McCain's health care proposal raises questions
10 10 08 - 11:29
McCain's tax credit for healthcare raises questions
By DAVID LIGHTMAN - McClatchy Newspapers
WASHINGTON -- John McCain's health care tax-credit plan would save the average household an estimated $1,241 next year. But critics charge that many people - especially those in poor health - could have a difficult time getting coverage with it.
The centerpiece of the Republican nominee's health care program is a refundable tax credit of $2,500 for individuals and $5,000 for households. The credit would go to insurers, though participants could deposit any amount higher than the premiums into personal health savings accounts.
McCain would tax consumers on the value of employer-paid health coverage. Employees are not taxed currently on those benefits.
Democratic rival Barack Obama, whose health plan includes subsidies to low-income families having trouble getting employer-sponsored or publicly funded coverage, said Wednesday that McCain's plan is a tax increase.
"He gives you a tax credit with one hand, he raises your taxes with the other," Obama told an Indianapolis audience, "and he didn't mention that the average health care plan costs $12,000, not $5,000."
McCain's proposed health care tax credit raises several questions:
-Tax savings. According to the Urban Institute-Brookings Institution Tax Policy Center, McCain's plan wouldn't only save the average household $1,241 next year, but also would most benefit middle-income earners, who stand to save an average of $1,559.
They would pay income tax, but not Social Security or Medicare tax, on the value of any employer insurance benefit. Currently, such benefits aren't taxed.
Leonard Burman, Tax Policy Center director, said that the credits are big enough so the taxes would be more than offset.
-Cost of coverage. Premiums for employer-sponsored health coverage average averaged $12,680 this year, with employees paying $3,354, according to a Kaiser Family Foundation 2008 employer survey.
Those numbers have spawned concern that the McCain plan wouldn't cover the cost of a policy, and that the gap would grow in the future. The McCain plan is expected to adjust the credit for inflation, but health care costs usually rise far more than the cost of living.
- Employer-based coverage. "The employer-based insurance system could unravel," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal Washington study group, because employers would lose incentive to cover employees, leaving them with less coverage.
Business leaders have voiced similar concerns.
"We believe the employer-based system is the foundation of health insurance coverage in this country," said Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce.
Employers now insure 177 million people. An estimated 45 million are uninsured, and others buy coverage privately or are covered by government programs.
"You need to build on the (employer-based) system," Josten said, and what employers and insurers need to do is put pressure on the system so costs are held down. The Chamber takes no official position on any candidate's plans.
Grace-Marie Turner, president of the Galen Institute, a Virginia-based conservative health care research group, argued that employers wouldn't simply abandon employees.
Workers and their companies would have new incentive to work together to find ways to save on coverage, she said, particularly since McCain is not proposing to take away employers' tax breaks for providing benefits.
-Better, cheaper policies. McCain contends that his plan would make it easier for consumers to compare costs and benefits, and ultimately save money.
"We have got to give people choice in America and not mandate things on them," McCain insisted at Tuesday's debate, "and give them the ability - every parent I know would ... acquire health insurance for their children if they could."
Baker, though, was concerned that only healthy people would benefit, since insurers could charge high premiums to high-risk consumers or otherwise make it hard for them to get policies.
ON THE WEB
John McCain's health care plan: http://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm
Barack Obama's health care plan: http://www.barackobama.com/issues/healthcare/
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