Make It Plain: McCain Plan Raises Taxes, Cuts Health Coverage

If Sen. John McCain isn't going to be honest about the impact of his health care plan, we're just going to have to get louder and more blunt about it.

We've said it before [1], but it bears repeating: When McCain says he won't raise taxes, he's wrong. His health care plan would impose a tax on employer contributions to health insurance plans, which are currently not taxed. This will take away the incentive for employers to offer health insurance benefits to employees. And it would mean higher taxes for employees who do receive employer-based plans, since health insurance benefits would be treated as income for tax purposes.

A report published this week in "Health Affairs" [2] by four top health policy experts concludes that the loss of the tax exemption "would greatly reduce the number of people who obtain health insurance through their employers." Roughly 20 million Americans. and most likely more, according to some estimates, who currently have insurance would lose it under McCain's plan and have to fend for themselves in the private market.

The McCain plan would offer a tax credit to offset the cost of individual policies, but the report in Health Affairs says that the policies would likely be less generous, and the tax credit itself, at least as McCain envisions it, would lose value over time as health care costs increase. The result, the report says:

The McCain plan would shift coverage toward the nongroup market, lead to reductions in the comprehensiveness of coverage in that market through deregulation, and encourage employer-based coverage to become less generous as well. These changes would have the effect of shifting costs from insurance premiums toward out-of-pocket payments, and people with chronic or acute illnesses would likely incur much higher out-of-pocket health care costs than they do now.

Bob Herbert at The New York Times [3] calls McCain's plan "radical," and wonders why it's getting so little serious attention:

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.

Ezra Klein, who has written extensively himself on the McCain plan, states the bottom line [4] this way:

McCain's health care plan would increase taxes on employer based health insurance and price 20 million plus Americans out of the coverage they currently rely on. In return, he'd give them a tax credit that is not indexed to health costs, and will become worthless as the years pass. He'd push them into the individual market, where higher administrative costs and underwriting practices mean that if individuals try to purchase the exact policy offered by their employers, they will pay $2,000 more per year. In addition, the sick can be turned away, and the state regulations that ensure some minimum level of benefits will be dismantled. All this will cost us $1.3 trillion over 10 years, and set the rules so that more of the expense falls on the sick and less rests on the healthy.

In other words, his plan makes health care more expensive, less comprehensive, and less secure. It is health reform you can't believe in, or rely upon.

If we were having a real debate on the issues facing this nation, then McCain's health care plan would most likely be laughed off the stage. Instead, even as the fallout from the Wall Street casino binge has laid bare the fallacy of conservative economic policy, we're being told to make big bets in a health care casino dressed as a Potemkin village of universal coverage-lite. And when McCain says, "I won't raise your taxes," no one in the media interrupts and asks, "But, Mr. McCain, what about your tax increase on employer-provided health care?"

That must stop. This is one lipstick-on-a-pig example that deserves a real reality check and a serious debate.

UPDATE: Leo Gerard, the president of the United Steelworkers Union, posted a critical piece on The Huffington Post [5] this week that does what I'm calling for. He's run the numbers:

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.

He concludes: "McCain is traveling to states like Michigan, Ohio and Pennsylvania, hard hit by the economic devastation caused by eight years of Bush administration fiscal policy failures. At each stop, McCain is sucking up the middle class—as if his administration wouldn't cost workers dearly. He needs to stop lying to America's workers."