John McCain finally came forth this week with what his campaign dubbed a major policy speech, laying out his To Do list for health care reform. We at CJR have been asking a lot about his plans lately, which up to this point had raised more questions than answers. Tuesday’s address wasn’t much more illuminating. In fact, in some respects, it was utterly confusing. The Straight Talk Express took a circuitous route, and the press did not clear things up.
Let’s start with McCain’s overarching reform—altering the tax code to begin weaning the public off of employer-provided health coverage, currently the bedrock of the U.S. health insurance system. His plan would give workers the option of leaving their employers’ plans and getting a federal tax credit—$2500 for individuals and $5000 for families—to buy their own insurance in the commercial market. Leaving aside the merits of a plan that could eventually lead to the demise of our employer-based system, a question: How would McCain pay for that tax credit? Now here comes the confusion. The AP ran a somewhat muddled story Tuesday that said:
To pay for the tax credit, McCain would eliminate the tax exemption for people whose employers pay a portion of their coverage, raising an estimated $3.6 trillion in revenues, [McCain adviser] Holtz-Eakin said. Companies that provide coverage to workers still would get tax breaks. McCain would also cut costs by limiting health care lawsuits.
By that account—read our lips!— McCain means that if your boss pays for part of your health insurance, you will begin to pay taxes on some part of it, the way people pay taxes on employer-provided life insurance already. Apparently, the insurance would be counted as income subject to income taxes.
Meanwhile, would employers—who now can deduct health-insurance costs as a business expense—still get to do that, as the AP reported? Or not, as The New York Times suggested yesterday. The Times reported that Holtz-Eakin said the government would save that $3.6 trillion over the next decade by eliminating the tax break that currently goes to encourage employer-based health coverage. That sounds like eliminating the the tax break that employers currently get.
But did Holtz-Eakin mean the break to employers, employees, or both? It wasn’t really clear to the casual reader. Thursday’s Times reported that McCain proposed eliminating the exclusion of health benefits from taxable income for workers. So maybe that’s it. But to get further clarity, we called the McCain campaign press office (three times). No one called us back. We looked at McCain’s speech, posted on his Web site. No help there—gobbledygook to most people. Here’s what it said about the tax breaks:
Under current law, the federal government gives a tax benefit when employers provide health-insurance coverage to American workers and their families. This benefit doesn’t cover the total cost of the health plan, and in reality each worker and family absorbs the rest of the cost in lower wages and diminished benefits. But it provides essential support for insurance coverage. Many workers are perfectly content with this arrangement, and under my reform plan they would be able to keep that coverage. Their employer-provided health plans would be largely untouched and unchanged.
It’s a fair bet that Americans interested in the candidates’ health proposals are thoroughly confused. Many outlets, like The Houston Chronicle, picked up the AP story, which was little help. And get this—On Tuesday, McCain’s own Web site ran a story under the by-line of David Jackson of USAToday, calling it an “article excerpt.” The excerpt, however, contained the same paragraph that was in the AP story.
The important thing to know about McCain’s plan at the moment is that either way—by making employees pay taxes on employer-provided coverage or by no longer allowing employers to deduct health insurance as a business expense, or by doing both—it’s the proverbial nose under the camel’s tent. It’s the beginning of the end of health insurance as we know it, so what he proposes as a replacement should be very carefully reported and considered. In McCain’s plan, under the banner of consumer choice, everyone will eventually need to find insurance on their own in the private market. In his speech, McCain himself said: “Millions of Americans would be making their own health-care choices again.”
This reminds me a lot of what’s happening to Medicare. The push to entice beneficiaries to buy certain kinds of private-market policies and opt out of traditional Medicare is a wedge that begins to privatize the program. Encouraging people to opt out of their employer health coverage does the same thing—it makes people fly solo when it comes to their health insurance. Is that what American workers want?