The McCain health care plan

Mr. McCain’s health plan centers on eliminating the tax breaks for
employers who provide health insurance for their workers – a marked
departure from the current system – and giving $5,000 tax credits to
families to buy their own insurance. His goal in shifting from
employer-based coverage to having people buy their own policies is to
encourage competition and choice, and to drive down the costs of health

Here is more.  Portability is good but so many of the uninsured families do not pay $5000 in taxes.  Will this boil down to a subsidy to those who don’t need it or to health insurance vouchers?  InTrade says there is a 39.6 percent chance we will find out.  And here is some vagueness:

Mr. McCain proposed that the federal government work with the states to
cover those who cannot find insurance on the open market. With federal
financial assistance, states would be encouraged to create high-risk
pools that would contract with insurers to cover consumers who have
been rejected on the open market.

Here is more detail; in part it sounds like revived HillaryCare (part I), but only for the high-risk cases rather than for the entire population.  The "notches" problem is obvious as people at the relevant margin hold out for the subsidized pool, thereby making the pool size larger and larger.

McCain also emphasizes lifestyle as a factor behind health; that’s empirically important — more so than health care — but after cutting various stupid subsidies the government should not be the main driver there.  Megan McArdle comments overall.

Trade aside, so far I’ve yet to see many actual policy proposals from the McCain camp.  Mostly I’ve seen attempts to signal that they won’t do anything too offensive to the party’s right wing.  Very few of these trial balloons seem to be ideas that McCain had expressed much previous loyalty to.  I don’t even think we should be analyzing these statements as policy proposals.  We should be wondering why the Republican Party has given up on the idea of policy proposals.


Here's what was said in the conference call:

"Even so, those without prior group coverage and those with pre-existing conditions do have the most difficulty on the individual market, and we need to make sure they get the high-quality coverage they need. I will work tirelessly to address the problem. But I won’t create another entitlement program that Washington will let get out of control. Nor will I saddle states with another unfunded mandate. The states have been very active in experimenting with ways to cover the “uninsurables.† The State of North Carolina , for example, has an agreement with Blue Cross to act as insurer of “last resort.† Over thirty states have some form of “high-risk† pool, and over twenty states have plans that limit premiums charged to people suffering an illness and who have been denied insurance."

Doesn't really sound like HillaryCare at all. It's quite a federalist approach. McCain is saying that he won't tell the states to no pay for the uninsurables' health care. Well, fine with me...

"We should be wondering why the Republican Party has given up on the idea of policy proposals."

You're kidding, right? I'll take "Softballs" for $1000, Tyler.

Perhaps because they realized:
(a) the more specific you are the more people can criticize you,
(b) nobody with less than a graduate degree understands the specifics on most issues
(c) nobody with less than a college degree cares about specifics, and certainly not as much as they say care about them,
(d) they are not penalized in any meaningful way, such as losing elections, for not providing specifics,
(e) most Republicans don't care about specifics because it implies the government *doing something*, which is anathema to Republicans c.2008 (see: the dismantling of FEMA prior to Hurricane Katrina; the whole planning for the aftermath of the war in Iraq by everyone in the administration except career State Dept folks who had no say in policy anyway), and
(f) having specifics implies having an understanding and interest in resolving the problem, which the Republican Party and its elected officials do not have, at least not at the federal level.

Tyler Cowen asks a few questions and claims that this is new ground for McCain, but that is more due to Cowen not having paid attention until now, and relying on Politico for his information (watching McCain's ad alone would have answered Cowen's first question, as McCain emphasizes the word "refundable" tax credit).

I've been wondering about the lack of proposals and initiative from the McCain camp as well and, because of this, I have been questioning the prevailing assumption that McCain is benefiting from the continued Democratic nomination fight (apparently along with at least one other person; Division of Labour: "McCain on Clinton-Obama"). While this whole battle has been raging and Clinton/Obama have been all over headlines, for better or worse, McCain has hardly seen any press at all. He could be using this time to send out trial balloons and policy proposals, as Tyler suggests, to build a solid platform, but he seems to be doing nothing of the sort, or at least nothing of interest to the press. I don't profess to be any sort of genius political mind, but I just can't see how McCain's current obscurity and lack of any sort of platform works in his favor. Maybe the rumors that McCain has a terrible organization underneath him are correct.

By the way, I totally agree with Hei Lun Chan's assessment of McCain's healthcare plan. I'm sure discussing his own plan is probably one of the last things McCain would like to do.

I noticed at this link:

This comment
"McCain is targeting community rating for good reason. It forces the young and healthy to pay far more than their actual cost by making them subsidize the elderly and sick. Like the mandated benefits, it's pushed millions of Americans in their 20s to drop their health insurance."


I've been calling BS on the "uninsured crisis" for a while. In my opinion, young people are often perfectly rational to go without health insurance as it is. Wouldn't it be great if a Clinton/Obama mandate plan was the last straw between younger voters and the liberal democrats?

From McArdle:
"The senator is proposing one thing that I think is a terrible idea, pharmaceutical reimportation. Naturally, this is the part of his health care plan with the highest probability of passage."

Reimportation is a joke. I'm all for price discrimination, but why should arbitrary government borders support it? But, since it is a joke and won't do much damage, that's why you use it as the carrot to get the camel's nose under the tent. That's political economics. Give something that doesn't cost you anything to get something valuable. McCain doesn't have to pass anything he doesn't agree with. So, if I were McCain, it wouldn't pass without being tied to something substantive.


The reason you need to drop employer tax breaks is because with them, insurers have too many incentives to ignore the individual market. The incentives are 1) people with jobs are generally healthier than people without (so by "strategically" focusing on the "group"/employer market, you can discriminate without discriminating); 2) one sales process, multiple insurance premiums (seemingly reducing sales costs per contract, though I think this is a red herring given the innovation in, say, car insurance sales techniques); 3) an easy "out" for denied claims - "well, the policy your employer bought for you doesn't cover that" (instead of "the policy our agent sold you isn't the right one for you" and the potential liability that opens up); 4) save money educating the population on health insurance "details" (have you ever actually read the gory details of your employer provided policy? Most people haven't. Why bother? Health insurance is a "checkbox" when comparing jobs opportunities. Few people evaluate the quality of the employer-provided policy. Ever.)

To have a robust individual market, eliminating the employer-based market is at least an important consideration, if not an outright necessity.

After all those articles I`ve read about the health care issue I think that Hilary`s universal health care is the most objective one. Not because of the fact that I`m working for a Toronto life insurance company I think that health insurance is an essential thing to have in our age. The other question is that how it would be realized. As in other countries as well a greater pressure should be put on health education, it could solve a lot of problems in my opinion.

It's silly to have detailed policy proposals when you don't control either house of congress.

I would think he was proposing something like the earned income credit... which is actually essentially welfare for single moms to the tune of 3-5000 a year.

Otherwise the program is very stupid, since most poor families don't come anywhere near paying 5k a year in taxes or even having it withheld.

Who needs policy proposals when the left is self destructing? Better to say nothing at all, and be the only candidate left who hasn't offended anyone.

Even without tax breaks, employers will always have an advantage purchasing health care plans than individuals, it's called buying in bulk. That's why Dell pays less for its Windows licenses than you do, it's why WalMart pays less for toothpaste and why Costco is cheaper per unit than your corner grocery store. The employer link will likely never die, unless mandated by law.

Dems didn't always have an advantage in the youth vote. in 1992, 18-29 year olds were 50-50. Since the Clinton administration, the Republicans have been bleeding the youth vote and it accelerated under Bush.

The tax credit is refundable. So it does not matter what your tax liabilbity is.

McCain's health plan would affect me personally since I receive good benefits from my employer who would probably be only to happy to jettison the health care expense. The $2500 tax credit is not near the total expense of what a company pays per person for health care. That is a hidden expense which is not being mentioned.

He said that the $5,000 would be granted automatically, even to families who normally do not file taxes. The special pool would only be for patients with pre-existing conditions (to prevent them from raising the price of insurance for everyone else, while still ensuring them coverage). I think it's a great plan. If he would only withdraw the troops, I'd actively campaign for him (and forgive campaign finance "reform").

Richard: "Health insurance is a "checkbox" when comparing jobs opportunities. Few people evaluate the quality of the employer-provided policy. Ever."

Perhaps that is true for young workers who have no families. It is definitely not true for workers who have health problems or who have families with health problems. It is not true for workers who have large families.

Though most large employers have similar health plans, small employers do not. Small business owners - I am one - generally cannot offer anything remotely close to what the big guys provide. So we either give up trying to attract workers who require extensive health options, or else we provide something else that compensates for our inadequate bargaining power with insurance companies.

We all pay for the uninsured now. Bush said they can go to the emergency room right? Good plan! Face it, screening and testing SAVE medical expenses by catching conditions early.

A great example is the Baltimore boy who had a tooth infection, the mother did not have the $80, nor could she find a dentist who would accept medicaid...the nerve in the boys tooth eventually died and stopped hurting. But the infection went to the boys brain, he ended up in the 'emergency room' care Bush advocates.

Total cost to society? $250,000 for a couple of brain surgeries. OH, and the boy died.

You all need to watch SICK-O.

I have always been self employed and have a catastrophic ($5,000 deductable) plan from BCBS. Each and every year, my premium goes up and the benefits of the policy go down. I have tried to file ONE claim in 20 years for a broken bone in my hand. The original policy stated I had a one time benefit for a accidental broken bone of $500. Guess what? They fazed out that benefit the year before I broke my hand.

Health insurance is a scam, it is money for nothing. This is the only contract that can be changed without the consent of the signatory each and every year, or more often as they see fit.

Bush doesn't like the current system either. That's why he proposed a 15,000 deduction per family last year...That went nowhere, nor was any alternative put forward by Dems.


First, I'm not defending the current system. I'm among the "everyone" who thinks the current system is broken. But you cannot use today's dysfunctional individual insurance market as a model for what the individual insurance market would be like in the absence of employer subsidies.

Second, the SL Trib article you cited is NOT the "current Democratic proposal". It's a bi-partisan plan called the "Healthy Americans Act" and it ELIMINATES the tax benefit for getting insurance through an employer, replacing it with an individual tax benefit that will offset the cost of purchasing insurance and a requirement that employers raise wages according to their savings on health insurance. The best current summary (it isn't actually introduced legislation yet) I've found is at

To see President Bush's proposal, see and pay particular attention to the "Documents" section. You could have found that yourself - it's the first link under a Google search for "Bush Health Care Proposal".

You'll note at least one similarity between Bush's plan, the Healthy Americans Act, and McCain's proposal, in that they ALL attempt to give individuals, employed or not, the same tax benefit currently only available for health insurance provided through an employer.



It's easy to get a doctor to see you without insurance. Just pay for it yourself. Many docs even offer discounts for cash at time of service.

An insurance pool is a group of similarly situated individuals. Auto insurance companies do NOT charge the driver with no tickets the same rate as the guy with 3 DUIs. Health insurance companies ought not be required to charge the smoking alcoholic the same rate as the Olympic swimmer. Insurance is about spreading unpredictable expenses (risk) across a pool, not about spreading predictable expenses (subsidy) across a pool. We already force the younger, healthier, less well-off members of our society to subsidize the health care of the older, sicker, richer members. Let's not further add to the moral hazards already in the system by refusing to acknowledge the very real costs of personal choices like smoking, drinking, doing drugs, etc. Unless, of course, you actually enjoy hearing the religious right arguing that they should be able to control more and more of your vices... After all, if you're going to make them pay for the consequences of your choices, that will certainly justify them complaining about your choices.

It's amazing how willing those that have no idea what a life without health insurance are to throw less fortunate under the bus. A $5,000 (not adjusted for size of family) is ridiculously low and does nothing to lower costs. Moreover, implementing a plan - especially when the person that is promoting it could not care less about healthcare - like this would take decades. This argument will be won by those favoring a hybrid national system...much like our education system. We'll expand Medicare and Medicaid to cover most Americans and let the people decide between that plan (which will offer decent healthcare to all) and private healthcare. Some - like education - will still choose private. It's in our best interest to offer all kids education and healthcare and the free market is not capable of doing so

While I still hope Obama is successful I think McCain would have been a better president because of his experience. Talk is cheap! We need action from Obama!

Well, he’s right about one thing: the bills presently before Congress WON’T cut costs enough. In fact they won’t do much at all.This story reminds me of a comedy sketch I saw on TV a few months ago that showed some Red State Redneck sittin’ on a bale of hay saying “Ah’d rather DIE than be treated by some dirty Socialist government takeover healthcare program.†

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