation coupled with a fallback National Health Plan and a play-or-pay financing choice also raise questions about the future of the employer insurance market.

The "pay or play provision, detail of which are vague, is discussed by the NCPA and by  James Capretta at NRO. Briefly, Obama will require employers to either provide health insurance or pay a supplemental payroll tax to a Federal health care fund.  This also represents a tax on jobs.  From Capretta:

The consequences for the lowest paid workers would be devastating. For those earning just above the minimum wage, employers would not be able to take the full cost “pay or play” out of wages because it would push cash compensation below the minimum allowable. These employers would therefore have no choice but to eliminate these jobs, lest they end up paying more for their workforce than it is worth to the firm. Katherine Baicker of Harvard and Helen Levy of the University of Michigan estimate that an employer health-insurance mandate would destroy about 224,000 low-wage jobs, with the losses disproportionately concentrated among non-whites, high school drop-outs, and women. Another study found that a version of California’s “pay or play” scheme, passed in 2003 but later repealed, would have eliminated 71,000 jobs in that state alone.

Tough to introduce that during a recession - talk about change we don't want to believe is happening.

Obama's plan also has an odd quirk that was beaten to death during the Democratic debates - he obliges insurers to accept new applicants regardless of pre-existing conditions, yet does not require anyone to buy coverage.  The probable consequence - healthy people will tend to delay purchasing insurance until they are sick.

Reuters has a pox on both houses report:

WASHINGTON (Reuters) - Democratic presidential candidate Barack Obama's health care plan would cost too much and create more regulation, while Republican John McCain's plan would leave 60 million Americans without health insurance and reduce coverage, experts said on Tuesday.

Neither plan would fully fix the broken U.S. health care system, the separate teams of experts concluded in the journal Health Affairs.

...

A survey of benefits managers released on Tuesday showed wide disapproval of both plans, also.

"Rather than taxing workers' health benefits and compelling employers to provide coverage they can't afford, candidates should focus on initiatives to control costs and promote top quality care," James Klein, president of the American Benefits Council, which represents employer-sponsored health plans, said in a statement.

...

The American Benefits Council survey found that managers want both candidates to focus more on controlling costs and improving the quality of health care.

It found that 74 percent of the 187 managers surveyed disapproved of McCain's tax proposal while 46 percent disliked Obama's plan to require employers to "pay or play."

Companies currently offering coverage ought to prefer Obama's plan, which imposes costs on their rivals that don't offer coverage.  Companies not offering coverage (which I think is the smaller number) should favor McCain, from the perspective of their own bottom line anyway.

Comments

[sbw]

Can I get a grant to pursue my PhD and teaching certification. I need to get out of business. It's not worth it.

Call me when it's time to pick up the pieces.

[Pofarmer]

Can we PLEASE not further complicate the tax code????

[matt]

both plans sound like disasters. Frankly, I don't see the government taking on too many responsibilities very soon. With entitlementys already at @ 70% of the overall budget, there is simply no wiggle room left with Iraq/Afghanistan, the Wall Street debacle, and earmarks out of control.

The bills are coming due and we have to put our financial house in order.

[J Verner]

The problem isn't that we need any "new plans" The problem is that the health care system has no competition, is shielded from market forces and therefore has become bloated and, in many cases inefficent.

In the first place--the 47 million uninsured Americans is a joke. By the lastes census figures, 10 million of that number are non citizens. If they need insurance, and can't buy it themselves, or have it through an employer--they need to go home. I don't expect France or Canada to pay for me.

Further, several million are those who make over 75,000, and decide not to buy health insurance. Their choice, not my problem. There are also millions who are elidgable for governmnet programs like medicaid or the famous SCHIPS program for children. Again, if they don't sign up, whose fault is that?

Most of the uninsured are young people, 18-35, who really don't need a comprehensive health plan anyway. They are the healthiest group, and represent a fraction of total health care costs. All most need is a catastrophic plan that will cover a major problem or accident. That's relatively cheap.

But NOOOO. The government has to pick all of our pockets, rather than apply common sense solutions for a small percentage of our population that falls through the cracks.

That's what they did with Fannie and Freddie--and look where it's gotten us.

[Pofarmer]

The problem isn't that we need any "new plans" The problem is that the health care system has no competition, is shielded from market forces and therefore has become bloated and, in many cases inefficent.

Yes, yes, yes.

Might I be allowed an example???

In the cattle industry they are doing "ultrasounds" to score backfat for slaughter and, in some cases, to do pregnancy testing. It takes a few minutes and costs $12 a head. You go to an OB's office, and they do an "ultrasound" to look at a baby, or to an office to look at your heart, or whatever. SAME machine. Yet to do a 15 minute ultrasound of your heart, or 10 minutes to look at JR. Costs 1000 bucks.

[MartyH]

It looks like the goal of the McCain plan is to get employers out of the busines of supplying insurance. The argument for this is simple: once people are paying for their own health insurance they will spend their money more wisely.

Note that companies who are providing coverage will be able to give their employees raises that will partially compensate for the loss of employee coverage. The tax credit is meant to make up at least some of the difference so that employees aren't getting screwed.

[J Verner]

Yep profamer. Add to that, at least 20% for administrative costs, and big bucks in "defensive" medicine, especially for OBGYNS.

But Consumers doen't care how much it costs, cause they just hand over their insurance card, and it all goes away except for the little co-pays for office visits and Rxs.

That's the real problem.

[J Verner]

It looks like the goal of the McCain plan is to get employers out of the busines of supplying insurance. The argument for this is simple: once people are paying for their own health insurance they will spend their money more wisely.

I've got another argument: GM (as in general motors) Look what the health care componant of their retirement plan has done to them.

[matt]

so now Obama is running an ad in Spanish purposely misquoting Rush Limbaugh and saying it is the evil republicans who are against Latinos. The only problem was that Limbaugh was quoting Mexican government policies when he did it.

Which party is sinking into the gutter? This guy is now well on the way to fomenting race war. Disgraceful.

[Barney Frank]

It looks like the goal of the McCain plan is to get employers out of the busines of supplying insurance.

Precisely. Easy (theoretically) three step solution to health care problem:
1. No more employer health care; replaced by HSAs.
2. Serious tort reform with teeth.
3. Privatize medicare over time and means test for those who can't afford replacement insurance.

There's a reason medical procedures which are not covered by insurance go down in cost while those covered skyrocket.

[PaulD]

Being an optimist, I am hopeful that gridlock will continue.

[kimsch]

Why do we need groups for health insurance? We don't need them for car insurance, or homeowners' or renters' insurance.

Why do employers have to provide insurance?

Why do we want our employers deciding what plans we can get? How much coverage we can get? What our deductibles are?

When I was a kid, we paid the doctor for visits and insurance was for catastrophic or chronic situations. Regular doctor visits you just paid for.

The system we have now is pretty much a pre-paid medical program.

[sbw]

Employers provide health insurance because in the post WWII -middle 1950s environment with price controls health insurance was a cheap perk an employer could offer to keep an employee.

It has metamorphosed into a political monster where people who decide the benefits -- Congress and State legislatures -- do not pay the tab directly. Price signals are gone. Accountability is gone.

The political conversation has become a competition tossing out benefits, not a discussion of how to make it work, and journalists are incapable of either seeing the problem or unwilling to report on it. Or both.

[cathyf]

Why do we need groups for health insurance? We don't need them for car insurance, or homeowners' or renters' insurance.

Have you ever been hit by someone with no car insurance? Guess what -- it's not the fabulously wealthy people that you can sue who are driving around with no insurance. It's people who have no assets to protect and just thumb their noses at you when you try to get them to take responsibility for their negligence.

Of course even worse than no car insurance is the fake car insurance. In most states you are required to have insurance to have your car registered. So an entire industry has grown up to sell people a cheap insurance card. But if somebody covered by this "insurance" hits you, just try to get one of these bogus companies to pay up. And if you go to a lawyer, the lawyer will give you a kindly lecture about squeezing blood from a turnip. And your own "uninsured motorist" coverage doesn't kick in if the person who hits you has an insurance card...