McCain’s Health Plan: DOA

John McCain is fond of repeating the patently false assertion that Barack Obama would “raise taxes on the middle class.” FactCheck.org has had to re-iterate that Obama’s tax plan would absolutely not “raise taxes on the middle class,” unless people in the “middle class” make over $250,000 a year. Even though the ads have been thoroughly debunked, McCain continues to repeat this claim, which is not just an opinion, and not just “spin,” but an outright lie. In no way will an Obama tax plan raise taxes on the “middle class.” McCain knows this, and yet he continues to say that Obama’s tax plan will raise taxes on the middle class.

Ironically, McCain is himself preparing a tax on the middle class — in the form of his health care proposal. McCain, of course, wants to work within the broken confines of the broken health care system. This is his plan for “reform,” but to borrow a phrase from Barack Obama, McCain’s health care plan is still a pig wearing lipstick. There is no real reform: no attempt to bring costs — which have doubled (doubled!) since 2000 — down; no attempt to utilize the government’s bargaining power to get deals for patients; no attempt to get health insurance for people who are denied due to “pre-existing conditions.” McCain’s plan is this: throw a $2500 tax exemption ($5000 for families) at consumers and tell them to go get their own health care.

That’s it. Here’s some money, let The Market work things out.

The problem — as I’ve often said in the past — is that health care does not operate according to the Invisible Hand, since the respective interests of the health care provider and the health care customer are mutually exclusive. The insurer (provider) wants to provide the least amount of health care for the most amount of money. The customer wants to obtain the most amount of health care for the least amount of money. People who get health insurance through their companies get a break, since they get group rates. Because there are so many people in the insurance pool, the average cost of health care per person can stay low, and the pool can absorb the hit if any member of the group needs to cash in on that health care.

McCain isn’t even proposing that. Literally, he wants you to get your cash, go down to the UnitedHealthCare office, and sign up for a plan all on your own. No group discounts. No nothing. Regular retail price. Health care premiums in Ohio start at $300 per month. Even The Wall Street Journal agreed that John McCain’s health care plan was outrageous.

At the same time, McCain wants to tax the money that employers contribute to their employees’ health insurance:

The value of the typical plan provided by an employer to a family is $12,106, of which the employer pays $8,824, and the worker pays the remaining $3,282. The median household income is $44,389, which places most American families in the 15 percent income tax bracket.

McCain wants to add the employer’s cost — an additional $8,824 — to that middle class family’s income, then tax it. The hit to the average family is 15 percent of the McCain-added income — $1,323 more in income taxes.

This new tax would affect the 158 million Americans who are insured through their employer.

Now there’s a tax on the middle class! The Hill Blog goes into a little bit of conspiracy theory, though:

So if you choose to remain with your employer-based insurance, there’s no guarantee that you’ll ever see any benefit from that $5,000 payment. In addition, giving young healthy workers $2,500 to buy insurance on their own, where it won’t be taxed, will encourage them to leave employer-based plans, quickly raising the costs for everyone remaining and thus eliminating benefits of the tax credits. 

Republicans love to complain about how ineffective a particular agency or program is, intentionally staff that agency with idiots, and then, when the idiot-staffed agency messes up, point to that agency and exclaim (loudly enough for the cameras to hear), “See?! I told you that the government doesn’t work! Now, the private sector, that would have done things better!” Then, they outsource the previously government-provided benefit or service to a private company, most likely run by the personal friend of someone high up in the government.

The end result of the situation described in the blockquote above is that private health insurance companies would find their coffers pregnant with the cash generated by individuals buying insurance at the retail price rather than the discounted group rate. Why settle for getting income from group discounts when you could goad your consumers into paying full price?! That’s what I call reform.