Good Time For An Enormous Gaffe On Health Care

by dday

Douglas Holtz-Eakin earned a reputation in the Congressional Budget Office as a fairly honest conservative economist. Today he told the truth about John McCain’s health care plan.

Experts, however, fear that eliminating the tax advantage of employer-based coverage would prompt younger, healthier workers to leave their office plans. If that happened, costs for the remaining workers could skyrocket. Companies may drop coverage altogether.

“If companies know their employees have the tax credit, it relieves them of the burden of providing coverage,” said Sara Collins, who directs a health insurance program at the Commonwealth Fund. McCain’s plan “moves people out of the employer system and to the individual market.” […]

McCain advisers counter these concerns. Changing the tax treatment wouldn’t hurt the employer-sponsored system and would allow more of the uninsured to buy their own coverage, they say. Also, his advisers say a McCain administration would keep an eye on the credit to make sure it didn’t lag behind the cost of coverage, while also working to lower the rate of medical inflation.

Younger, healthier workers likely wouldn’t abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain’s senior economic policy adviser.

“Why would they leave?” said Holtz-Eakin. “What they are getting from their employer is way better than what they could get with the credit.”

Ay caramba.

Holtz-Eakin is basically saying that the individual health insurance market is crap and the employer market is more preferable because it provides more. That’s elementary, since it pools resources to get a better deal. But of course the entire McCain health care plan seeks to get people AWAY from the employer system and into the individual market. Jason Rosenbaum explains:

Of course, tying health care to employment is the way we’ve done things in America for generations, and it turns out it’s also pretty popular. (Not to mention that insurance companies have to cover you through an employer health care plan, while they can deny you for pre-existing conditions on the individual market.) And so, in the face of political pressure, you have Douglas Holtz-Eakin admitting the truth.

Faced with the fact that destroying our employer-based health care system isn’t exactly a priority for most Americans, he argues that the McCain plan wouldn’t actually destroy the employer-based system. Why? Because the tax credit McCain is offering wouldn’t buy a decent health care plan, even for the young and healthy!

Let’s unpack this a little bit more. According to Holtz-Eakin, John McCain doesn’t actually want to dismantle the employer-based health care system. But, McCain’s plan would tax any health benefits you’d get through work. So, if Holtz-Eakin is right in saying you’d get better coverage through work than you’d get with the tax credit on the individual market (and he probably is), and if he’s right in saying most workers won’t drop their employer-based insurance for the individual market because they’re getting a better deal at work, then John McCain is simply proposing a tax on your current health care benefits without giving you anything in return. That’s the worst kind of tax increase.

There’s also the issue of employers cutting out of the system because of the loss of incentives to provide health care, too.

The best part of this is how the Obama campaign is going after it:

“This morning, the McCain campaign’s top economic policy advisor unleashed an October Surprise of straight talk when he finally admitted that the health insurance people currently get from their employer is ‘way better’ than the health care they would get if John McCain becomes President. Independent studies have shown that under John McCain’s health care plan, at least 20 million Americans will lose the insurance they rely on and be forced to buy health care coverage on the individual market that costs more than $12,000 with a tax credit of just $5,000. Senator McCain has been trying to cover this up for months, but his advisor’s brutal honesty today is certainly better late than never, and it should give every American pause about electing a candidate who has proposed such radical and dangerous changes to our health care system,” said Obama-Biden Spokesman Bill Burton.

Obama has put a significant amount of money into talking about health care, with a whopping 68% of his TV ads devoted at least in part to the issue, including 86% in October. That shows you that the potential is there to make reform an urgent priority. Our health care crisis is tied to the economic woes of the country – US companies are less competitive than their counterparts abroad because they have to also be a giant HMO, skyrocketing costs are putting a giant hole in the federal budget, and treating the uninsured costs everyone in increased premiums.

So far Obama’s spent lots of time defining McCain’s dangerous health care plan but less on his own. After the election, there needs to be massive education around this issue. McCain has steered the election to ground where it really has become a referendum on progressive policies – progressive taxation, government investment in energy and infrastructure, diplomacy versus militarism, and the need to rein in the free market. This mandate needs to carry into health care policy as well. The Republicans know that a Democratic Party giving Americans universal health care would be strong for decades, and will stop at nothing to block it. Even some employers are willing to fight against it even though it’s not in their economic interest. We have a responsibility on many fronts, but especially on health care, to steer the argument and make sure that we meet progressive policy goals and not just cheer because our home team makes it into the White House.

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