May 5, 2008

WE ALL KNOW WHERE WE'RE HEADED:

Democratic and Republican healthcare plans offer clear choices: John McCain wants better and cheaper coverage for more Americans. So do Barack Obama and Hillary Clinton. But their strategies for achieving those goals are fundamentally different. (Ricardo Alonso-Zaldivar, 5/05/08, Los Angeles Times)

The Democratic and Republican candidates espouse similar goals: making medical insurance more available and more affordable for more Americans. But their strategies for achieving those goals are fundamentally different. So are the ways in which, over time, the nation's healthcare system would change.

McCain, for example, says he would give individuals more freedom of choice; critics say he could destabilize the employer-based system that the middle class has relied on for more than half a century.

Clinton and Obama, meanwhile, say their fairly similar strategies would give better and more affordable coverage to more -- eventually all -- people; critics say they would march the country toward socialized medicine.

For the approximately 60% of Americans covered by employer-provided health insurance, none of the plans would bring dramatic changes overnight. But over a period of years, employer-based coverage could decline.

McCain's way is to de-emphasize job-based insurance and encourage people to choose their own coverage in a yet-to-be-created national marketplace; he would offer tax credits to help them pay for such coverage. [...]

Ideology is not the only thing that divides the candidates. In a practical sense, they view the problem differently.

For McCain, the main problem is cost: Bring healthcare costs under control, and more people will get coverage. For the Democrats, the main problem is lack of coverage: Unless everybody is in the risk pool, spending can never be brought under control because different players will try to shift the costs of caring for the uninsured to one another.

Some economists think that one of the main reasons U.S. healthcare costs have grown so rapidly is that Americans are not aware of what they spend on healthcare. That insight is the starting point for McCain's plan.

Since many people get healthcare as a tax-free fringe benefit, relatively few are aware of what it actually costs -- about $12,000 a year, on average, for family coverage and $4,500 annually for an individual plan.

Critics also argue that making health insurance tax-free for employees -- that is, not counting the value of the insurance as income for tax purposes -- is unfair because similar benefits are not available to people who are self-employed.

McCain would change that by taking away the tax breaks for employees. But companies could keep deducting their costs to provide employee healthcare as a business expense.

He would give everyone a tax credit of up to $5,000 for families and $2,500 for individuals. Those who earn too little to owe any taxes would still get the credit.

For many self-employed people, that could be a sizable down payment for insurance. But it might only be enough for a bare-bones plan for low-wage workers who don't get coverage from their employers.


All people generally need -- especially when they're young -- is bare bones, though it would be better to mandate HSAs universally, which would give them money for when they're older and start consuming health care. Universality and some employer mandates would make for the basis of a compromise with Democrats. In broad terms, it doesn't make much difference whether you pay for the HSA before or after your paycheck is issued and, as a practical matter, it's probably easier for most folks to have their company take care of it for them. Throw the Left a seemingly anti-business bone.

Posted by Orrin Judd at May 5, 2008 11:37 AM
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