McCain-Palin Health Plan Relies on the Very Marketplace Strategy
That's Crippling Our Economy

By Bob Herbert, The New York Times. Posted September 18, 2008.

The Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers and AIG
fiascos show just how well the unfettered marketplace has been
working.

Talk about a shock to the system. Has anyone bothered to notice the
radical changes that John McCain and Sarah Palin are planning for the
nation's health insurance system?

These are changes that will set in motion nothing less than the
dismantling of the employer-based coverage that protects most American
families.

A recent study from scholars at Columbia, Harvard, Purdue and Michigan
projects that 20 million Americans who have employment-based health
insurance would lose it under the McCain plan.

There is nothing secret about Senator McCain's far-reaching proposals,
but they haven't gotten much attention because the chatter in this
campaign has mostly been about nonsense -- lipstick, celebrities and
"Drill, baby, drill!"

For starters, the McCain health plan would treat employer-paid health
benefits as income that employees would have to pay taxes on.

"It means your employer is going to have to make an estimate on how
much the employer is paying for health insurance on your behalf, and
you are going to have to pay taxes on that money," said Sherry Glied,
an economist who chairs the Department of Health Policy and Management
at Columbia University's Mailman School of Public Health.

Ms. Glied is one of the four scholars who have just completed an
independent joint study of the plan. Their findings are being
published on the Web site of the policy journal, Health Affairs.

According to the study: "The McCain plan will force millions of
Americans into the weakest segment of the private insurance system --
the nongroup market -- where cost-sharing is high, covered services
are limited and people will lose access to benefits they have now."

The net effect of the plan, the study said, "almost certainly will be
to increase family costs for medical care."

Under the McCain plan (now the McCain-Palin plan) employees who
continue to receive employer-paid health benefits would look at their
pay stubs each week or each month and find that additional money had
been withheld to cover the taxes on the value of their benefits.

While there might be less money in the paycheck, that would not be
anything to worry about, according to Senator McCain. That's because
the government would be offering all taxpayers a refundable tax credit
-- $2,500 for a single worker and $5,000 per family -- to be used "to
help pay for your health care."

You may think this is a good move or a bad one -- but it's a
monumental change in the way health coverage would be provided to
scores of millions of Americans. Why not more attention?

The whole idea of the McCain plan is to get families out of
employer-paid health coverage and into the health insurance
marketplace, where naked competition is supposed to take care of all
ills. (We're seeing in the Bear Stearns, Fannie Mae, Freddie Mac,
Lehman Brothers and Merrill Lynch fiascos just how well the unfettered
marketplace has been working.)

Taxing employer-paid health benefits is the first step in this
transition, the equivalent of injecting poison into the system. It's
the beginning of the end.

When younger, healthier workers start seeing additional taxes taken
out of their paychecks, some (perhaps many) will opt out of the
employer-based plans -- either to buy cheaper insurance on their own
or to go without coverage.

That will leave employers with a pool of older, less healthy workers
to cover. That coverage will necessarily be more expensive, which will
encourage more and more employers to give up on the idea of providing
coverage at all.

The upshot is that many more Americans -- millions more -- will find
themselves on their own in the bewildering and often treacherous
health insurance marketplace. As Senator McCain has said: "I believe
the key to real reform is to restore control over our health care
system to the patients themselves."

Yet another radical element of McCain's plan is his proposal to
undermine state health insurance regulations by allowing consumers to
buy insurance from sellers anywhere in the country. So a requirement
in one state that insurers cover, for example, vaccinations, or annual
physicals, or breast examinations, would essentially be meaningless.

In a refrain we've heard many times in recent years, Mr. McCain said
he is committed to ridding the market of these "needless and costly"
insurance regulations.

This entire McCain health insurance transformation is right out of the
right-wing Republicans' ideological playbook: fewer regulations; let
the market decide; and send unsophisticated consumers into the
crucible alone.

You would think that with some of the most venerable houses on Wall
Street crumbling like sand castles right before our eyes, we'd be a
little wary about spreading this toxic formula even further into the
health care system.

But we're not even paying much attention.