McCain will make sure only rich people can afford health insurance

"For starters, the McCain health plan would treat employer-paid health benefits as income that employees would have to pay taxes on."

Oh god. Please tell me the Republican ticket would be in disarray if McCain happens to have a coronary before election day.

I'll defend this one.

The basic idea is this: Health insurance is wrongly tied to your employer, not as a taxable benefit, but as an untaxed one. Stemming from this error, employment and health insurance are now completely intertwined.

The result is that, if you don't have an employer, you are screwed.

That's how people without an employer-based plan—the poor, largely, and some independent contractors*—pay so much for their health insurance. The system subsidizes people with good, health-insurance-bearing jobs.

If you think of health insurance as a normal good, not some magic good, the weirdness is more stark. What if people with good jobs didn't pay taxes on food, but everyone else did? Would that be a good thing or a terrible, regressive thing? All in favor of tax-free food for the middle class, raise your hand! After all, only the poor should pay taxes on food.

Now, the decision to decouple health insurance taxation benefits from employment is otherwise policy (and party) neutral. You can turn around and subsidize health insurance for poor people a little or a lot. You can even go to a "single-payer" system, if that's what you think is best. But at least you won't be unnaturally subsidizing health care for the people who need the subsidies least.

*Including yours truly, when I was starting up LibraryThing. Paying souped-up independently-employed insurance was a big issue for my family then. Indeed, employer-sponsored health insurance systematically distorts the market for small businesses and start-ups, rendering protecting yourself and you family much easier with a big employer than on your own, innovating.

Tim, the problem is this: When it is the employer who negotiates the health insurance, they can drive a reasonable deal. The HMO has to insure all employees, not just the ones that are healthy. The HMO has an incentive not to deny coverage, or they threaten the whole contract. When the individual negotiates the health insurance, people with problems in their health history don't get any. The HMO has every reason to deny or minimize coverage to the individual who gets sick. And they do. They also raise the rates to unaffordable levels, so that you lose the policy. Individuals do not have much bargaining power in this situation. You can go through various appeals within the HMO or insurer, and then you can file a bad faith claim, but it's tough.

(One of these days so called "tort reform" will pass, and then the HMOs and health insurance providers will have every reason to deny coverage, because at worst, if they do lose the suit, they only have to pay what they would have anyway -- so why not try to get out of it. Malpractice costs are only about 1% of the costs of the US health system.)

The effect of the McCain health plan will be to hand it over to the individual to cut the best deal they can. For young, healthy individuals, it will be a good deal, but only so long as they are young and healthy. McCain has proposed tax credits -- but (a) they are going to be much too small to make up the loss of employer provided insurance, and (b) the individual still will be in a very weak bargaining position. I don't agree that employer provided health insurance is making individually purchased health insurance more expensive by distorting the market -- any evidence on this?? I think that if employer provided health insurance is radically decreased, which would be the tendency of the McCain plan, we'll all be as bad off as those who have to purchase their own insurance today. It would radically cut the only part of the US health care system that works for people who don't get Nedicare. The number of uninsured would balloon.

We have to answer the question of why the US spends twice as much as European countries to get a standard of health care that isn't as good. We should have a single payer system.

It will never fly. I would be a crushing loss in revenue to the insurance companies, and there has yet to be an administration tough enough to swim against that current.

Empty promise.

It's the meaning of the phrase "divide and conquer". The HMO (or any group/company) will always have the upper hand dealing to individuals. The GOP will try to sell it otherwise (only YOU can decide what's best for YOU nonsense) but it's how they get the control away from people.

Decoupling health insurance from employment makes sense on one level, but it introduces several additional problems.

Health insurance purchased through an employer usually does not carry exceptions for pre-existing conditions. Where such exceptions are included, they are typically expressed in the form of a waiting period (weeks or months). But exclusion of pre-existing conditions is a huge issue for anyone attempting to purchase health insurance individually. If you have had diabetes, cancer, or any number of other conditions, you may as well forget about private health insurance. If you are able to find any coverage at all, it will be extremely expensive. Many insurance companies routinely deny claims on the premise that claimants failed to report a pre-existing condition, even if they didn't know about it at the time they applied.

Another major problem (somewhat related to pre-existing conditions) is adverse selection. If an employer offers health insurance, most employees are going to take advantage of that group rate, and premiums from healthy employees will pay some of the costs for those less healthy. But someone confronted with the astronomical premiums for private insurance may be tempted to take a gamble and do without, if s/he is young enough and/or healthy enough. That leaves those who must have insurance – those who already have health problems, and those who have small children.

My employer historically offered two options: traditional health insurance, with a moderate deductible and no restrictions on choice of care providers, or an HMO, with lower premiums and low co-pays, but a restricted list of providers. I have always been healthy, so I opted for the lower cost HMO, but I always felt that I was wasting my money on coverage I did not expect to use.

A few years ago we were offered a high-deductible plan linked to a health care savings account. I immediately chose that option, and my premiums are much lower. These high deductible and HSA plans are supposed to incentivize healthy lifestyles and consumer choice. In reality, I am no more healthy now than I was before, and I have not needed any medical care that would require choices. But my HSA account has a nice fat balance, and I will be able to roll it over to an IRA upon retirement.

However, it seems that most of the healthy employees chose that option. As a result, the traditional insurance plan and the HMO are left with those employees who actually need health care. Both options significantly increased their premiums last year, and are expected to do so again this year.

Consider the waste and duplication involved in having dozens of very high priced executives, dozens of sales forces, dozens of claims processing departments (some would say claims rejection departments). eHealthInsurance offers this list of major health insurance providers.

Just last week, the former CEO of UnitedHealth agreed to pay $30 million to CalPERS. This settlement was in addition to $900 million that UnitedHealth had previously agreed to refund to CalPERS in a related lawsuit. Last year, this former CEO agreed to give up $420 million in stock options and retirement pay, to settle complaints over the awarding of stock options.

The state of New York is investigating health insurer manipulation of reimbursement rates for out-of-system services. Here again, UnitedHealth is a prime suspect.

I couldn’t find a current list of executive compensation in the health insurance industry. In September 2001, Managed Care Magazine offered this list of highest compensated executives at for-profit health insurers. In 2000, the top 10 executive salaries totaled $154 million, and the top 10 stock option packages totaled $930 million.

It just reminds me how the government never seems like it's on the side of the people.

Imagine if a president (not just Bush, but any U.S. president) called the CEO of a big health care company and said that he was standing up for the American people, that he needed to negotiate better rates.

We seem so far away from times like that (if they ever existed) but it keeps coming back to the same maxim: "If you're on your own and things don't work out, don't come to us. It's everyone for themselves in this game."

AIG? Freddie and Fannie M? That's a different story.

In the UK employer provided HI is already seen as a taxable bonus (just like a company car or any other bonus)

This still prevents the insurers from playing the worst of their games, as the large coporate deals, threats to pullout and support from company HR lawyers are all still available.

Tim, the problem is this: When it is the employer who negotiates the health insurance, they can drive a reasonable deal.

I agree that's part of the problem--probably the larger part. The other part is the tax structure of health insurance.

I hold no brief for the other details of McCain's plan. Personally I think US Health Care is what George Will once called the Israel/Palestine problem—"Not a problem, but a mess." Failure is overdetermined. But one modest step would be stop subsidizing health care for the middle class (people with jobs that provide health care), at the expense of the poor (people who get it some other way).

Sorry. I haven't read the other messages on this topic.

If you can believe it, I am currently in the healthcare system, typing this while sitting in the "Fast Track" room at the Jamaica Hospital in Queens. Running to catch the plane from Portland I hit a step wrong and did some nasty to my left leg. By the time we landed it wouldn't support any weight.

Without any political angst, there's something crazy about the emergency-room process. It's absolutely insane, particularly compared to Portland. Although I sat for an hour and could have filled out countless forms, the data entry was all oral--presumably because many of the patients can't read and write in English. After all that I signed my name 14 times--I counted.

In the waiting room—the first waiting room—big signs say that it's going to cost me $600, just to play, as it were. I'm guessing that many of the people I sat with will never pay a dime--they're too poor, either a write-off or Medicaid. I'll be paying a $50 co-pay. I doubt very much my insurance company is going to pay $550, so the only people who pay the $600 are the working poor--the ones without insurance.

The disparity here is interesting because this is a "perfect" test case. Care isn't dependent on the severity of the injury, or on my health. Everyone pays the same, at least until tests or stays extend that. In this perfect test case, the poor and the well-off are okay; the working poor are screwed. Damn, I got political ;)

I thought McCain was against raising taxes? This flies in the face of his campaign promise.

I'm reminded of another notable anti-taxer, Ronald Reagan, whose IRS made previously untaxed fellowships and grants earned by college students taxable income.

I'll enjoy hearing McCain explain this during a debate question about health care.

"I doubt very much my insurance company is going to pay $550,"

eh? If the hospital wants $600 and you only pay $50, surely the insurers pay the rest? or deny it forcing you to pay it? Hospitals' don't get stiffed do they?

Hope it turns out to be nothing serious and that you're all back and coding up collections as soon as possible ;-)

Take it easy and have a rest.

#13: Insurers negotiate and contract with health care providers to pay lower reimbursement rates. Self-pay patients pay more than insurance companies.

Good rundown here.

The abstract from the actual study, btw: " People who lack health insurance and those who pay for care out of their own pockets were charged on average 2.5 times more for hospital services in 2004 than what health insurers pay and three times more than Medicare-allowable costs, a leading health policy researcher reported in the May-June 2007 issue of Health Affairs.

The gap between rates hospitals charge to self-pay patients and other payers has widened greatly since 1984, study author Gerard F. Anderson reports."

eh? If the hospital wants $600 and you only pay $50, surely the insurers pay the rest? or deny it forcing you to pay it? Hospitals' don't get stiffed do they?

it's a negotiation, of sorts. They—and Medicaid—will only pay X for Y (see message 14 for the result, a 250% difference). The Hospital has to choose between accepting it and refusing to accept it. If a Hospital in the Northeast decides not to accept Blue Cross, they might as well close.

You live in a very weird country.

Presumably the hospital isn't out to make a profit - it has to cover costs, training, equipment etc but not a surplus to that - and it seems reasonable to assume that a specific healthcare procedure costs the hospital the same amount (time material etc) for both private and insured people ... so do they massively rip off the private people charging way over actual cost, or are they stiffed by the insurers and run at a loss? If the latter why don't they send some of america's famous laywers after then for unpaid bills?

I know this is going to sound silly, but somehow I can't shake the feeling that health care would be more manageable for everyone if health insurance was dropped altogether.

The money supply would dry up, the number of doctors would either drop or the cost of medical care would have to drop due to competition. Hospitals could become general hospitals providing beds, surgery, nursing care. The really expensive equipment might be centrally located in places specializing in these services. More doctors might consider the GP route and become jacks of all trades. More procedures could be done on an outpatient basis. Doctors would not need an additional employee whose sole function is dealing with insurance companies, there would be no paperwork issues with regard to insurance, the issue of whether this is a taxable or non-taxable form of income for the middle class would be moot, and one's access to health care would not change from year to year with ever declining benefits.

I can't help but think that taking all that money out of the health care superstructure, that part that transfers money from pocket to pocket without adding any health benefit would be a good thing for health care in general. Insurance, like credit cards, bring nothing to the table but pointless wealth to a few and increased hardship for the many.

The same folks who can't afford care now still would not be able to get care, but just as legal systems have public defenders, so too can the health system have public doctors supplied from the ranks of MD organizations on a tax credit pro bono system.

What?! Health insurance for a vast majority of Americans gives them access to medicine they could not otherwise come close to affording. Yes the poor and unemployed would be screwed but so would the middle-class and everyone with employer based insurance.

Take all health insurance away and only the rich have access to the best technology and treatments, life expectancy would drop because once you are old and not working the money dries up and you're toast, and many people would die simply because the care they need would be too far away. I agree the system is messed up, and reform to make it more simplified would help, but what you are talking about is a return to what medicine was...50-60 years ago, at least, and not in a good way.

The cost of health care is huge because we have made such advances and everyone wants access to the best medicine. True take away health insurance and you help demolish the monster, but you destroy the money train that keeps advances in medicine going and pays for millions of Americans to have access to good care. As one who deals with my wife's employer provided insurance, the burden is worth the benefit. We need to lift the poorest up, not drag everyone else down.

I'm not so sure. Insurance is the reason medical care is so expensive now. If insurance was not available one of two things would happen, either only the wealthy would receive care, in which case an awful lot of doctors and dentists would have to quit because they wouldn't have any clients, or they would have to drop their rates to something an average middle-class person could afford. We know what happens with insurance in the mix, let's remove it and see.

ETA: It comes down to a matter of supply and demand combined with charging what the market can bear.

ETAA: I doubt if the wealthy use much affordable insurance for health care now.

#12: explanation here:

"McCain has proposed to end one of the largest tax breaks in the entire economy. Some 60 million Americans buy health insurance thru employers tax-free, and McCain would indeed begin to tax the value of the benefit.

However McCain also proposes to give the money back as a tax credit, $2,500 for individuals, $5,000 for families.

"Let's give them a $5,000 refundable tax credit to go out and get the health insurance of their choice," McCain said.

"It's mostly a tax break," said Len Burman of the Tax Policy Center.

The non-partisan tax policy center says except for the very richest Americans, most people buying insurance will see a tax cut."

link here:

http://www.cbsnews.com/stories/2008/09/15/eveningnews/realitycheck/main4451525.s...

Maybe I'm being naive, but the idea of taxing healthcare benefits doesn't seem TERRIBLE on the face of it. It does seem semi-regressive in that the burden would fall disproportionally on those less able to bear it. On the other hand, I don't believe it would force a great many companies to terminate their group plans, or force workers to opt out of them (so long as the credit offered covered the loss).

For instance, companies could offer arrangements whereby covered workers would agree in advance to sign benefit checks over to the company when they arrived, and in return, companies would pay workers' interim insurance taxes.

Extending a tax credit back to encourage individuals to choose their own plan doesn't seem like a terrible idea either. Would fall far short of "national health insurance", but would be a direct and significant benefit to the poorest segment of society: specifically those who aren't currently receiving employer-sponsored healthcare (and therefore wouldn't be paying the proposed new tax in the first place).

In real terms, I suspect the net effect on the American health insurance system would be minimal. Most people would grumble and moan and pay the new taxes, and then they'd spend the bonus money on whatever. Do agree that the amount involved wouldn't be enough to purchase much meaningful insurance for the currently uninsured.

Idea that employment should be forcibly "decoupled" from the receipt of benefits does seem like a terrible idea. As others have said, it would decrease group bargaining power (though buying groups would likely emerge to fill some of that gap), and in the absence of a truly national health insurance plan, it would offer few people anything they don't already have.

19: yes, but I think we would give up so much in quality of care. Someone mentioned earlier that an large company has more leverage to negotiate than an individual, it also provides a large pool of money to do research, pay for expensive procedures, etc. To me the idea of health insurance is that collectively we do better and can afford more. However if the health insurance system waste the money, then that becomes less true. What is needed is a more efficient system, as you mentioned, and I totally agree. But I think that individualized health care is not quite that system.

I also think we would be far better off if we were not so obese as a society. It would make us healthier in general and reduce the cost of overall care. With so many diseases tied to being overweight and out of shape, we could greatly reduce the cost of insurance by being more proactive, and require less care at such young ages. We would lessen the need for cardiac care, knee surgeries, many types of diabetes, breathing problems, back problems the list goes on. I'm not saying its a cure-all but if everyone tried to keep a healthy BMI or at least a lower % body fat, I think it would greatly improve the cost of health care, and our quality of life. IMHO.

Note: I am not saying I am perfect. I need to lose weight myself, but watching this crap happen to family is making me aware of the advantages of being in good shape.

This is the same thing as vouchers for school. How much insurance can I buy for $5,000? Not much would be my guess.

There is no infusion of money involved here, you are just going to pay the government less. This will not help those masses who are living from paycheck to paycheck because it will reduce each paycheck by the tax amount. In what way is a tax credit going to help those who are struggling today? Not only that, but it will cause more people to be uninsured because the tax will make it unaffordable.

If I don't pay the tax do I get the tax-credit? If I take the bait and go out and buy a policy I won't be taxed so how can I get a tax xredit. It seems to me the incentive (tax-credit) is a disincentive because I now pay twice as much for health care (my half and the company's half) and get less in return.

If McCain is giving everyone $2,500/$5,000 in tax credits because they don't use company provided insurance how is that different than just giving people money? If only those who use company insurance will get the credit how does it become an incentive to get off the company insurance? If the credit only goes to those who use it for insurance how is that not a massive government subsidy of the insurance industry?

No, this is an idea that, like most Republican ideas, doesn't make sense.

Interesting to note that health care spending is almost equal between all income groups, between $4,000.00 and $5,000.00 annually per individual - with 2/3 of the total being financed by employers or the government, that is, not readily transparent to the actual consumer.

http://www.galen.org/component,8/action,show_content/id,68/category_id,0/blog_id...

#20 Without the group rates, insurance rates will sky-rocket and the $5000 will be eaten real fast. Insurance for a family is way more than that. So even if we were to save a little on taxes, we'll be forking over way more to the insurance companies. What republicans don't get is that of the total expenses a household faces, taxes are only part of it. If you cut taxes without thinking about the consequences, you often end up increasing cost for people somewhere else. In the end it does not matter much for my bottom-line if I pay more because of taxes, or more because the insurance company is fleecing me. The only difference is that I have some control over taxes through the democratic process, but very little control over the big companies, especially if they continue to merge to undermine competition.

So, my prediction: Probably this plan will not fly. But if it does it will increase the number of uninsured by a huge margin and drive insurance cost up.

If insurance was not available one of two things would happen, either only the wealthy would receive care, in which case an awful lot of doctors and dentists would have to quit because they wouldn't have any clients, or they would have to drop their rates to something an average middle-class person could afford. We know what happens with insurance in the mix, let's remove it and see.

While I think true catastrophic insurance is important and valid, I agree with this in a general way. If you have a high deductible, you might actually call a doctor and find out what he charges for a non-emergency procedure—and then call someone else to see if she charges less. No one with what is typically considered "good" insurance would dream of shopping around (or turning down any covered procedures, necessary or not), which is what keeps prices competitive in all other areas. But catastrophic coverage is important and gives peace of mind—I need to be insured against the risk of hitting someone's car, because if I had to pay for the damage out of pocket I probably couldn't make the person whole very easily. But that doesn't mean I need to be insulated from the cost of an oil change, which is what people expect from health insurance.

Madcow, the problem of obesity in this country is only partially an issue of how much one eats. It is more related to what we eat. Much of this problem is not one the typical consumer has much choice over and the poorer one is the less choice they have.

As we see with the current Bisphenol-A problem we don't know what the hell we're putting into ourselves, much less what they are doing to us.

#26, etc:

I agree.

Let me keep my 5k, and I'll invest in catastrophic care coverage and an HSA, which I will use to purchase services and goods from a competetive medical market.

And, even better, I have additional incentive to keep me and my family healthy.

Seems sensible to me.

How about if health insurance actually worked to spread the risk, like insurance is supposed to do. Make the insurance companies charge the same rate to everyone, regardless of pre-existing conditions, and not be allowed to deny coverage to anyone either.

This is how I remember it from Germany, and it works reasonably well (better than here).

28> Why even have HSA's? They're just a way to avoid paying taxes on a portion of your income that will be used to pay health expenses. Why not just allow everyone to deduct health expenses from their taxes. I suspect the reason is that the companies that manage HSA's, and make large political contributions, won't get their cut.

geneg, I agree, we need to eat better as in better quality, and good food choices. We are getting better with greater access to fruits and veggies, and organic foods, at least where I live, but they come at a greater cost than the cheap fatty foods. Also, personal gardens are a way to know what you are eating, plus weed pulling is a good physical activity :), but that requires an actual plot of land that you can garden.

#31: why? because it is a managed pre-tax deduction with investment options (like an IRA).

31: HSAs encourage people to save now for health expenses they may have in the future, and since they can be rolled over indefinitely the tax advantage can be a significant reason to save up rather than be caught later with your pants down.

Speaking as someone who went from catastrophic coverage with an HSA when I was a freelancer to "good" coverage with my current employer, I would much rather get paid more in wages and buy a cheaper plan for myself, especially if I could pay my premiums tax-free like my employer does.

IRA's encourage Americans to save for retirement, but they suck at it. I have seen repeated articles stating that most working Americans have far too little saved for retirement. What makes you think, they'll save in an HSA?

In all the discussions I've seen on McCains plan to make employer provided health Insurance taxable, I've yet to see people take in the FULL ramifications, in spite of any "tax credit" you may get off your FEDERAL taxes.

This new "income" would now be subject to state and local taxes.

This new "income" would now be subject to Social Security taxes unless otherwise exempted.

So, depending on just how much your employer is paying on your behalf towards health insurance, in the end, you may see little or none of that credit actually make it to your pocket.

#35: In 2007, 46.2 million U.S. households, or 39.8 percent, owned at least one IRA, with median assets at ~$45,000.00 and the growth rate continues at 2.8% a year.

By most measures, the IRA model is a success.

PDF link here:
http://www.ici.org/issues/ret/fm-v17n1_appendix.pdf

Ok, so IRA maybe is a bad comparison (although 45K is not retirement fund, depending on the age). My point is we generally stink at actually saving money, some people cannot really afford to and others just don't have the discipline to. Unless that changes, HSA's will not be a legitimate way for many to cover their medical costs.

I didn't HSA's roll over. I thought they were like the Healthcare Flexible Spending Accounts that we were offered through work in which you put money in but if you didn't spend it all by the end of the year you lost it. I was never sure if the money went to the company managing the account or to the gov't. There were a lot of glasses sold in December when people realized they needed to spend their FSA money.

From the very handy FAQ on HSAs at the Treasury Department:

"Do unused funds in a Health Savings Account roll over year after year?

Yes, the unused balance in a Health Savings Account automatically rolls over year after year. You won’t lose your money if you don’t spend it within the year."

link here:
http://www.treas.gov/offices/public-affairs/hsa/faq_using.shtml

right the 'new' program with the HSA's are YOUR money. It stays yours forever until you spend it on medical treatment. It will rollover year after year and can grow with interest. Right now you can put up to $2900 a year starting in 2009.

I would encourage everyone to click through from the summary linked at #24 to this supporting presentation, which shows:

1) From 2000 to 2007, real household income fell for all groups at or below the median income, while increasing for those at the 85th, 90th, and 95th percentiles (but we already knew that).

2) From 2000 to 2007, the percentage of the population covered by a private health insurance plan declined (5.1% on average) for all age groups. The greatest declines occurred in age groups 25-34, under 18, and 45-54, while the smallest decline was in the 55-64 age group. The percentage of the population covered by any insurance plan also declined for most groups, but increased slightly for those in the under 18 and 55-64 age groups.

3) The net benefit derived from government and employer-provided insurance is greatest for those in the lowest decile of adjusted gross income. Net benefits for this group averaged $3362, presumably from Medicaid. OK, no surprise there. But the next highest benefits, averaging $3071, went to those in the 8th decile of adjusted gross income (probably employer-provided benefits), followed by $3039 for those in the 2nd decile group (probably Medicaid). The only groups with government and employer-provided benefits under $2000 were those in the top decile ($1772), the 5th decile ($1927), and the 9th decile ($1972).

>37 enevada:

Interesting statistics for IRAs, but they have not exactly been embraced by the masses. That growth rate of 2.85% per year is the increase in the number of households owning IRAs.

From page 11, Characteristics of U.S. Households Owning IRAs, 2007, households owning (any type of) IRA have median household income of $80,000, and 58% of the decision makers have a college or postgraduate degree. For Roth IRAs, median household income is $87,500, and 66% of decision makers have a college or postgraduate degree.

From page 8, 65% of households with traditional IRAs and 54% of households with Roth IRAs did not contribute at all in tax year 2006. And 39% of those with traditional IRAS have never made a contribution other than a rollover (from a job change, layoff, termination, or retirement).

I have tried to encourage family members to establish Roth IRAs, with little success - the list of excuses is incredibly long.

What if there were a flat tax version of health care? Imagine having to pay like three grand up front, and at the end of the year you got money back based on what you DIDN'T use. This would give people incentive to not rush to the doctor because of a little cough, and the interest earned over the course of a year would help pay for people who couldn't afford insurance.

I'm not saying this is THE answer, but we seem rather one-dimensional in our solutions.